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Implications of a Carbon-Based Energy Tax for U.S. Agriculture

Published online by Cambridge University Press:  15 September 2016

Uwe A. Schneider  and
Bruce A. McCarl
Uwe A. Schneider
Affiliation:
Research unit Sustainability and Global Change at Hamburg University in Hamburg, Germany, and Research Associate at the International Institute of Applied Systems Analysis in Laxenburg, Austria
Bruce A. McCarl
Affiliation:
Research unit Sustainability and Global Change at Hamburg University in Hamburg, Germany, and Research Associate at the International Institute of Applied Systems Analysis in Laxenburg, Austria
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Abstract

Policies to mitigate greenhouse gas emissions are likely to increase energy prices. Higher energy prices raise farmer costs for diesel and other fuels, irrigation water, farm chemicals, and grain drying. Simultaneously, renewable energy options become more attractive to agricultural producers. We consider both of these impacts, estimating the economic and environmental consequences of higher energy prices on U.S. agriculture. To do this we employ a price-endogenous agricultural sector model and solve that model for a range of carbon-tax-based energy price changes. Our results show mostly positive impacts on net farm income in the intermediate run. Through market price adjustments, fossil fuel costs are largely passed on to consumers. Additional farm revenue arises from the production of biofuels when carbon taxes reach $30 per ton of carbon or more. Positive environmental benefits include not only greenhouse gas emission offsets but also reduced levels of nitrogen leaching.

Keywords

energy taxgreenhouse gas policyU.S. agricultural sectorbioenergymathematical programming
Type
Contributed Papers
Information
Agricultural and Resource Economics Review , Volume 34 , Issue 2 , October 2005 , pp. 265 - 279
Copyright
Copyright © 2005 Northeastern Agricultural and Resource Economics Association 

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