Economic modeling of bioenergy crop production and carbon emission reduction in Illinois

This study develops a dynamic land use decision model for analyzing optimal land allocation to achieve the various levels of carbon emission reduction at the lowest cost. It uses the framework that integrates a resource allocation model; a biophysical model of spatially and temporally differentiated life cycle emission reduction benefits from alternative land uses; and a transportation module to link power plants with low cost sources of biomass for co-firing with coal in existing power plants. The carbon friendly alternative land uses include conservation tillage practice, pasture and bioenergy crops, namely switchgrass and miscanthus, to produce biomass. The model is adapted to Illinois at county level disaggregation and runs in annual time steps under various policy scenarios for the 15 year horizon, 2003-2017. It is then implemented in the General Algebraic Modeling System package.; The key model results are: (i) in the absence of carbon incentives, about {dollar}1 billion of bioenergy subsidy is needed to bring about 1.7% of the total cropland to miscanthus production. With this subsidy, 5.5% of "green electricity" would be produced, and 7% of the total carbon emissions by existing power plants over the 15 years period, would be taken out of the atmosphere; (ii) disregarding spatial heterogeneity in sequestration rates distorts optimal allocation of land use more than disregarding temporal dynamics of carbon accumulation process; (iii) an incentive of {dollar}71 t-1 CO2e emission reduction would bring 4.2% of the total cropland to miscanthus production at the current coal-equivalent price for biomass, which is sufficient to generate 11.8% of "green electricity" with a 15% co-firing limit. This would reduce about 23.4% and 8.9% of the carbon and sulfur emissions, respectively, generated by power plants over the 15-year horizon.; These results have several policy implications. Carbon cap-and-trade policy, if adopted, is likely to create an incentive for biomass co-firing. Such a policy would reduce the significant amount of carbon emissions and help the State obtain a considerable share of renewable energy. The carbon incentives would significantly increase the farm profitability and could help power plants achieve the emission reduction at a reasonably low cost.