Long-Term Economic Consequences of Alternative Carbon Reducing Conservation and Wetlands Reserve Programs: A BLS Analysis
Randall Reese, Aziz Bouzaher, Jason F. Shogren
September 1993 [93-WP 114]
Reese, R., A. Bouzaher, and J.F. Shogren. 1993. "Long-Term Economic Consequences of Alternative Carbon Reducing Conservation and Wetlands Reserve Programs: A BLS Analysis." Working paper 93-WP 114. Center for Agricultural and Rural Development, Iowa State University.
Three alternative Conservation Reserve Program (CRP) scenarios and a targeted Wetlands Reserve Program (WRP) scenario were analyzed using the Basic Linked System (BLS) of applied general equilibrium models to project their likely economic impacts on the agriculture sector of the United States. The programs are proposed as means of reducing carbon emissions from agriculture. The CRP scenarios each reflect different assumptions about the size of future programs and alternative uses of CRP land. Specifically, two alternative proposals--a 40 million acre CRP and a 50 million acre CRP--are compared with a baseline scenario consisting of a 17.5 million acre CRP, considered a likely outcome after current contracts expire. The results of the model give the economic impacts of the two larger CRP proposals relative to the 17.5 million acre baseline over the period 1996-2030. A 5 million acre WRP targeted to bottomland capable of supporting hardwood tree growth is run in conjunction with the baseline CRP and the results are compared with those obtained under the baseline alone. Among the impacts presented are changes in U.S. agricultural production, consumption, acres, yields, producer and consumer prices, government program costs, and net farm income for crop and livestock production. Impacts on producers, consumers, and government expenditures are presented in the summary table.
Overall, the results are as one would expect. In the CRP scenarios, acreage planted and production of major crops is lower under the larger programs and producer prices are concomitantly higher. Feed grains are most significantly affected, causing feed prices to be higher under the larger CRP scenarios. Livestock production is generally lower under the larger programs, reflecting higher feed costs. Per capita consumption of most commodities changes only slightly, although consumption of grain products and most meat fall by 1 to 2.5 percent after the programs have been fully implemented. Producer net returns increase for crop producers, but are significantly lower for livestock producers. Government price support payments to crop producers fall by more than the cost of the programs. The programs lower overall net farm income and make consumers generally worse off with slightly lower consumption and higher retail prices. Similar but less dramatic results are obtained when the WRP scenario is added to the CRP baseline. The decline in overall economic welfare due to these programs will have to be balanced against the benefits of carbon emission reductions from them.