INCENTIVIZING FEEDSTOCK SUPPLY FOR THE BIOECONOMY: IMPLICATIONS FOR ECOSYSTEM SERVICES AND POLICY DESIGN

• Sponsoring Institution: National Institute of Food and Agriculture
• Project Status: TERMINATED
• Funding Source: AFRI COMPETITIVE GRANT
• Reporting Frequency: Annual
• Accession No.: 1012169
• Grant No.: 2017-67019-26283
• Project No.: ALA011-3-16035
• Proposal No.: 2016-08641
• Program Code: A1413
• Project Start Date: May 1, 2017
• Project End Date: Apr 30, 2022
• Grant Year: 2017

Project Director
Miao, R.

Recipient Organization
AUBURN UNIVERSITY
108 M. WHITE SMITH HALL
AUBURN,AL 36849

Performing Department
Agricultural Economics

Non Technical Summary
The emerging cellulosic biofuel and bioproduct industry will require the development of markets where technological and demand uncertainty is high and economic and policy challenges need to be overcome for farmers to successfully engage as viable suppliers of biomass. The purpose of this proposed research is to combine innovative economic and ecological modeling to identify the economic barriers to biomass production, to evaluate the effectiveness of the Biomass Crop Assistance Program (BCAP) in stimulating biomass market expansion, and to explore the economic and ecosystem service implications of biomass production. Specifically, we will 1) assess the technical potential to produce biomass for biofuels and bioproducts from corn stover, miscanthus, switchgrass, and energy cane in the rainfed United States and quantify the potential ecosystem service impacts of this production; 2) examine the economic incentive and environmental impacts of producing biomass from aforementioned feedstocks on various types of available land under a wide range of biomass prices, accounting for production risk of these feedstocks and farmers' attitude toward risk, loss, and present value of future returns; and 3) analyze the impacts of the current BCAP and of alternatively designed BCAP on the crop mix and quantity of biomass supply, on spatial pattern of biomass production, and on the environmental consequences of the production. In addition to expanding the knowledge on farmers' biomass production decisions by accounting for both objective production risk and farmers' subjective attitude toward risk and loss, and on the economic and ecosystem implications of incentivizing policies of biomass production, this project will also generate a comprehensive database of crop yields, greenhouse gas (GHG) fluxes (CO2, CH4, and N2O), soil organic carbon, an overall GHG intensity and nitrate losses for each crop covered in this study at a 10km×10km grid level on an annual basis based on daily weather information over 1986-2015. This research will provide both a conceptual and simulation modeling framework and a rich database as a publically available resource to the research community in the area of bio-economic and policy analysis.

Animal Health Component

0%

Research Effort Categories

Basic

30%

Applied

40%

Developmental

30%

Classification

Knowledge Area (KA)	Subject of Investigation (SOI)	Field of Science (FOS)	Percent
601	1629	3010	70%
102	1629	1070	30%

Knowledge Area
601 - Economics of Agricultural Production and Farm Management; 102 - Soil, Plant, Water, Nutrient Relationships;

Subject Of Investigation
1629 - Perennial grasses, other;

Field Of Science
1070 - Ecology; 3010 - Economics;

Keywords

bioenergy

economic

market development

public policy

Goals / Objectives
The purpose of this proposed research is to combine innovative economic and ecological modeling to identify the economic barriers to biomass production, to evaluate the effectiveness of the Biomass Crop Assistance Program (BCAP) in stimulating biomass market expansion, and to explore the economic and ecosystem service implications of biomass production. Specifically, we will1) assess the technical potential to produce biomass for biofuels and bioproducts from corn stover, miscanthus, switchgrass, and energy cane in the rainfed United States and quantify the potential ecosystem service impacts of this production;2) examine the economic incentive and environmental impacts of producing biomass from aforementioned feedstocks on various types of available land under a wide range of biomass prices, accounting for production risk of these feedstocks and farmers' attitude toward risk, loss, and present value of future returns; and3) analyze the impacts of the current BCAP and of alternatively designed BCAP on the crop mix and quantity of biomass supply, on spatial pattern of biomass production, and on the environmental consequences of the production.

Project Methods
This project will combine innovative economic and ecological modeling to identify the economic barriers to biomass production, to evaluate the effectiveness of the Biomass Crop Assistance Program (BCAP) in stimulating biomass market expansion, and to explore the economic and ecosystem service implications of biomass production. The specific methods are:1). We will first compile a comprehensive database of crop yields, GHG fluxes (CO2, CH4, and N2O), soil organic carbon, an overall GHG intensity and nitrate losses for each of the five crops: corn (with and without corn stover harvesting), soybeans, miscanthus, switchgrass, and energy cane on an annual basis over 1986-2015 at a 10km×10km grid level by using DayCent model.2). Since farmers' crop choice decisions depend both on the objective risks of crop profits and on farmers' subjective risk, loss, and time preferences, we will measure objective risks of crop profits by estimating profit distributions of each crop due to variation in yields (and also prices for conventional crops) over the lifespan of the crop. Farmers' subjective preferences towards risk, loss, and time will be modeled using two alternative decision theories: prospect theory and expected utility theory. Based on the objective risks and farmers' subjective preferences, we will then develop a conceptual model of a farmer's decision problem of allocating a tract of land between a conventional use and an energy crop to maximize the farmer's expected utility (or, in another term, subjective value) from cropping land over a period of time. A numerical simulation model will be developed to analyze farmers' optimal crop choices at various biomass prices at the 10km×10km grid level. We will then examine how the optimal land allocation is affected by the farmer's risk, loss, and time preferences. Economic and environmental implications of the land allocation will be examined as well. This task includes three key components: 1) assessing crop specific profit distributions reflecting the risk of producing biomass with each feedstock; 2) prospect theory and expected utility theory as two alternative approaches to model farmers' risk and loss attitude; and 3) conceptual framework and numerical simulation model that combine profit distribution and prospect theory (or separately, expected utility theory) to identify optimal crop choices.3). The BCAP affects farmers' crop choice and land use through its payments that influence profit distributions of various crops. We will first incorporate the BCAP payments specified under the 2014 Farm Bill into landowners' profit calculations and re-calculate the profit distribution for each crop. We will then feed the new profit distributions incorporating BCAP payments into the simulation model to re-simulate farmers' crop choice and land-use decisions under BCAP's budget. As a benchmark case, we will assume that land is selected for enrollment based on the additional biomass produced per dollar of BCAP payment. For example, if $1,000 of BCAP payment causes larger biomass increase on land tract A than that on land tract B, then land tract A will have higher priority to be enrolled in the BCAP than land tract B. This mechanism implies that the analysis will provide an upper bound on the effectiveness of BCAP in inducing additional biomass production for a given budget. Then we will further investigate alternative designs of BCAP enrollment mechanism and these designs' impact on biomass production and associated environmental outcomes as well as the tradeoff between GHG emission and nitrate losses.The practical application and usefulness of the results of this project will be assessed by our advisory committee that includes a miscanthus grower, a sustainable energy extension specialist, and leaders of organizations focusing on outreach, agribusiness, clean energy, or conservation (please see the Management Plan for details). A series of papers are expected to be generated by the work under this project. These will be presented to a wide ranging policy and research community at relevant workshops and regional and national conferences. Moreover, they will also be subject to peer-review when submitted for publication.

Progress 05/01/17 to 04/30/22

Outputs
Target Audience:The target audiences that our efforts reached included academics, students, farmers, and researchers in federal agencies. Changes/Problems: Nothing Reported What opportunities for training and professional development has the project provided?During the lifetime of this project, two PhD students and two post-doctoral research associates were trained under this project. The two PhD students were trained to conduct economic analyses for bio-energy crops. One post-doc was trained to conduct crop yield simulations using DayCent model. The other post-doc was trained to conduct economic analysis using dynamic optimization approaches. How have the results been disseminated to communities of interest?The results have been disseminated through publications and presentations at conferences, as well as through classroom teaching. They are listed in the 'Products' section. What do you plan to do during the next reporting period to accomplish the goals? Nothing Reported

Impacts
What was accomplished under these goals? 1) For the first goal, Co-PD DeLucia and his team have completed the simulation of crop yields of miscanthus, switchgrass, corn, and soybeans at a 4km-by-4km scale for the US rainfed regions. This scale is finer than the originally proposed scale (i.e., 10km-by-10km) in the proposal. 2) For the second and third goals, two PhD students and one post-doctoral research associate have conducted studies aiming to complete these goals. Mohit Anand, a former PhD student at Auburn University, published a paper in 2019 that examined the role of farmers' loss aversion and time preference on their willingness to grow bio-energy crops such as miscanthus and switchgrass. The paper also studied the interactions between the aforementioned behavioral factors and policy interventions in terms of incentivizing biomass production from miscanthus and switchgrass. Fahd Majeed, a current PhD student at the University of Illinois at Urbana-Champaign, writes his dissertation focusing on the economics of biomass production and the impact of potential carbon payment on this production. In the first chapter of his dissertation, the team examined the effect that emerging carbon markets can have on the spatially varying returns and risk profiles of bioenergy crops (miscanthus and switchgrass) relative to conventional crops (corn and soybean) by coupling an economic model that includes carbon mitigation payments with a biogeochemical model (DayCent) at the county level across the U.S. rainfed region. We find that carbon mitigation payments increase the likelihood of positive profit for bioenergy crops over conventional crops in the Midwest and southern states, for miscanthus and switchgrass, respectively. When biomass prices are low, carbon mitigation payments reduce the coefficient of variation of returns to these crops, potentially making them appealing to risk-averse farmers. At moderate biomass prices, carbon mitigation payments increase bioenergy crop profitability and reduce the risk-to-returns ratio, making bioenergy crops appealing to all farmers regardless of risk preference. In the second chapter, we examine the effect that various payment schemes for carbon mitigation can have on feedstock (miscanthus, switchgrass, corn stover) and conventional crop (corn and soybean). We find that without carbon mitigation payments, risk-averse, credit-constrained, and present-biased farmers require high biomass prices to grow bioenergy crops. These farmers are less likely to plant bioenergy crops in areas with the most carbon mitigating potential. Carbon mitigation payments lower the price at which farmers adopt bioenergy crops and mitigate more carbon at moderate biomass than at higher prices without payment. Lump sum upfront payments incentivize more carbon mitigation in risk-averse, credit-constrained, and present-biased farmers, and annual payments do so with farmers who are not. Additionally, when farmers are paid only for fossil fuel displacement, they tend to overproduce corn stover and underproduce bioenergy crops. Bijay Sharma, a current post-doctoral research associate at University of Illinois at Urbana-Champaign, is examining the land allocation problem between row crops and bio-energy crops by using a dynamic framework. The preliminary results show that there is a reduction of energy crop acreage across rotations even when the row crop prices are constant because of decreasing discounted value of the soil carbon stock. Furthermore, the loss of energy crop acreage across rotations is amplified for a positive row crop price growth rate. Moreover, we show the existence of an increasing maintenance payment across rotations which compensates for the decreasing sequestration payments due to a decline in soil carbon flows when the refinery has a fixed biomass contract. Finally, we analytically derive the relationships of the optimal energy crop acreage and maintenance payment to spatial and temporal features of soil carbon sequestration. We find that as the long-run equilibrium level of soil carbon that can be sequestered under energy crop or the natural growth rate of carbon accumulation increases, the energy crop acreage increases; the magnitude of which depends on the rate at which carbon price increases.

Publications

• Type: Journal Articles Status: Published Year Published: 2022 Citation: Khanna, Madhu and Ruiqing Miao. 2022. Inducing the Adoption of Emerging Technologies for Sustainable Intensification of Food and Renewable Energy Production: Insights from Applied Economics Australian Journal of Agricultural and Resource Economics 66(1):1-23. doi: https://doi.org/10.1111/1467-8489.12461
• Type: Conference Papers and Presentations Status: Accepted Year Published: 2022 Citation: Majeed, F.*, M. Khanna, and R. Miao, Blanc-Betes, E., Hudiburg, T., DeLucia, E. Payment for carbon mitigation reduces riskiness of bioenergy crop production. Poster presented at the Department of Agriculture and Consumer Economics, University of Illinois, Urbana, IL, April 25, 2022.
• Type: Conference Papers and Presentations Status: Accepted Year Published: 2022 Citation: Majeed, F.*, M. Khanna, and R. Miao, Blanc-Betes, E., Hudiburg, T., DeLucia, E. Payment for carbon mitigation reduces riskiness of bioenergy crop production. Paper presented at Agricultural & Applied Economics Association annual meeting, Anaheim, CA, July 31-August 2, 2022.
• Type: Conference Papers and Presentations Status: Accepted Year Published: 2021 Citation: Sharma, B. P.*, M. Khanna, and R. Miao. Designing Carbon Payments to Incentivize Energy-crop Based Carbon Sequestration and Mitigation: An Optimal Control Approach. Paper presented at Agricultural & Applied Economics Association annual meeting, Austin, TX, August 1-3, 2021.
• Type: Journal Articles Status: Submitted Year Published: 2022 Citation: Majeed, F.*, M. Khanna, and R. Miao, Blanc-Betes, E., Hudiburg, T., DeLucia, E. Payment for carbon mitigation reduces riskiness of bioenergy crop production. Submitted to Journal of the Agricultural & Applied Economics Association
• Type: Conference Papers and Presentations Status: Accepted Year Published: 2022 Citation: Sharma, B. P.*, M. Khanna, and R. Miao. Designing Efficient Payments to Incentivize GHG Mitigation Using Energy Crops. Paper presented at Agricultural & Applied Economics Association annual meeting, Anaheim, CA, July 31-August 2, 2022.

Progress 05/01/20 to 04/30/21

Outputs
Target Audience:Due to restrictions caused by the COVID-19 pandemic, the target audiences that our efforts reached during this reporting period included academics, students, and researchers in federal agencies. Changes/Problems: Nothing Reported What opportunities for training and professional development has the project provided?During the reporting period, two post-doctoral researchers and two PhD students worked on this project and were partially supported by funding from this project. One post-doc was trained to modeling crop yields of miscanthus, switchgrass, corn, and soybeans. The other post-doc was trained to conduct economic analysis on farmers' land use decisions in a dynamic framework. The two PhD students were trained to conduct economic analysis about the profitability of bioenergy crops and policies related to bioenergy market in the United States. How have the results been disseminated to communities of interest?The results have been disseminated through publications and presentations at conferences in this reporting period. The publications are listed in the 'Products' section. The presentations are: Fahd Majeed*, Madhu Khanna, Ruiqing Miao, Elena Blanc, Tara Hudiburg, and Evan DeLucia. CABBI Annual Meeting, Center for Advanced Bioenergy and Bioproducts Innovation, "Designing Payments for GHG Mitigation to Induce Low Carbon Bioenergy Production", Urbana, IL, January 26, 2021. Fahd Majeed*, Madhu Khanna, Ruiqing Miao, Elena Blanc, Tara Hudiburg, and Evan DeLucia. program in Environmental and Resource Economics seminar (pERE), Agriculture and Consumer Economics, University of Illinois, "Designing payments for GHG mitigation to induce low carbon bioenergy production", Virtual, University of Illinois, Urbana, IL, November 30, 2020. Fahd Majeed*, Madhu Khanna, Ruiqing Miao, Elena Blanc, Tara Hudiburg, and Evan DeLucia. 2020 AAEA Annual Meeting, Agricultural & Applied Economics Association, "Designing payments for GHG mitigation to induce low carbon bioenergy production", Virtual, August 10, 2020. <https://ageconsearch.umn.edu/record/304394/files/18576.pdf> Mohit Anand, Ruiqing Miao, and Madhu Khanna. Contracting in the Presence of Insurance: The Case of Bioenergy Crop Production. The 2021 Alabama Academy of Science Annual Meeting, March 18th, 2021 (scheduled). What do you plan to do during the next reporting period to accomplish the goals?In the next reporting period, we will finalize the 4km-by-4km scale simulation on miscanthus, switchgrass, corn, and soybean yield simulation by using DayCent model. The simulation will also include soil carbon and nutrient dynamics of these crops. This will complete the first goal. Regarding the second and third goals, we will complete the economic analysis on the impact of carbon payment on the profitability of bioenergy crops and on farmers' land-use decisions discussed in the 'accomplishment' section above.

Impacts
What was accomplished under these goals? 1) For the first goal, the post-doctoral research associate, Dr. Elena Blanc, expanded the DayCent model to simulate switchgrass and miscanthus yields and their associated excahnges of carbon and nutrients at a 4km-by-4km scale in the rainfed area of the United States. This line of work is currently at its final stage and we expect that it will be completed during the next reporting period. 2) For the second goal, Fahd Majeed, a PhD student under this project, was conducting economic analysis to examine the riskiness of returns to cellulosic ethanol feedstock production and how potential carbon payments would affect the riskiness. Specifically, we compared how the farmer's profit distribution changes with the introduction of GHG mitigation payments. We focused first on the effect of lump-sum upfront payments and annual payments for GHG mitigation on farmer profit distribution. Second, we explored the effect of payment for GHG reduction only from fossil fuel displacement changes to payment for GHG reduction from fossil fuel displacement and soil carbon sequestration. We analyzed feedstock profit distributions by using an integrated model simulation framework that links the economic model with the DayCent model. We generated distributions of annual profits and distribution of the farmer's net present value under exogenous biomass and GHG reduction payments. We then analyzed these distributions in terms of their variance and probability of positive profit under a fifteen-year cropping cycle at the county level. We expect to complete the analysis in the next reporting period. 3). For the third goal, we analyzed the potential carbon payments would affect farmers' land-use decisions, while considering the farmers' behavioral factors and credit constraint situation. Specifically, we use a stylized integrated model simulation framework that links an economic model with the DayCent model to analyze farmers' cropping allocation to various tillage and rotation choices for conventional crop and miscanthus or switchgrass under GHG reduction payments while accounting for spatial and temporal heterogeneity in crop yields and GHG intensities. First, we explore whether lump-sum upfront payments or annual payments for GHG mitigated each year can incentivize more GHG mitigation. Second, we explore whether payment for lifecycle GHG reduction from fossil fuel displacement only incentivizes the adoption of a similar feedstock mix and spatial distribution to that of payment for both sources of GHG mitigation. Preliminary results show that GHG reduction payments cause farmers to adopt energy crops at lower carbon prices with the potential to incentivize up to 200 million metric tons of biomass and to displace and mitigate 400 million metric tons of carbon. GHG payments can induce miscanthus production under high-risk aversion, high time discounting, credit constraint scenarios. We expect to complete the analysis in the next reporting period.

Publications

• Type: Journal Articles Status: Published Year Published: 2020 Citation: Miao, Ruiqing and Madhu Khanna. 2020. Harnessing Advances in Agricultural Technologies to Optimize Resource Utilization in the Food-Energy-Water Nexus. Annual Review of Resource Economics 12:65-85. doi: https://doi.org/10.1146/annurev-resource-110319-115428
• Type: Journal Articles Status: Published Year Published: 2021 Citation: Khanna, Madhu. 2021. "COVID-19: A Cloud with a Silver Lining for Renewable Energy?" Applied Economic Perspectives and Policy 43(1):7385.
• Type: Conference Papers and Presentations Status: Submitted Year Published: 2020 Citation: Fahd Majeed, Madhu Khanna, Ruiqing Miao, Elena Blanc, Tara Hudiburg, and Evan DeLucia. 2020. Designing payments for GHG mitigation to induce low carbon bioenergy production. Selected Paper prepared for presentation at the 2020Agricultural & Applied Economics Association Annual Meeting, Kansas City,MOJuly 26-28,
• Type: Other Status: Published Year Published: 2020 Citation: Miao, Ruiqing and Madhu Khanna. 2020. The Food-Energy-Water Nexus and Emerging Agricultural Technologies. Farmdoc daily (10):137, Department of Agricultural and Consumer Economics, University of Illinois at Urbana-Champaign, July 24.Available at: https://farmdocdaily.illinois.edu/2020/07/the-food-energy-water-nexus-and-emerging-agricultural-technologies.htm

Progress 05/01/19 to 04/30/20

Outputs
Target Audience:The target audiences that our efforts reached during this reporting period included policy makers, academics, students, landowners, and farmers. Changes/Problems: Nothing Reported What opportunities for training and professional development has the project provided?This project has provided training for one post-doc in a) quantifying the yields of energy crops (miscanthus and switchgrass) and row crops (corn and soybeans) by using DayCent model and b) assessing the changes in soil carbon and nutrients caused by growing the energy crops. The project has also provided training for two PhD students in a) modeling farmers' crop choice decision making under risk; b) large scale economic simulations based on economic models and computational software; and c) understanding the US biofuel markets and their interaction with corn production. How have the results been disseminated to communities of interest?The results have been disseminated through presentations at conferences in this reporting period. The presentations are: Fahd Majeed*, Madhu Khanna, Ruiqing Miao, Elena Blanc, Tara Hudiburg, and Evan DeLucia. GSP Annual Principal Investigator Meeting, US Department of Energy - Genomic Science Program, "Effectiveness of Payments for Greenhouse Gas Mitigation to Induce Low Carbon Bioenergy Production", Washington, D.C., February 24 2020.<https://www.orau.gov/gsp2020/abstracts/DeLucia_Majeed.pdf> Fahd Majeed*, Madhu Khanna, Ruiqing Miao, Elena Blanc, Tara Hudiburg, and Evan DeLucia. AGU Fall Meeting 2019 American Geophysical Union, "Incentivizing ecosystem services from crop production: implications for energy crop production by risk-averse farmers", San Francisco, CA, December 12 2019.<https://agu.confex.com/agu/fm19/meetingapp.cgi/Paper/491847> Fahd Majeed*, Graduate Research Paper Celebration, Agriculture and Resource Economics, University of Illinois, "Incentivizing ecosystem services from crop production: implications for energy crop production by risk-averse farmers", Urbana, IL, December 6 2019. Fahd Majeed*, Madhu Khanna, Ruiqing Miao, Elena Blanc, Tara Hudiburg, and Evan DeLucia. ESA/USSEE Joint Meeting Ecological Society of America & United States Society for Ecological Economics, "Incentivizing ecosystem services from crop production: implications for energy crop production by risk-averse farmers", Louisville, KY, August 16 2019. Fahd Majeed*, Madhu Khanna, Ruiqing Miao, Elena Blanc, Tara Hudiburg, and Evan DeLucia. Switchgrass V International Conference, Institute for Sustainability, Energy, and Environment, University of Illinois, "Incentivizing ecosystem services from crop production: implications for energy crop production by risk-averse farmers", Champaign, IL, July 25 2019. <https://sustainability.illinois.edu/outreach/annual-events-conferences/switchgrass-v-conference/> Mohit Anand, Ruiqing Miao, Madhu Khanna. "Contracting in the Presence of Insurance: The Case of Bioenergy Crop Production" AAEA Annual Meeting, July 2019, Atlanta, GA. Miao, Ruiqing. "Economics of Switchgrass as Feedstock for Livestock and Bioenergy." Alabama Grazing Academy, Perdido River Farms, September 20, 2019, Atmore, Alabama. What do you plan to do during the next reporting period to accomplish the goals?In the next reporting period, we will aim to complete the fine-scale simulation (4km-by-4km) for corn, soybean, miscanthus, switchgrass yields and associated soil carbon and nutrient dynamics by using the DayCent model. Based on the fine-scale dataset, we plan to complete the economic analysis to examine farmers' energy crop adoption decisions under various market situations of biomass and the impact of different policy instruments on the decisions.

Impacts
What was accomplished under these goals? During the reporting period (May 1, 2019 - April 30, 2020), the team accomplished the following: a) Regarding the first goal, the post-doctoral research associate recruited under this project, Dr. Elena Blanc, was guided by Drs.Evan DeLucia and Madhu Khanna to simulate exchanges of carbon, nutrients, and trace gases among the atmosphere, soil, and plants as a function of light, temperature, and water and nutrient availability and in response to changes in land use, management practices, and climate with a focus on U.S. marginal land by using the biogeochemical model DayCent. The model is used to simulate the yields of switchgrass and miscanthus on marginal land at a county level and the associated changes in soil organic carbon if the land were to grow energy crops over the 2016-2030 period. Model simulations of marginal land integrate input data from county-specific CRP acreage including current management, soil quality and year of enrollment in the program provided by the US Department of Agriculture, Economic Research Service. Management of conservation grasslands is assumed to optimize the development of ecosystem services and included prescribed fire recommended among the allowed practices on marginal land. The DayCent model also simulates the effect on soil organic carbon stocks of switching from non- permanent cover on marginal land in the baseline scenario to energy crops.Simulated yields of miscanthus and switchgrass on marginal land at a county level from DayCent are aggregated to the crop reporting district scale and drive the assessment of the costs of growing energy crops on the land and the profitability of allocating marginal land to alternative energy crops at various biomass prices and soil rental payments for the marginal land. b). For the last two goals, a PhD student, Fahd Majeed, was conduct economic analysis under the supervision of Drs. Madhu Khanna and Ruiqing Miao. Specifically, Majeed explored directly the effect of incentivizing the spatially varying GHG mitigation that cellulosic ethanol feedstocks provide that make them appealing to produce. We did so by providing a comprehensive analysis of the potential impact of incentivizing greenhouse gas (GHG) mitigation from cellulosic ethanol feedstocks in a risk-averse crop production context. We examined the impact of payments linked to GHG reduction on cropping decisions of risk-averse farmers at various biomass prices with a focus on aggregate GHG mitigation, aggregate cost to reduce emissions, and the spatial distribution of feedstock. Additionally, we explored whether the manner of payment influences cropping decisions by comparing lump-sum upfront payments for total GHG mitigated to annual payments for GHG mitigated each year. To do this, we used a stylized integrated numerical simulation framework that links an economic model with a biogeochemical model, DayCent (described above), to analyze farmers' decisions in 2,174 rainfed counties in the eastern United States under GHG reduction payments while accounting for spatial and temporal heterogeneity in crop yields and GHG intensities over a period of 15 years.

Publications

• Type: Journal Articles Status: Published Year Published: 2019 Citation: Anand, Mohit, Ruiqing Miao, and Madhu Khanna. 2019. Adopting Bioenergy Crops: Does Farmers Attitude toward Loss Matter? Agricultural Economics 50(4):435-450.
• Type: Journal Articles Status: Published Year Published: 2019 Citation: Li, Yijia, Ruiqing Miao, and Madhu Khanna. 2019. Effects of Ethanol Plant Proximity and Crop Prices on Land-Use Change in the United States. American Journal of Agricultural Economics 101(2):467-491.
• Type: Journal Articles Status: Published Year Published: 2019 Citation: Deepayan Debnath, Madhu Khanna, Deepak Rajagopal, David Zilberman, The Future of Biofuels in an Electrifying Global Transportation Sector: Imperative, Prospects and Challenges, Applied Economic Perspectives and Policy, Volume 41, Issue 4, December 2019, Pages 563582, https://doi.org/10.1093/aepp/ppz023

Progress 05/01/18 to 04/30/19

Outputs
Target Audience:The target audiences that our efforts reached during this reporting period included policy makers, academics, students, non-governmental organizations, and bioenergy companies. Changes/Problems: Nothing Reported What opportunities for training and professional development has the project provided?This project has provided training for one post-doc in a) quantifying the yields of energy crops (miscanthus and switchgrass) by using DayCent model and b) assessing the implications of growing the energy crops for soil carbon sequestration and nitrate-runoff. The project has also provided training for two PhD students in a) economic modeling by using prospect theory and expected utility theory to assess the effects of farmers' risk and loss preferences on their incentives to grow energy crops; and b) large scale economic simulations based on economic models and computational software. How have the results been disseminated to communities of interest?The results have been disseminated through presentations at conferences in this reporting period. The presentations are: "Effects of Risk and Uncertainty on the Cellulosic Biofuel Supply Chain: Implications for Policy" International Association of Agricultural Economics, Vancouver, CA, July 28-August 2, 2018. "Willingness of Farmers to Grow Energy Crops: Role of Behavioral Drivers" Environmental Science Division, Argonne National Laboratory, Lemont, IL, September 13, 2018. "Realizing the Environmental Benefits of Energy Crops: Economic Incentives and Policy Implications" Advanced Bioenergy Leadership Conference, San Francisco, November 7-9, 2018. "Nexus Between Food, Energy and Ecosystem Services: Synergies and Trade-offs" 2018 International Workshop on "Multifunctional Agriculture - Management and Utilization of Bioresources" NWAFU, Yangling, China, Nov 18-20, 2018. "Lessons Learnt From a Decade of Experience with Biofuels: Comparing Hype with Evidence" Keynote Talk at Low Carbon Markets Conference, University of Sao Paulo, Brazil, December, 2018. "Nexus Between Food, Energy and Ecosystem Services: Synergies and Trade-offs" Division of Nutritional Sciences, University of Illinois, Urbana-Champaign, IL, March 26, 2019. "Contracting in the Presence of Insurance: The Case of Bioenergy Crop Production." Southern Agricultural Economics Association (SAEA) Annual Meetings, February 2-5, 2019, Birmingham, AL. What do you plan to do during the next reporting period to accomplish the goals?In the next reporting period, we will finalize the work under the first goal so that we will produce the updated DayCent simulation resultsabout energy crop yields and associated environmental metrics such as soil carbon and nitrate-runoff at a 4km-by-4km scale. Then we will then expand our economic model that was developed in this reporting period under the thrid goal by incorporating the data obtained under the first goal to study a) various BCAP payment schemes on farmers' crop choice decisions and and b) the environmental impacts of these correspondng bioenergy crop production decisions while considering farmers' risk and loss preferences.

Impacts
What was accomplished under these goals? In this reporting period, the second year of the 3-year project, the team proceeded simultaneously on the three goals ofthe project. For the first goal, the post-doctoral research associate recruited under this project, Dr. Elena Blanc, was guided by Drs.Evan DeLucia and Madhu Khanna to simulate miscanthus and switchgrass yields by using DayCent model. We have completed DayCent model simulations reproducing contemporary (1980-2016) and 30-year projections of net primary productivity, annual yields, soil organic carbon content (SOC budgets), nitrate runoff, and greenhouse gas emissions (i.e. CH4 and N2O) at a county level under various scenarios. We developed county specific model descriptors integrating county- and land use- specific soil attributes (SSURGO-NRCS and ISRIC soil databases) and county-specific climate reconstructions of historic daily weather (DayMet, ONRL). Our model simulations consider USDA plant hardiness zones described by 30-year normals of temperature and precipitation records (USDA, National Agricultural Statistics Service) to reproduce county-level planting and harvesting dates and irrigation intensities, and use historical records for the correct parameterization of region specific fertilization loads and common cultivation events (USDA, NASS). Model projections of business as usual scenarios and conversion to alternative land uses incorporate randomized iterations of the last 15-year records of daily weather to integrate climate variability, and include alternative practices of tillage (conventional till and no till) and stover removal (0%, 30% and 50%) to integrate current variability in agricultural management. We used a complete 10-year data set of above- and below-ground productivity, annual yields and soil carbon content from the Energy Farm (UIUC, Champaign, IL) for all land uses considered for the calibration of the DayCent productivity and decomposition modules incorporating these implementations. For the second goal, a graduate student recruited under this project, Mohit Anand, was guided by Drs. Ruiqing Miao and Madhu Khanna to complete the paper "Adopting Energy Crops: Does Farmers' Attitude toward Loss Matter?" and to make it accepted for publication by Agricultural Economics. Mohit Anand has earned his PhD and was placed as a faculty member in Miles College. He no longer works under this project. For the third goal, another PhD student recruited under this project, Fahd Majeed, was guided by Drs. Madhu Khanna and Ruiqing Miao to examine the impact of various payment schemes on farmers' crop choices and biomass supply, as well as their environmental consequences.

Publications

• Type: Journal Articles Status: Accepted Year Published: 2019 Citation: Anand, Mohit*, Ruiqing Miao, and Madhu Khanna. Accepted for publication. Adopting Bioenergy Crops: Does Farmers Attitude toward Loss Matter? Agricultural Economics.

Progress 05/01/17 to 04/30/18

Outputs
Target Audience:The target audiences that our efforts reached during this reporting period included policy makers, academics, and students. Changes/Problems: Nothing Reported What opportunities for training and professional development has the project provided? This project has provided training for one post-doc in a) quantifying the yields of energy crops (miscanthus and switchgrass) by using DayCent model and b) assessing the implications of growing the energy crops for soil carbon sequestration and nitrate-runoff. The project has also provided training for one PhD student in economic modeling by using prospect theory to assess the effects of farmers' risk and loss preferences on their incentives to grow energy crops. How have the results been disseminated to communities of interest?The results from the economic analysis have been disseminated through presentations at conferences in this reporting period. The presentations are: Anand, Mohit. "Adopting Energy Crops: Does Farmers' Attitude toward Loss Matter?" Co-authors: Ruiqing Miao and Madhu Khanna. Southern Agricultural Economics Association (SAEA) Annual Meetings, February 2-6, 2018, Jacksonville, Florida. Anand, Mohit. "Adopting Energy Crops: Does Farmers' Attitude toward Loss Matter?" Co-authors: Ruiqing Miao and Madhu Khanna. Agricultural & Applied Economics Association (AAEA) Annual Meeting, July 30 - August 1, 2017, Chicago, IL. Miao, Ruiqing. "Incentivizing Feedstock Supply for the Bioeconomy: Implications for Ecosystem Services and Policy Design." USDA-NIFA Bioeconomy Agroecosystem and Natural Resources Project Directors Meeting, October 20-23, 2017, Tampa, FL. Miao, Ruiqing. "Adopting Bio-Energy Crops: Does Farmers' Attitude toward Loss Matter?" (Poster Presentation). USDA-NIFA Bioeconomy Agroecosystem and Natural Resources Project Directors Meeting, October 20-23, 2017, Tampa, FL. Khanna, Madhu. "Role of Land in Mitigating GHG Emissions," Workshop on A Decade of Biofuel Policies- Lesson Learnt, University of California Los Angeles, Los Angeles, CA, September 27, 2017. Khanna, Madhu. "Regulating indirect land use change due to biofuels: is it worth it?" 23rd Annual Conference of the European Association of Environmental and Resource Economists, Athens, Greece, June 28-July 1, 2017. Khanna, Madhu. "Perennial Biomass Crops for Multiple Ecosystem Services in Corn-Soy Landscapes," Coalition on Agricultural Greenhouse Gases meeting, Chicago, IL, July 19, 2017. Khanna, Madhu. "Assessment of the Additionality of GHG Savings with Biofuel Production," CRC Workshop on Life Cycle Analysis of Transportation Fuels, Argonne National Laboratory, Argonne, IL, October 24-26, 2017. Khanna, Madhu."The Hidden Costs of Regulating Indirect Land Use Change Due to Biofuels," Advanced Bioeconomy Leadership Conference on Next-Gen of Technology, San Francisco, CA, Oct 16-19. 2017. What do you plan to do during the next reporting period to accomplish the goals?In the next reporting period, we plan to complete the first goal that will provide us with the updated DayCent simulation results about energy crop yields and associated environmental metrics such as soil carbon and nitrate-runoff. Then we will expand our economic model that was developed in this reporting period by incorporating the data obtained under the first goal to study the environmental impacts of bioenergy crop adoption while considering farmers' risk and loss preferences.

Impacts
What was accomplished under these goals? In this reporting period, the first year of the 3-year project, the team proceeded simultaneously on the first two goals of the project. For the first goal, the post-doctoral research associate recruited under this project, Dr. Elena Blanc, was guided by Drs. Evan DeLucia and Madhu Khanna to simulate miscanthus and switchgrass yields by using DayCent model. We have finished developing county specific weather record files based on CRU-NCEP climate reconstructions of historic daily weather records from 1901 to 2016 to integrate climatic variability into our model simulations. We have reassessed the historical reconstruction of the original biomes based on Olson 2001 classification for an improved representation of the historical land use country wide. Further, we are rebuilding and parameterizing the event descriptor files integrating our new climatic inputs for the fine calibration of historical ecosystem dynamics of the above mentioned ecoregions that will set the basis for the precise simulation of contemporary and future biogeochemical dynamics in crop- and marginal-land at a county level country wide. For the second goal, the graduate student recruited under this project, Mohit Anand, was guided by Drs. Ruiqing Miao and Madhu Khanna to develop the economic model based on prospect theory to study farmers' economic incentive of adopting energy crops. We have finished a manuscript titled "Adopting Energy Crops: Does Farmers' Attitude toward Loss Matter?" and obtained a request for revision and resubmission under Agricultural Economics. Currently we are revising the manuscript to make the manuscript publishable under the journal.

Publications

• Type: Journal Articles Status: Under Review Year Published: 2018 Citation: Anand, Mohit, Ruiqing Miao, and Madhu Khanna. Adopting Bioenergy Crops: Does Farmers Attitude toward Loss Matter? Revision and Resubmission requested from Agricultural Economics.