A Model of Producer Incentives for Livestock Disease Management

We examine the management of livestock diseases from the producers' perspective, incorporating information and incentive asymmetries between producers and regulators. Using a dynamic model, we examine responses to different policy options including indemnity payments, subsidies to report at-risk animals, monitoring, and regulatory approaches to decreasing infection risks when perverse incentives and multiple policies interact. This conceptual analysis illustrates the importance of designing efficient combinations of regulatory and incentive-based policies.livestock disease, asymmetric information, reporting, indemnities, risk management, Livestock Production/Industries, C61, D82, Q12, Q18, Q28,

The Effects of Potential Land Development on Agricultural Land Prices

We conduct a national-scale study of the determinants of agricultural land values to better understand how current farmland prices are influenced by the potential for future land development. The theoretical basis for the empirical analysis is a spatial city model with stochastic returns to future land development. From the theoretical model, we derive an expression for the current price of agricultural land in terms of annual returns to agricultural production, the price of recently developed land parcels, and expressions involving model parameters that are represented in the empirical model by nonlinear functions of observed variables and parameters to be estimated. We estimate the model of agricultural land values with a cross-section on approximately three thousand counties in the contiguous U.S. The results provide strong support for the model, and provide the first evidence that option values associated with irreversible and uncertain land development are capitalized into current farmland values. The empirical model is specified in a way that allows us to identify the contributions to land values of rents from near-term agricultural use and rents from potential development in the future. For each county in the contiguous U.S., we estimate the share of the current land value attributable to future development rents. These results give a clearer indication of the magnitude of land development pressures and yield insights into policies to preserve farmland and associated environmental benefits.

Land-Use Change and Carbon Sinks

When and if the United States chooses to implement a greenhouse gas reduction program, it will be necessary to decide whether carbon sequestration policies — such as those that promote forestation and discourage deforestation — should be part of the domestic portfolio of compliance activities. We investigate the cost of forest-based carbon sequestration. In contrast with previous approaches, we econometrically examine micro-data on revealed landowner preferences, modeling six major private land uses in a comprehensive analysis of the contiguous United States. The econometric estimates are used to simulate landowner responses to sequestration policies. Key commodity prices are treated as endogenous and a carbon sink model is used to predict changes in carbon storage. Our estimated marginal costs of carbon sequestration are greater than those from previous engineering cost analyses and sectoral optimization models. Our estimated sequestration supply function is similar to the carbon abatement supply function from energy-based analyses, suggesting that forest-based carbon sequestration merits inclusion in a cost-effective portfolio of domestic U.S. climate change strategies.abatement; carbon; climate change; costs; forestry; greenhouse gases; land use; landuse change; sequestration

Determinants of Land-Use Change In the United States 1982-1997

Changes in the use of land in the United States produce significant economic and environmental effects with important implications for a wide variety of policy issues, including protection of wildlife habitat, management of urban growth, and mitigation of global climate change. In contrast to previous descriptive and qualitative analyses of the trends in national land use, this paper uses an econometric approach to isolate the importance of historical changes in land-use profits and key government policies in determining national land-use changes from 1982 to 1997. The policies we examine are the Conservation Reserve Program (CRP) and total government payments to crop producers. We estimate a national-level discrete choice model of changes among the major land-use categories (crops, pasture, forest, urban, range, and CRP) with parcel-level observations of land use and land quality from the U.S.D.A. National Resources Inventory NRI) and measures of countylevel land-use net returns from a variety of sources. We then use fitted values from the econometric model to simulate land-use change from 1982 to 1997 under a series of factual and counterfactual scenarios that isolate the effects of different economic and policy factors. The simulations suggest how changes in economic returns and government policies have driven land-use changes in the past and will continue to affect nationwide land-use changes in the future. For example, we find that the introduction of the CRP and the decline in crop profits were the most significant explanatory factors driving the decline in cropland. Our results highlight some “unintended consequences” of government policies and the importance of net returns to a range of alternative land uses as determinants of land area change for each particular use.land use; econometric model; counterfactual simulation; Conservation Reserve Program (CRP)

Linking Reduced Deforestation and a Global Carbon Market: Impacts on Costs, Financial Flows, and Technological Innovation

Discussions over tropical deforestation are currently at the forefront of climate change policy negotiations at national, regional, and international levels. This paper analyzes the effects of linking Reduced Emissions from Deforestation and Forest Degradation (REDD) to a global market for greenhouse gas emission reductions. We supplement a global climate-energy-economy model with alternative cost estimates for reducing deforestation emissions in order to examine a global program for stabilizing greenhouse gas concentrations at 550 ppmv of CO2 equivalent. Introducing REDD reduces global forestry emissions through 2050 by 20-22% in the Brazil-only case and by 64-88% in the global REDD scenarios. At the same time, REDD lowers the total costs of the climate policy by an estimated 10-25% depending on which tropical countries participate and whether the “banking” of excess credits for use in future periods is allowed. As a result, REDD could enable additional reductions of at least 20 ppmv of CO2-equivalent concentrations with no added costs compared to an energy-sector only policy. The cost savings from REDD are magnified if banking is allowed and there is a need to increase the stringency of global climate policy in the future in response, for example, to new scientific information. Results also indicate that REDD decreases carbon prices in 2050 by 8-23% with banking and 11-26% without banking. While developing regions, particularly Latin America, gain the value of REDD opportunities, the decrease in the carbon price keeps the value of international carbon market flows relatively stable despite an increase in volumes transacted. We also estimate that REDD generally reduces the total portfolio of investments and research and development of new energy technologies by 1-10%. However, due to impacts on the relative prices of different fossil fuels, REDD has a slight positive estimated effect on investments in coal-related technologies (IGCC and CCS) as well as, in some cases, non-electric energy R&D. This research confirms that integrating REDD into global carbon markets can provide powerful incentives for the preservation of tropical forests while lowering the costs of global climate change protection and providing valuable policy flexibility.Carbon market, Climate change, Innovation, Mitigation, Policy costs, Offsets, Reduced Emissions from Deforestation and Degradation (REDD), Technological change, Tropical deforestation

Extent, Location, and Characteristics of Land Cropped Due to Insurance Subsidies

We examine changes in land use caused by the large increase in crop insurance premium subsidies under the 1994 Federal Crop Insurance and Reform Act (FCIRA). We use a conditional logit model to estimate changes in six major land uses from 1992 and 1997 as a function of the change in expected return to crop insurance. Our data on individual land parcels across the entire coterminous United States enable identification of the extent, location, and physical characteristics of the land brought into and retained in production as a result of the crop insurance policies. Results indicate the additional crop insurance premium subsidies increased cultivated cropland area on the order of 1.9 million acres (0.6%), consistent with the lower range of previous estimates of crop insurance acreage effects. The estimated lands in production due to the subsidy increases are of lower quality than cropland overall in term of both Land Capability Classification and proneness to flooding, as well as more environmentally sensitive in terms of erodibility and proportion in wetlands.Land Economics/Use,

The 1996 Federal Agriculture Improvement and Reform Act: Correcting a Distortion?

This study makes use of farm-level data from the Agricultural Census to evaluate the effects of the 1996 Federal Agriculture Improvement and Reform (FAIR) Act, which intended to "decouple" commodity payments from production decisions. Prior to this Act, agricultural support payments were linked to production decisions via prices and a complex set of restrictions that acted to control the supply of agricultural commodities. We compare farm-level 1992-to-1997 changes in commodity crop plantings of farms that participated in government programs with farms that did not participate. We find that the growth rate of program-crop acreage of non-participants was 19 percentage points below that of participants. This estimated difference remains unchanged after we account for unobserved effects relating to farm size, type, location, and interactions of these factors using over 1900 fixed-effects variables. These results may imply that program participation rules associated with pre-1996 programs effectively acted to limit program acreage in 1992. An alternative explanation is that payments associated with decoupled programs instituted with the 1996 Act were in fact distortionary and induced farmers to produce more than they would have without the payments. Additional research would be needed to test these competing theories.Agricultural and Food Policy,

Linking Reduced Deforestation and a Global Carbon Market: Impacts on Costs, Financial Flows, and Technological Innovation

Discussions of tropical deforestation are currently at the forefront of climate change policy negotiations at national, regional, and international levels. This paper analyzes the effects of linking Reduced Emissions from Deforestation and Forest Degradation (REDD) to a global market for greenhouse gas emission reductions. We supplement a global climate-energy-economy model with alternative cost estimates for reducing deforestation emissions in order to examine a global program for stabilizing greenhouse gas concentrations at 550 ppmv of CO2 equivalent. Introducing REDD reduces global forestry emissions through 2050 by 20-22% in the Brazil-only case and by 64-88% in the global REDD scenario. At the same time, REDD lowers the total costs of the climate policy by an estimated 10-25% depending on which tropical countries participate and whether the “banking†of excess credits for use in future periods is allowed. As a result, REDD could enable additional reductions of at least 20 ppmv of CO2-equivalent concentrations with no added costs compared to an energy-sector only policy. The cost savings from REDD are magnified if banking is allowed and there is a need to increase the stringency of global climate policy in the future in response, for example, to new scientific information. Results also indicate that REDD will decrease carbon prices in 2050 by 8-23% with banking and 11-26% without banking. While developing regions, particularly Latin America, gain the value of REDD opportunities, the decrease in the carbon price keeps the value of international carbon market flows relatively stable despite an increase in volumes transacted. We also estimate that REDD generally reduces the total portfolio of investments and research and development of new energy technologies by 1-10%. However, due to impacts on the relative prices of different fossil fuels, REDD has a slight positive estimated effect on investments in coal-related technologies (IGCC and CCS) as well as, in some cases, non-electric energy R&D. This research confirms that integrating REDD into global carbon markets can provide powerful incentives for the preservation of tropical forests while lowering the costs of global climate change protection and providing valuable policy flexibility.Climate change, deforestation, carbon sinks

What Drives Land-Use Change in the United States? A National Analysis of Landowner Decisions

Land-use changes involve important economic and environmental effects with implications for international trade, global climate change, wildlife, and other policy issues. We use an econometric model to identify factors driving land-use change in the United States between 1982 and 1997. We quantify the effects of net returns to alternative land uses on private landowners’ decisions to allocate land among six major uses, drawing on detailed micro-data on land use and land quality that are comprehensive of the contiguous U.S. This analysis provides the first evidence of the relative historical importance of markets and Federal farm policies affecting land-use changes nationally.Land Use, Land-Use Change, Econometric Analysis, Simulations

Prevention or Control: Optimal Government Policies for Invasive Species Management

We present a conceptual, but empirically applicable, model for determining the optimal allocation of resources between exclusion and control activities for managing an invasive species with an uncertain discovery time. This model is used to investigate how to allocate limited resources between activities before and after the first discovery of an invasive species and the effects of the characteristics of an invasive species on limited resource allocation. The optimality conditions show that it is economically efficient to spend a larger share of outlays for exclusion activities before, rather than after, a species is first discovered, up to a threshold point. We also find that, after discovery, more exclusionary measures and fewer control measures are optimal, when the pest population is less than a threshold. As the pest population increases beyond this threshold, the exclusionary measures are no longer optimal. Finally, a comparative dynamic analysis indicates that the efficient level of total expenditures on preventive and control measures decreases with the level of the invasive species stock and increases with the intrinsic population growth rate, the rate of additional discoveries avoided, and the maximum possible pest population.invasive species, exclusion, control, eradication, public expenditures, Environmental Economics and Policy, Resource /Energy Economics and Policy,