Decreases in air pollution result in surplus of $1.60 billion annually for corn and soybeans

As the global population increases, a critical issue is how the world will meet the growing demand for crops. One solution to increase land productivity is to reduce air pollution. In a recent study, MIT Sloan School of Management Visiting Prof. Konstantinos (Kostas) Metaxoglou quantified the crop yield increases attributed to the reductions in emissions in the U.S. and found that the changes resulted in significant benefits for consumers.

“Crops such as corn and soybeans are grown in a part of the country that also has a large number of electric power plants that are major nitrogen oxides (NOx) emitters. There hasn’t been a lot of research or discussion about the impact of NOx on crops. Our study brings attention to the effect of these emissions on agriculture in the U.S. and shows a strong benefit for consumers of U.S. crops,” Metaxoglou said.

He notes that U.S. agriculture productivity has grown substantially in the past 100 years, with average corn yield increasing 8-fold and average soybean yield increasing 5-fold. However, the rate of growth has recently slowed, which raises questions about how the supply of agricultural products will meet global demand.

Part of that decrease in land productivity growth, says Metaxoglou, was caused by emissions of NOx from electric power plants in the U.S. Large amounts of NOx emissions from coal-fired power plants react with volatile organic compounds in the presence of sunlight to produce ozone. Exposure to ground-level (“bad”) ozone has been shown to be responsible for about 90% of the U.S. crop loss due to air pollution. However, in the past decade, the amount of coal used for electricity generation in the U.S. decreased by more than a third, mainly due to fracking and the declining price of natural gas.

In a recent study, Metaxoglou and his colleague, Prof. Aaron Smith of UC Davis, quantified the crop yield increases attributed to the recent reductions in the emissions of NOx from power plants in the U.S. They found that the average corn yield increased by 2.5% and soybean yield by 1.6% over an eight-year period from 2003 to 2011.

The yield improvements for the two crops translated into an increase in total annual surplus of $1.6 billion, $1.1 billion of which was attributed to corn. This increase in total annual surplus was due to an increase in consumer surplus by $3.8 billion and a decrease in producer surplus by $2.2 billion. These findings are attributed to the increase in quantity and the decrease in price associated with the shift in the crop supply curves due to yield improvements.

“While farmers are worse off and consumers are better off, the economy on the whole benefits because the gain for consumers outweighs the loss for producers,” Metaxoglou said. “Our findings show that reducing NOx and other harmful emissions from power plants is beneficial not only for human health, but also for agriculture production.”

Metaxoglou and Smith are coauthors of “Productivity spillovers from pollution reduction: Reducing coal use increases crop yields,” which was published in the American Journal of Agricultural Economics.

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