The potential cost of methane and nitrous oxide emissions regulation in U.S. agriculture

Most studies on the impacts of agriculture on the environment have devoted efforts to measure the environmental impacts of the sector rather than to assess its ability to reduce or mitigate such impacts. Some have addressed the environmental efficiency of the sector (Reinhard, et al., 1999, Ball et al., 1994 and 2004; Rezek and Perrin, 2004 and Serra et al., 2011) but only few have examined greenhouse gas emissions (Njuki and Bravo-Ureta, 2015; Dakpo, Jeanneaux and Latruffe, 2016) from the sector. This paper analyzes the agricultural performance of states in the U.S. in terms of their ability to reduce emissions of methane and nitrous oxide, two major greenhouse gases (GHGs) with important global warming potential. The analysis evaluates Färe’s PAC (pollution abatement cost) for each state and year, a measure of the opportunity costs of subjecting the sector to GHG emissions regulation. Using both hyperbolic and directional distance functions to specify the technology with good and bad outputs, we find that such regulations might reduce output by an average of about 2%, though the results for individual states vary quite widely.