An assessment of the influence of bioenergy and marketed land amenity values on land uses in the Midwestern US

There is substantial concern that bioenergy policies could swamp other considerations, such as environmental values, and lead to large-scale conversions of land from forest to crops. This study examines how bioenergy and marketed environmental rents for forestland potentially influence land use in the Midwestern US. We hypothesize that current land uses reflect market values for environmental benefits of forestland, so that the marketed component of the environmental value of land can be captured as the difference between Census land values and value of land as a timber asset. We use a multinomial logit model to estimate the land use shares of forests, crops and urban in Ohio, Indiana, and Illinois. The results show that marketed environmental rents increase forestland relative to cropland. To examine the effects of biofuels on land use, we conduct policy analysis by altering future land rents. Our baseline scenario projects that urban development uses mostly cropland, but with higher crop rents resulting from increased demand for bioenergy, there will be significant losses of forestland to urban and cropland. On the other hand, if marketed environmental rents grow while crop rents are maintained at their baseline value, urban growth will occur, primarily at the expense of cropland.