Adopting Bioenergy Crops: Does Farmers’ Attitude toward Loss Matter?
CABBI Theme: Sustainability
Keywords: Economics, Modeling, Software
Anand, M., Miao, R., Khanna, M. May 23, 2019. “Adopting Bioenergy Crops: Does Farmers’ Attitude Toward Loss Matter?“ Agricultural Economics 50 (4), 435-450. DOI: 10.1111/agec.12501.
We applied prospect theory to examine farmers’ economic incentives to divert a share of their land to bioenergy crops (miscanthus and switchgrass in this study). A numerical simulation was conducted for 1,919 rain‐fed U.S. counties to identify the impact of loss aversion on bioenergy crop adoption and how this impact is influenced by biomass price, discount rate, credit constraint status, and policy instruments. Results show that ignoring farmer’s loss aversion causes overestimation of miscanthus production but underestimation of switchgrass production, particularly when farmers are credit constrained and have a high discount rate. We find that establishing cost subsidy induces more miscanthus production whereas subsidizing energy crop insurance induces more switchgrass production. The efficacy of these two policy instruments, measured by biomass production increased by per dollar of government outlay, depends on the magnitude of farmers’ loss aversion and discount rate.
Table S1: Biomass production (Million MT) on Total Land under different scenarios for a range of biomass prices
Table S2: Riskiness of Conventional Crops and Bio-Energy Crops
Table S3: Biomass Production without credit constraint (million MT)
Table S4: Profitability of Conventional Crops and Bioenergy Crops
Table S5: Land use under different scenarios with credit constraint (acres)
Table S6: Land use for Miscanthus and Switchgrass without credit constraint (acres)
Table S7: Biomass Production without Land Conversion Limit (million MT)
Table S8: Biomass Production when Farmers Evaluate Gains and Losses based on the 30-year NPV of Profits (million MT)
Software and Crop and Land Data (zipped: 8.9 MB, unzipped: 20 MB)