Transformation in US Agriculture: Insights from Energy Price Shocks, Ecosystem Service Enhancements, and Renewable Energy Developments

Abstract

Agriculture in the US is undergoing significant transformation in response to shifting energy markets, environmental challenges, and renewable energy policies. Using economic simulation and econometric models, this dissertation explores how changes in energy prices, renewable energy policies, and conservation programs influence agricultural production, land use, and environmental outcomes across the country. In the first chapter, the focus is on the impacts of energy price shocks and ethanol policy changes. Since agriculture relies heavily on energy, from fuel to fertilizers, changes in energy prices can significantly affect farming operations. The findings show that higher energy prices tend to increase the costs of production, leading to reduced output. A 40 percent increase in energy prices leads to crop output reductions of up to 13.7 percent for rice, 12.1 percent for corn, and 12.0 percent for oats, while prices increase by 9.6 percent, 6.8 percent, and 7.4 percent, respectively. Livestock output falls modestly, but higher prices offset these losses as pork and beef values increase by 13.1 percent and 3.1 percent, respectively. Conversely, a 40 percent drop in energy prices boosts crop output (e.g., corn +6.4 percent) and lowers prices (corn −3.9 percent), leading to only a 1.3 percent gain in value. Livestock value increases slightly (about 0.27 percent) due to higher output but falling prices. The study also evaluates the effects of increased ethanol demand. In the highest-demand scenario (increasing the blend wall, the allowable proportion of ethanol that can be added to gasoline, to 20 percent and quadrupling exports), corn production jumps by 44.8 percent, and processing for ethanol grows by 151.1 percent. This expansion reduces livestock feed costs by increasing the feed supply, thereby boosting pork, poultry, and beef output. However, the resulting increase in meat supply pushes prices downward, especially for pork (−6.2 percent), leading to a 3.4 percent decline in the total livestock sector value. The second chapter compares two agricultural conservation programs for reducing water pollution from nitrogen (N) runoff: (i) a Yield Reserve Program, which pays farmers to reduce fertilizer use; and (ii) an expanded Conservation Reserve Program (CRP), which pays farmers to take land out of production. The research finds that the Yield Reserve Program is generally more cost-effective at excess N reduction, reducing N loads by up to 771 million pounds under a 2 percent corn yield reserve scenario. However, it also causes a "rebound effect", increasing corn acreage by 9.2 million acres because lower per-acre fertilizer use combined with subsidies encourages more planting. The CRP shows a much stronger "slippage effect" as up to 76–79 percent of retired land is offset by marginal land brought into production, diluting the environmental benefits. Despite this, both programs show promise in excess N reduction, especially when targeted to high-output regions like the Corn Belt and Northern Plains. The third chapter shifts to a rapidly evolving issue in the energy transition: the siting of large-scale solar photovoltaic (LSSPV) facilities. Although solar energy is key to decarbonizing the power sector, new solar developments increasingly face community opposition. This study combines a nationwide property sales dataset with solar site locations to measure the impact of LSSPV proximity and visibility on nearby property values. Difference-in-differences estimates show that LSSPV significantly increases agricultural or vacant land value by about 19.4 percent within a 2-mile radius, while simultaneously reducing residential property values within 3 miles by about 4.8 percent. The estimated average negative impact on home values is primarily driven by site proximity and diminishes with both distance and time. Effect estimates are more robust to alternative specifications when proximity pairs with visibility rather than invisibility, but no evidence suggests visibility significantly amplifies the proximity effect. Heterogeneous effect estimates indicate that high solar lease potential, being in heavily Democratic-leaning counties, and brownfield redevelopment largely mitigate the negative residential value impact. The analysis reveals no significant heterogeneity of price impact across a few factors, including varying site visibility, directional orientation of properties relative to the LSSPV site, and different tracking systems. Evidence indicates that the negative impact on residential values might mostly stem from negative perceptions, but channels through physical conditions cannot be entirely dismissed. Our assessment provides benchmark information for local externality mitigation plans, potentially reducing community opposition and expediting the renewable energy transition. Together, these three studies offer a forward-looking view of the potential for US agriculture and rural economies to adapt to shifting energy landscapes, conservation needs, and renewable energy development. The findings provide valuable guidance for farmers, planners, and policymakers working to ensure sustainable and inclusive rural futures in a changing world.