Improving the way land use change is handled in economic models

Xin Zhao; Dominique Y van der Mensbrugghe; Roman M Keeney; Wallace E Tyner

doi:10.1016/j.econmod.2019.03.003

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Improving the way land use change is handled in economic models

Journal article

Open access

Peer reviewed

Improving the way land use change is handled in economic models

Xin Zhao, Dominique Y van der Mensbrugghe, Roman M Keeney and Wallace E Tyner

Economic modelling, Vol.84, pp.13-26

01/2020

DOI: https://doi.org/10.1016/j.econmod.2019.03.003

Handle:

https://hdl.handle.net/2376/108327

Appears in Aviation Sustainability Center (ASCENT)

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Abstract

Land heterogeneity

Land use modelling

CET

Additive CET

Conversion cost

General equilibrium

Land Use Planning

Sound economic modelling of land use in global economic models is critical for evaluating agricultural, biofuel, and climate policies. Current approaches do not preserve physical land area, do not account for the fact that land is of different qualities, or do not explicitly include the cost of converting land from one use to another. This study proposes a land use modelling framework building on the additive form of the constant elasticity of transformation (ACET) approach. We demonstrated that the framework could (1) directly provide traceable physical land use results, (2) flexibly handle land productivity differences based on biophysical information, (3) explicitly introduce land conversion cost, and (4) provide welfare decomposition in light of land heterogeneity and conversion cost. An experiment of mandating a 10 percent increase in grain consumption in the US food sector showed that ignoring land heterogeneity and conversion cost would underestimate the welfare loss by 28 percent. •Existing methods of land use modelling have different traceability problems.•We extend the additive CET approach to physically model land use in a CGE model.•The method permits accounting for land heterogeneity using biophysical information.•Land conversion cost is accounted for to maintain welfare traceability.•Ignoring land heterogeneity and conversion cost leads to biased policy analysis.

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Title: Improving the way land use change is handled in economic models
Creators: Xin Zhao - Department of Agricultural Economics, Purdue University, 403 West State Street, West Lafayette, IN 47907, USA
Dominique Y van der Mensbrugghe - Department of Agricultural Economics, Purdue University, 403 West State Street, West Lafayette, IN 47907, USA
Roman M Keeney - Department of Agricultural Economics, Purdue University, 403 West State Street, West Lafayette, IN 47907, USA
Wallace E Tyner - Department of Agricultural Economics, Purdue University, 403 West State Street, West Lafayette, IN 47907, USA
Publication Details: Economic modelling, Vol.84, pp.13-26
Academic Unit: Aviation Sustainability Center (ASCENT); Alternative Jet Fuel
Publisher: Elsevier B.V
Grants: 13-C-AFJE-PU-03,10,15, 19, 29, Federal Aviation Administration (United States, Washington) - FAA
Identifiers: 99900581262501842
Language: English
Resource Type: Journal article