Bioenergy Crop Production and Climate Policies: A Von Thunen Model and the Case of Reed Canary Grass in Finland

Posted: 17 Mar 2009

See all articles by Jussi Lankoski

Jussi Lankoski

Agrifood Research Finland

Markku Ollikainen

University of Helsinki - Department of Political and Economic Studies

Abstract

We examine the potential of bioenergy crops to offset greenhouse gas emissions from fossil fuels, assuming homogeneous agricultural land and distance-dependent transport costs. Variable transport costs define the socially and privately optimal extensive margin of the bioenergy crop production and imply that fertiliser intensity differs across locations. Under current policy, private fertiliser application is suboptimal, requiring location-specific input, transport or output subsidies. The theoretical model is applied to reed canary grass (Phalaris arundinacea L.) in Finland, which offsets emissions from peat in electricity production. If oats is the alternative crop, and taking permit price of CO emissions as the proxy for climate benefits over the life cycle, reed canary grass production is socially optimal even 100 km away from the power plant and still offsets more than 6 tons/ha of CO emissions from peat.

Keywords: von Thunen model, climate benefit, bioenergy crops, emission permit market, nutrient runoff

JEL Classification: Q18, Q24, Q25, Q28

Suggested Citation

Lankoski, Jussi and Ollikainen, Markku, Bioenergy Crop Production and Climate Policies: A Von Thunen Model and the Case of Reed Canary Grass in Finland. European Review of Agricultural Economics, Vol. 35, No. 4, pp. 519-546, 2008. Available at SSRN: https://ssrn.com/abstract=1359991 or http://dx.doi.org/jbn040

Jussi Lankoski

Agrifood Research Finland

Helsinki
Finland

Markku Ollikainen (Contact Author)

University of Helsinki - Department of Political and Economic Studies ( email )

P.O. Box 54
FIN-00014 Helsinki
Finland

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