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COSTS OF MAINTAINING THE CONSERVATION RESERVE PROGRAM IN ILLINOIS IN THE PRESENCE OF BIOFUELS BY

By Linlin Li

Abstract

The Conservation Reserve Program (CRP) has played a key role in reducing soil erosion, improving water quality and protecting wildlife habitat. Rising crop prices, partly induced by the expansion of biofuel production, is likely to increase the maintenance cost of the program. This study develops a dynamic, multi-market, mathematical program to estimate the cost of maintaining CRP enrollment at the 2007 level in Illinois over 2007-2020 under exogenously given ethanol prices. We conduct the analysis under three policy scenarios, including the existing CRP policy and two modified policies that provide subsidies to induce energy crop production on expiring CRP land. We also explore the mix of biofuels produced from corn and various cellulosic feedstocks over this period under these policies. Our results show that in the presence of biofuels, to maintain CRP enrollment at the 2007 level, government expenditure would increase by as much as $0.1-3.9 billion depending on ethanol prices over the 2007-2020 compared to a no-biofuel baseline. If the government allows farmers to grow perennial energy crops on retired CRP land and provides existing soil rental payments, it will lead to a 37.7 % ($2.3 billion) reduction in the maintenance cost relative to the existing CRP policy. If the subsidy provided is similar to those under the Biomass Cro

Year: 2012
OAI identifier: oai:CiteSeerX.psu:10.1.1.225.5236
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