Adaptation to Environmental Change: Agriculture and the Unexpected Incidence of the Acid Rain Program

The Acid Rain Program (ARP) cut sulfur dioxide (SO2) emissions from coal-fired power plants in the Midwest and Eastern United States. The ARP likely benefitted the economy in several ways, including improved human health and a reduction in environ- mental damages from “acid rain”. However, decreased ambient SO2 negatively affected the agricultural sector by shifting the abundance of sulfur, an important nutrient in crop production. We observe decreases in the value of agricultural land, suggesting cutting SO2 generated output losses, reduced long-run farm profits, and shaped regional land prices. We find limited adjustment to the new sulfur cycle, showing producers were slow to adapt to changing environmental conditions. We compare changes over time in corn and soybean yields in counties by proximity to ARP-regulated power plants. The basic model with linear treatment effects show a standard deviation in- crease in exposure to ARP-regulated plants causes crop losses of 6% for corn and 5% for soybean. Semi-parametric estimates show the most extreme counties lost 20% for corn and 15% for soybean. Additional variation using wind direction and soil traits supports the ARP as the primary mechanism of agricultural losses. Presenter: Nicholas J. Sanders, Cornell University