Ethanol Plant Location and Land Use: A Case Study of CRP and the Ethanol Mandate

Abstract

This study uses a county-level difference-in-difference framework to estimate the share of re-enrollment into the Conservation Reserve Program (CRP) in response to local ethanol production capacity after the Renewable Fuels Standard (RFS). Relatively more land remained in CRP in ethanol-intensive areas after the RFS. This seemingly counter-intuitive result can be explained by post-RFS changes to the CRP that favored ethanol-intensive areas. Both CRP design changes and production trends correlated with ethanol plant location pose challenges for empirical strategies that use ethanol plant location to study production or land use decisions. Changes to CRP policies can play an important role in participation and land use decisions.

Impact of Ethanol Plant Location on Corn Revenues for U.S. Farmers

“…The lack of an effect of ethanol plant location on local corn contract revenues supports ideas presented in other studies as to: (1) Other drivers rather than ethanol plant location affect changes in planted corn acreage [10]; (2) effects of the ethanol plant location may be temporary, dissipating in months [4] and as such would not be captured in this model; (3) counties with higher specialization in corn production attract a new ethanol plant [8]; or (4) there are no corn price premiums in counties with an ethanol plant [2]. It is important to highlight that our results are limited to revenues from corn contracts.…”

“…Our study fills this gap in the literature by estimating the impact on farmers' corn revenues from having an ethanol plant in their county. The location of an ethanol plant is determined by factors such as access to feedstock, trends in corn production, government incentives, local amenities, and infrastructure [8][9][10]. Lambert et al [9] The location of an ethanol plant is determined by factors such as access to feedstock, trends in corn production, government incentives, local amenities, and infrastructure [8][9][10].…”

“…The location of an ethanol plant is determined by factors such as access to feedstock, trends in corn production, government incentives, local amenities, and infrastructure [8][9][10]. Lambert et al [9] The location of an ethanol plant is determined by factors such as access to feedstock, trends in corn production, government incentives, local amenities, and infrastructure [8][9][10]. Lambert et al [9] find that infrastructure, markets, and subsidies can provide counties with a comparative advantage in charming ethanol plants to the county.…”

“…The distance to the ethanol plant, though, may not always be the cause for changes in corn acreage. Ifft et al [10] argue that land use change maybe mostly driven by general price changes rather than by the location of an ethanol plant.…”

Impact of changes in Title II of the 2018 Farm Bill on the acreage and environmental benefits of Conservation Reserve Program

“…Many studies have examined various aspects of the CRP, such as its environmental benefits (Babcock et al, 1996; Wu, 2000), CRP enrollment mechanism designs and their performance (Babcock et al, 1997; Miao, Feng, et al, 2016; Peterson et al, 2015; Wu et al, 2001; Wu & Boggess, 1999), and the relationship between CRP acreage and commodity prices or ethanol plants (Hellerstein & Malcolm, 2011; Hendricks & Er, 2018; Ifft et al, 2019). However, few studies have examined the impact of CRP rental rates and acreage cap on CRP acreage and associated environmental benefits.…”