Executive Summary
The basic objective of this research was to estimate land use changes associated with US corn ethanol production up to the 15 billion gallon Renewable Fuel Standard level implied by the Energy Independence and Security Act of 2007. We also used the estimated land use changes to calculate Greenhouse Gas Emissions associated with the corn ethanol production.
The main model that was used for the analysis is a special version of the Global Trade Analysis Project (GTAP) model. It is a computable general equilibrium model that is global in scope. The version used for this analysis has up to 87 world regions and 57 economic sectors plus the biofuel sectors that were added for this analysis. There are many different versions of the GTAP model. It is used by thousands of economists around the world for analysis of trade, energy, climate change, and environmental policy issues. The model is publically available with documentation of the model and data base at www.gtap.org. The version used in this analysis contains energy and GHG emissions (GTAP-E) and also has land use (GTAP-AEZ). The name for the special version created for this work is GTAP-BIO-ADV and encompasses many changes to improve the analysis of corn ethanol:
• The three major biofuels have been incorporated into the model: corn ethanol, sugarcane ethanol, and biodiesel.
• Cropland pasture in the US and Brazil and Conservation Reserve Program lands have been added to the model.
• The energy sector demand and supply elasticities have been re-estimated and calibrated to the 2006 reality. Current demand responses are more inelastic than previously.
• Corn ethanol co-product (DDGS) has been added to the model. The treatment of production, consumption, and trade of DDGS is significantly improved.
• The structure of the livestock sector has been modified to better reflect the functioning of this important sector.
• Corn yield response to higher corn prices has been estimated econometrically and included in the model.
• The method of treating the productivity of marginal cropland has been changed so that it is now based on the ratio of net primary productivity of new cropland to existing cropland in each country and AEZ.
There are many other changes both in data and model structure, which are detailed in the report, but these are the major model and data modifications.
To evaluate the land use implications of US ethanol production we develop three groups of simulations. In the first group we calculate the land use implications of US ethanol production off of the 2001 database. This approach isolates impacts of US ethanol production from other changes which shape the world economy. In the second group of simulations, we first construct a baseline which represents changes in the world economy during the time period of 2001-2006. Then we calculate the land use impact of the US ethanol production off of the updated 2006 database, while we follow the principles of the first group of simulations for the time period of 2006-20015. Finally, in the third group of simulations we use the updated 2006 database
ii
obtained from the second group of simulations but we assume that during the time period of 2006-2015 population and crop yields will continue to grow.
Executive Summary
The basic objective of this research was to estimate land use changes associated with US corn ethanol production up to the 15 billion gallon Renewable Fuel Standard level implied by the Energy Independence and Security Act of 2007. We also used the estimated land use changes to calculate Greenhouse Gas Emissions associated with the corn ethanol production.
The main model that was used for the analysis is a special version of the Global Trade Analysis Project (GTAP) model. It is a computable general equilibrium model that is global in scope. The version used for this analysis has up to 87 world regions and 57 economic sectors plus the biofuel sectors that were added for this analysis. There are many different versions of the GTAP model. It is used by thousands of economists around the world for analysis of trade, energy, climate change, and environmental policy issues. The model is publically available with documentation of the model and data base at www.gtap.org. The version used in this analysis contains energy and GHG emissions (GTAP-E) and also has land use (GTAP-AEZ). The name for the special version created for this work is GTAP-BIO-ADV and encompasses many changes to improve the analysis of corn ethanol:
• The three major biofuels have been incorporated into the model: corn ethanol, sugarcane ethanol, and biodiesel.
• Cropland pasture in the US and Brazil and Conservation Reserve Program lands have been added to the model.
• The energy sector demand and supply elasticities have been re-estimated and calibrated to the 2006 reality. Current demand responses are more inelastic than previously.
• Corn ethanol co-product (DDGS) has been added to the model. The treatment of production, consumption, and trade of DDGS is significantly improved.
• The structure of the livestock sector has been modified to better reflect the functioning of this important sector.
• Corn yield response to higher corn prices has been estimated econometrically and included in the model.
• The method of treating the productivity of marginal cropland has been changed so that it is now based on the ratio of net primary productivity of new cropland to existing cropland in each country and AEZ.
There are many other changes both in data and model structure, which are detailed in the report, but these are the major model and data modifications.
To evaluate the land use implications of US ethanol production we develop three groups of simulations. In the first group we calculate the land use implications of US ethanol production off of the 2001 database. This approach isolates impacts of US ethanol production from other changes which shape the world economy. In the second group of simulations, we first construct a baseline which represents changes in the world economy during the time period of 2001-2006. Then we calculate the land use impact of the US ethanol production off of the updated 2006 database, while we follow the principles of the first group of simulations for the time period of 2006-20015. Finally, in the third group of simulations we use the updated 2006 database
ii
obtained from the second group of simulations but we assume that during the time period of 2006-2015 population and crop yields will continue to grow.
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