Integrating agricultural and forestry GHG mitigation response into general economy frameworks: Developing a family of response functions

An econometrically estimated family ofresponse functions is developed forcharacterizing potential responses togreenhouse gas mitigation policies by theagriculture and forestry sectors in theU.S. The response functions are estimatedbased on results of anagricultural/forestry sector model. Theyprovide estimates of sequestration andemission reductions in forestry andagriculture along with levels of sectoralproduction, prices, welfare, andenvironmental attributes given a carbonprice, levels of demand for agriculturalgoods, and the energy price. Sixalternative mitigation policiesrepresenting types of greenhouse gasoffsets allowed are considered. Resultsindicate that the largest quantity ofgreenhouse gas offset consistently appearswith the mitigation policy that pays forall opportunities. Restricting carbonpayments (emission tax or sequestrationsubsidy) only to aff/deforestation or onlyto agricultural sequestration substantiallyreduces potential mitigation. Highercarbon prices lead to more sequestration,less emissions, reduced consumer and totalwelfare, improved environmental indicatorsand increased producer welfare.