Evaluation of Economic, Land Use, and Land Use Emission Impacts of Substituting Non-GMO Crops for GMO in the US Farzad Taheripour Harry Mahaffey Wallace E. Tyner Purdue University June 2015

GMO Crops in the US The United States is a leading country in producing GMO crops with a 40% share in global area planted to GMO crops in 2014. In 2014, 94% of soybeans, 91% of cotton, and 89% of corn produced in US were GMO crops.

What happens if GMO crops were no longer available? Lower crop production on existing cropland Reduction in US net crop exports Forest and pasture land conversion to cropland and associated GHG emissions Higher US and global crop prices Increase in food prices Increases in pesticides and other inputs

Research objective The main objective of this study was to evaluate what would be the economic and environmental consequences of losing the GMO traits in the US for the major crops of corn, soybeans, and cotton. We evaluated changes in land use, GHG emissions, commodity prices, food prices, production, and welfare

Approach The first step was to obtain from the literature a range of estimates of the yield loses if we move away from GMO traits in the US. The second step was to introduce the yield losses obtained in the first step into GTAP-BIO to quantify the land use and economic impacts of banning GMO traits in the US.

Literature Review Extensive literature approaching these issues from various perspectives Two broad categories: Analysis of farm level impacts and issues related to GMO adoption Analysis of economic impacts of GMO technology Evaluation of welfare gains using PE models Analysis done using CGE models

Early PE and CGE Conclusions PE models generally conclude that GMO adoption increases crop supplies generating welfare gains. The magnitude of the gains vary by study and by crop. CGE models also show welfare gains and also suggest land use impacts, but these were not quantified.

Recent Research Combining Econometrics and PE Models By developing counterfactual partial equilibrium analysis built on the estimated yield gains of GMO crops, these papers conclude that agricultural biotechnology made significant contribution in lowering food prices, preserving deforestation, and saving GHG emissions associated with land use changes (Sexton and Zilberman, and Barrows, Sexton, and Zilberman).

Estimated Negative Productivity Shocks in the US

The GTAP-BIO Model We used the recent model version from Taheripour and Tyner 2013 This version also was used by the CARB for their calculations of biofuel induced land use changes The model has been extensively modified to trace allocation of land resources (including forest, pasture and cropland) by country and Agro-ecological Zone (AEZ) at the global scale.

Model Modifications The model uses regional land transformation elasticities which are tuned to recent observations on changes in land cover and crop harvested areas. It uses a set of regionalized extensive margins which are obtained from a biophysical model and used to evaluate the productivities of new and existing cropland. The model is enhanced to trace demands for and supplies of animal feeds (including biofuel by-products and oilseed meals) and substitution among these items. The new model takes into account substitution among vegetable oils on the demand side and allows consumers to switch among different types of vegetable oils in response to their relative prices.

Drivers of land use change When there is a sizeable increase in demand for a commodity (e.g., maize, rapeseed, etc.), that demand increase causes an increase in the price of the commodity unless the commodity supply is perfectly elastic. The price increase causes some combination of five main market mediated responses.

Drivers of land use change: Market mediated responses First, with a higher commodity price, consumption normally would fall. Second, with a higher price for this commodity, there can be switching among crops so that more of this crop is produced and less of other crops. Third, with a higher demand for this commodity, more cropland can be needed to meet that increased demand, and this cropland can come from pasture or forest converted to cropland. This is referred to as a change on the extensive margin.

Drivers of land use change: Market mediated responses Fourth, with the higher commodity demand, the existing cropland might be farmed more intensively such as via double cropping or irrigation or other investments in increased productivity. This is referred to as a change on the intensive margin. An increase in intensive margin on existing cropland reduces demand for land conversion. Fifth, there can be impacts on international trade of the commodity and of substitute commodities, and that could induce land use changes across the world.

Simulations Reference, average, and conservative yield shocks in the US (base case) Fixed trade case – we only shock US yields because we do not have data globally, but the impacts would be global – this case is aimed at establishing a proxy for global impacts Fixed food case – food consumption not allowed to change Both trade and food consumption fixed

Land Use Change Impacts (1000 hectares)

Comparison of Land Use Changes (cropland)

GMO vs US Ethanol Mandate Emissions

GMO Emissions as a Share of Total and Ag Emissions GMO loss emissions would be 13-17% of total ag emissions for the reference case and 7-10% for the average case.

Production Changes Coarse grains (mainly corn) and soybean production falls Sorghum production increase from a small base Production of all other crops falls

Price Changes These are very high price increases for a CGE model Price increases for reference and average cases are higher than those estimated for the US ethanol mandate.

Food Price Increases Commodity prices represent only a small fraction of food costs. For the fixed trade case, food prices increase 1% and 1.7% for the average and reference cases. This increase amounts to $14 - $24 billion per year for US consumers.

Welfare Impacts (million 2004$) For the reference case US welfare falls $1.1 - $4.9 bil. For the same case, global welfare falls $4.3 - $5.9 bil.

Conclusions Without GMO crops, a significant amount of land would be converted from other crops, forest, pasture, and cropland pasture. Induced land use change emissions would be larger than the total US ethanol program. The emissions would range from 7 to 17% of total ag emissions. Corn and soybean prices would increase as much as 28 and 22% respectively. US food costs would go up $14-$24 billion/year.