Economic and environmental impacts of the corn grain ethanol industry on the United States agricultural sector

Abstract

This study evaluated the impacts of increased ethanol production from corn starch on agricultural land use and the environment in the United States. The Policy Analysis System simulation model was used to simulate alternative ethanol production scenarios for 2007 through 2016. Results indicate that increased corn ethanol production had a positive effect on net farm income and economic wellbeing of the US agricultural sector. In addition, government payments to farmers were reduced because of higher commodity prices and enhanced net farm income. Results also indicate that if Conservation Reserve Program land was converted to crop production in response to higher demand for ethanol in the simulation, individual farmers planted more land in crops, including corn. With a larger total US land area in crops due to individual farmer cropping choices, total US crop output rose, which decreased crop prices and aggregate net farm income relative to the scenario where increased ethanol production happened without Conservation Reserve Program land. Substantial shifts in land use occurred with corn area expanding throughout the United States, especially in the traditional corn-growing area of the midcontinent region. Production of other crops, such as soybeans and cotton, shifted out of traditional growing areas to accommodate increased corn production. Fertilizer and chemical usage also increased. When conservation tillage adoption was assumed to remain at 2007 levels for the 10-year period, regional tillage intensity, soil erosion, and fossil fuel-based carbon emissions increased, while soil carbon stocks decreased as a result of increased corn production. However, the simulation demonstrated that additional adoption of conservation tillage above 2007 levels mitigated the adverse effects of increased corn production on soil erosion and net carbon emissions to the atmosphere.