The Opportunity Cost of Land Use and the Global Potential for Greenhouse Gas Mitigation in Agriculture and Forestry

This paper analyzes the role of global land-use in determining potential greenhouse gas mitigation by land-based activities in agriculture and forestry. Land-based activities are responsible for over a third of global greenhouse gas emissions, yet the economics of land-use decisions have not been explicitly modeled in global mitigation studies. In this paper, we develop a new, general equilibrium framework which effectively captures the opportunity costs of land-use decisions in agriculture and forestry, thereby allowing us to analyze competition for heterogeneous land types across and within sectors and input substitution between land and other factors of production. In our analysis of carbon taxation, we find significant changes in the global pattern of comparative advantage as a result of differential mitigation costs across sectors, regions, and land types. We find that forest carbon sequestration is the dominant strategy for GHG emissions mitigation globally in the land using sectors. However, when compared to the rest of the world, land-use emissions abatement in the US and China comes disproportionately from agriculture, and, within agriculture, disproportionately from reductions in fertilizerrelated emissions. In the world as a whole, agriculture-related mitigation comes predominantly from reduced methane emissions in the ruminant livestock sector, followed by fertilizer and methane emissions from paddy rice. The results also show how analyses that only consider regional mitigation may underor over-estimate mitigation potential. For example, U.S.-specific analyses likely over-estimate the potential for abatement in agriculture. Finally, we note that this general equilibrium framework provides the research community with a practical methodology for explicit modeling of global land competition and land-based mitigation in comprehensive assessments of greenhouse gas mitigation options. JEL: C68, Q15, Q54.