Implications of a carbon-based energy tax for U.S. agriculture. Agricultural and Resource Economics Review 2005;34:265–79

Policies to mitigate greenhouse gas emissions are likely to increase energy prices. Higher en-ergy prices raise farmer costs for diesel and other fuels, irrigation water, farm chemicals, and grain drying. Simultaneously, renewable energy options become more attractive to agricultural producers. We consider both of these impacts, estimating the economic and environmental consequences of higher energy prices on U.S. agriculture. To do this we employ a price-en-dogenous agricultural sector model and solve that model for a range of carbon-tax–based en-ergy price changes. Our results show mostly positive impacts on net farm income in the inter-mediate run. Through market price adjustments, fossil fuel costs are largely passed on to con-sumers. Additional farm revenue arises from the production of biofuels when carbon taxes reach $30 per ton of carbon or more. Positive environmental benefits include not only green-house gas emission offsets but also reduced levels of nitrogen leaching