UC Davis

U.S. agricultural policy strives to boost farm incomes and secure the nation's food supply, yet new policies are also tasking agriculture with reducing or offsetting the country's greenhouse gas emissions. California's Low Carbon Fuel Standard uses a system of tradable compliance credits to incentivize the consumption of alternative fuels instead of fossil fuels. These credits provide additional value for the production of agricultural biofuels including ethanol. My dissertation examines the effects of the LCFS on commodity prices by first building a spatial corn market model of ethanol plants selling to California and then empirically estimating the pass-through of LCFS credit values changes in local corn prices. I find that the LCFS could be providing a competitive advantage in the corn market to ethanol plants with lower emissions, and these plants only pass-through around 40\% of LCFS credit value changes to local corn farmers as a result. Moreover, policymakers across the globe see working farms as a possible carbon sink through increasing the carbon sequestered in cropland soils. The Inflation Reduction Act of 2021 provides billions of dollars to USDA programs that tangentially influence carbon sequestration. However, soil carbon sequestration is a complex process that cannot be easily influenced by policy. I review the scientific literature on soil carbon sequestration and relate it to economic research on environmental externalities. While practices like no-till or biochar can increase carbon sequestration on agricultural lands, effective policy design faces substantial challenges due to heterogeneity, costly measurement, and uncertainty.