The Economic Impacts of Bioenergy Crop Production on U.S. Agriculture

Report prepared for the U.S. Department of Energy and the U.S. Department of Agriculture

Daniel G. De La Torre Ugarte, Research Assistant Professor at the University of Tennessee Agricultural Policy Analysis Center (APAC); Marie E. Walsh, Economist at the Oak Ridge National Laboratory (DOE-ORNL); Hosein Shapouri, Economist at the Office of Energy Policy and New Uses (USDA-OEPNU); and Stephen P. Slinsky, Research Associate at the University of Tennessee Agricultural Policy Analysis Center (APAC).

The complete report is available as a PDF file (1,327k)

Abstract

The oil embargoes of the 1970s raised concerns about energy security. Today, concerns about the environmental impacts associated with fossil fuel use, particularly potential global climate change, have added new immediacy to the development of alternative energy systems. Biomass energy systems using dedicated bioenergy crops are among the alternative systems under development. The large scale production of bioenergy crops could have significant impacts on the United States agricultural sector in terms of quantities, prices and production location of traditional crops as well as farm income. To examine these potential impacts and to evaluate the prices that would be required to make bioenergy crops competitive with traditional crops, the United States Departments of Energy and Agriculture, in collaboration with The University of Tennessee and the Oak Ridge National Laboratory, modified an agricultural sector model (POLYSYS) to include switchgrass, hybrid poplar, and willow. The analysis also examined the potential to use Conservation Reserve Program (CRP) acreage as a source of bioenergy crops under two management scenarios: one to achieve high biomass production and one to achieve high wildlife diversity. Under the wildlife management scenario, the analysis indicates that, at $30/dry ton (dt) for switchgrass, $31.74/dt for willow and $32.90 for poplar, an estimated 19.4 million acres of cropland (8.2 million from CRP) could be used to produce 96 million dry tons of bioenergy crops annually at a profit greater than the profit created by existing uses for the land. In this scenario traditional crop prices increase from 3% to 9% (depending on crop) and net farm income increases by $2.8 billion annually. At $40/dt of switchgrass, $42.32/dt for willow and $43.87/dt for poplar and assuming the production management scenario, an estimated 41.9 million acres (12.9 million from CRP) could be used to produce 188 million dry tons of biornass annually. Under this scenario, traditional crop prices increase by 8 to 14% and net farm income increases by $6 billion annually.

Keywords: Alternative crops, bioenergy crops, biomass, Conservation Reserve Program, crop acreage shifts, crop budgeting, economic feasibility, economic impact, hybrid poplars, hybrid willow, POLYSYS, switchgrass