The Economic and Environmental Effects of Alternative Renewable Fuel Standards and Implementing a Cost of Carbon on Greenhouse Gas Emissions Mitigation in the United States

Abstract

This dissertation examines the economic and environmental agricultural sector implications of requiring renewable fuels and pricing greenhouse gas emissions in the US. The Forest and Agricultural Sector Optimization Model with Greenhouse Gases (FASOMGHG) is employed to do the analysis. Two analyses are reported. First, we focus on the total agricultural sector and find carbon prices stimulate significant GHG emission reduction mainly through replacing fossil fuels in power plants with biomass from energy crops and crop residues. We find allowing marginal land for growing energy crops expands the emission reduction potential but does not greatly alleviate competition for cropland as they are used largely to expand biomass for electricity replacement. The analysis then extended to include the US forest sector, which further increases the GHG reduction potential. However, increased demand for energy crops leads to land use competition not only with row crops but also with forest land, resulting in over 45 million acres of deforestation in the first 30 years. In terms of renewable fuels, we find expanding provisions for cellulosic ethanol is economically and environmentally inefficient.

Second, the dissertation addresses groundwater depletion and its impact in the context of the regional economy of the Texas High Plains. To study this a regional agricultural and hydrology model - the High Plains Simulation Model (HPSIM) is employed. In this study we examine the renewable fuel and cost of carbon policies by including the resultant prices from the sectoral analysis done in the first analysis with FASOMGHG. In that case under the business-as-usual scenario, dryland cotton is predominant, but energy and sweet sorghum become dominant under the scenarios with policy induced commodity prices. Despite increased pumping costs, the national cost of carbon and renewable fuel related policies induce accelerated aquifer depletion due to intensified irrigation pumping.

The empirical results from this dissertation demonstrate the agricultural sector’s potential to participate in achieving net-zero carbon emissions during the shift to renewable energy sources. The replacement of fossil fuels with biomass feedstocks offers significant GHG emission reductions. However, the findings also highlight challenges such as consumer welfare losses due to increased commodity prices, the allocation of limited natural resources like land and groundwater, as well as regional economic impacts.