Economic impacts of carbon charges on US agriculture

We evaluate the farm sector impacts that would result from implementing a s ystem of carbon based charges on energy intensive inputs. Our emphasis is o n production costs, crop acreage, commodity prices, input use, farm income, and farm welfare. The charges considered - $14, $100, and $200 per metric ton of carbon - were developed from the literature and are consistent with reducing U.S. GHG emissions to a 1990 minus 7% level by 2010 under differen t levels of carbon trading and developing country participation. Impacts ar e relatively modest for a charge of $14 per mt. Relative to baseline condit ions, producer and consumer surplus decline 0.02 and 0.03 percent, respecti vely. Across crop and livestock commodities, price increases and production declines are all less than 1.0%. As the carbon charge increases, farm sect or impacts become more pronounced and determination of whether the aggregat e effect is significant or not becomes more subjective.