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An Evaluation of the Economic and Environmental Impacts of the
Corn Grain Ethanol Industry on the Agricultural SectorWestern
Agricultural Economics Association Annual Meeting, Big Sky, MT,
June 25-27, 2008 James A. Larson, Burton C. English, and Daniel G.
De La Torre Ugarte
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ProblemThe Energy Independence and Security Act of 2007 mandates
production 36 billion gallons per year (BGY) of ethanol to by 2022,
with 21 BGY from feedstocks other than corn.Notwithstanding,
production of ethanol from corn grain is expected to rise
significantly over the next decade in response to legislative
mandates and tight energy market supply and demand conditions.
Changes in crop mix and production practices with increased corn
production have the potential to impact land resources in different
locals across the U.S. For example, soil erosion is the major
pathway by which sediment, nutrients, and pesticide residues reach
surface water.
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ObjectiveTo analyze the impacts on the agricultural sector as a
result of increasing corn ethanol production.To evaluate changes in
fertilizer expenditures, herbicide expenditures, gross soil erosion
and sedimentation, and carbon sequestration.
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Analytical ToolPOLYSYS:305 crop production regions
(ASDs)National livestock productionNational demand market
(Elasticity Driven)(Sum of Production = Domestic Supply)Energy
market is goal drivenSolutions compared to a USDA Baseline
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Cropland Base2002 Agricultural Census
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POLYSYS ModelEconomic ModuleEnvironmental Module
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Production Year tRegional Supply Elasticities Responds to
changes in expected price
POLYSYS GeneratedLagged Prices
Expected PriceYear t
ABSCrop Budgets
POLYSYSGeneratedSolution t-1
YieldChanges in expected priceChange in Prices Paid
Beginning Inventory
Regional Production
Imports
National Supply
By ASDAcres, Cost of production
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By ASDAcres, Cost of productionYear t
Baseline AcresCost of ProductionYear t
Change in AcresCost of ProductionYear t
Change inNon chemicalNitrogenOther FertilizerExpenditures
Change in Gross Soil Erosion, acres By ASD and Crop
Proportion Tillage by ASD and CropFrom BaselineBased on CTIC
County Crop Acres Based on NASS
KLSR Factors By ASD for Cropland, CRP, and Pasture
CP Factors By ASD for Crop and Tillage
Change in USLE Estimated Erosion by ASD and HUC
DetermineASD Change in Carbon Sequestration and Emissions
Carbon Seq. and Emissions byASD, Crop, and Tillage
Change inCarbon Sequestration andCarbon Emissions
A
A
MOSS
Change inSedimentation andSedimentation CostBy 10 USDA
Regions
Change inGross Soil Erosion by ASD
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Extended Economic Baseline2007 USDA Baseline (2007 to
2016):Ethanol use at 12 BGY by 2016.Crop yield increases for
traditional crops.No changes in current tillage practices.Corn
grain was the assumed feedstock for ethanol production through the
year 2016.Conversion efficiency for corn ethanol grows to 3.0
gallons/bushel.
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Ethanol ScenariosChanges in selected economic and environmental
indicators from the baseline were evaluated for:8.6 BGY of ethanol
by 2016,14 BGY of ethanol by 2016, 16 BGY of ethanol by 2016, and
18 BGY of ethanol by 2016. Results from these four scenarios were
compared with the 12 BGY baseline scenario to illustrate how
various ethanol industry output expansion paths might influence the
agricultural sector.
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Environmental SubmoduleChange in Land UseChange in Input
ExpendituresFertilizer application changes estimated based on
changes in expenditures in N,P,K (Fert). Herbicides and
insecticides application changes estimated based on changes in
expenditures on herbicide and insecticides for the 8 major
crops.Change in Soil ErosionEstimated using NRCS ASD region KLSR
and P estimates combined with an estimated C factor (incorporating
tillage) based on 1997 NRI dataChanges in land use by POLYSYS
region.Impact on Sedimentation Made using erosion estimates
converted to 99 river basins and coupled with sediment delivery and
deposit ratios used in MOSS II along with Ribaudos 1985 cost of
erosion study with costs indexed to 2007.
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Environmental SubmoduleChanges in carbon sequestrationCarbon
emissions for each ethanol scenario were calculated using methods
and estimated coefficients from the carbon lifecycle literature
(West and Marland, 2002, Marland et al., 2003). The estimated
coefficients and the quantities of fuel and inputs in the budgets
in POLYSYS were used to calculate total carbon emissions for each
crop in each ASD.In addition, the carbon sequestered in
agricultural soils for each crop and tillage practice was estimated
using methods outlined by West et al. (2008).
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Ethanol Production Paths
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Change in Land Use from the 12 BGY USDA Baseline Scenario under
the 18BGY Scenario
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Change in Land Use from the 8.6 BGY Scenario under the 18 BGY
Scenario.
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Change in Crop Area from the USDA Baseline 12 BGY to 18 BGY
Scenario 2016CornSoybeansWheatCotton
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Change in Crop Area from the 8.6 BGY to 18 BGY Scenario
2016CornSoybeansWheatCotton
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Change in Herbicide Expenditures for Selected Scenarios Compared
to the 12 BGY USDA Baseline Scenario 8.6 BGY 14 BGY 16 BGY 18
BGY
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Herbicide Use: Regional ChangesChanges between 18 BGY and 12 BGY
USDA Baseline Scenarios
Changes between 18 BGY and 8.6 BGY Scenarios
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Change in Fertilizer Expenditures for Selected Scenarios
Compared to the 12 BGY USDA Baseline Scenario 8.6 BGY 14 BGY 16 BGY
18 BGY
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Fertilizer Use: Regional ChangesChanges between 18 BGY and 12
BGY USDA Baseline Scenarios
Changes between 18 BGY and 8.6 BGY Scenarios
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Erosion: Regional ChangesChanges between 18 BGY and 12 BGY USDA
Baseline Scenarios
Changes between 18 BGY and 8.6 BGY Scenarios
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Change in Carbon Emissions for Selected Scenarios Compared to
the 8.6 BGY Scenario 18 BGY 16 BGY 14 BGY 12 BGY
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Carbon Emissions: Regional ChangesChanges between 18 BGY and 12
BGY USDA Baseline Scenarios
Changes between 18 BGY and 8.6 BGY Scenarios
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ImplicationsThe production of feedstock for biofuels using corn
as the feedstock will result in increased erosion, chemical and
fertilizer use unless the methods used to produce corn are
dramatically altered. Investment in research in agricultural
production and conversion technology, is required to reduce
projected environmental impacts.Increased yields, increased input
efficiency, and increased use of no-tillage production practices
would reduce impacts of this projected bioeconomy.Acceleration of
introduction of cellulose-to-ethanol path would likely ease
environmental impacts.
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ImplicationsWhat will happen when CRP land becomes available to
crop? incentives to biofuels industry should be consistent with
availability of environmental sustainable crop and conversion
technologies.
POLYSYS contains the entire cropland base with 34 million acres
removed for use in minor crops and farmsteads, etc. In the