The External Costs of Pollution Reduction: Agriculture and the Incidence of the Acid Rain Program

Presenter
Nicholas J. Sanders, College of William & Mary

Abstract
We evaluate the relationship between the 1990 Clean Air Act Amendments (CAAA), sulfur dioxide (SO2) regulations, and agricultural productivity in the United States. The Acid Rain Act, through Title IV of the CAAA, obliged over 100 coal-fired power plants to reduce SO2 production, causing large drops in airborne sulfur dioxide and a decrease in the prevalence of acid rain. The EPA calculates the benefits of the program at over $120 billion per year, largely from decreased SO2-related health costs and avoided acid rain damages to old growth forests, lakes and streams, and historic buildings. The effect of the program on the agriculture, however, is ambiguous and previously unconsidered. While excessive soil acidity may harm crops, some acid rain improves soil quality via a transfer of sulfates, a chemical helpful in plant growth. Using the CAAA as a potentially exogenous shock to SO2 trends, we are the first to directly examine how the policy impacted the agricultural sector, using corn yield per acre by county over time as our measure of agricultural productivity. We find the net impact of the CAAA on the agricultural sector was negative—the CAAA caused a drop in yields and a decrease in agricultural land values. Though calculated damages of the program are small in comparison to prior quantified benefits, they represent an unintended incidence of the program and are thus relevant in the consideration of policy impacts. Our findings also carry implications for other countries considering similar pollution regulations, particularly if regions are highly agrarian or support a large amount of self-sustenance farming.

Date
Thursday, October 10, 2013
12:00 - 1:30 p.m. A light lunch will be provided.

Location
7th Floor Conference Room
1616 P St. NW
Washington, DC 20036 All seminars will be in the 7th Floor Conference Room at RFF, 1616 P Street NW unless otherwise noted. Attendance is open, but involves pre-registration no later than two days prior to the event. For questions and to register to an event, please contact Karen Furman at [email protected]. Updates to our academic seminars schedule will be posted at www.rff.org/academicseminarseries.