Impacts of Ethanol on Planted Acreage in Market Equilibrium

14 Pages Posted: 6 Apr 2020

See all articles by Hongli Feng

Hongli Feng

Iowa State University - Center for Agriculture and Rural Development (CARD)

Bruce A. Babcock

Iowa State University - Department of Economics

Date Written: April 2010

Abstract

The magnitude of land conversion caused by biofuels expansion largely determines whether biofuels reduce net greenhouse gas emissions. To examine this issue, we model how equilibrium changes in input use and land allocation decisions respond to market‐ and policy‐induced increases in corn ethanol demand. We demonstrate why total cropland area unambiguously increases with increased ethanol demand. The impact of ethanol price subsidies and consumption mandates are examined in the context of technical change. If ethanol demand is elastic enough, an exogenous increase in corn yields leads to cropland expansion with price subsidies. Yield increases under consumption mandates reduce land use.

Keywords: biofuels, complements in supply, ethanol, ethanol mandates, land use changes, substitutes in supply, yield improvement

Suggested Citation

Feng, Hongli and Babcock, Bruce A., Impacts of Ethanol on Planted Acreage in Market Equilibrium (April 2010). American Journal of Agricultural Economics, Vol. 92, Issue 3, pp. 789-802, 2010, Available at SSRN: https://ssrn.com/abstract=3569205 or http://dx.doi.org/10.1093/ajae/aaq023

Hongli Feng (Contact Author)

Iowa State University - Center for Agriculture and Rural Development (CARD) ( email )

Ames, IA 50011
United States

Bruce A. Babcock

Iowa State University - Department of Economics ( email )

Heady Hall
578 Heady Hall
Ames, IA 50011-2063
United States

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