Leakage and Comparative Advantage Implications of Agricultural Participation in Greenhouse Gas Emission Mitigation

The world is moving toward efforts to reduce greenhouse gas emissions. Net emission reduction efforts may involve the agricultural sector through options such as planting of trees, crop and livestock management changes, and production of biofuels. However, such options can be competitive with domestic food production. In a free trade arena, reduced domestic food production could stimulate increased production and exports in other countries, which are not pursuing similar mitigative courses of action. As a consequence, net emission reductions in implementing countries may be offset by activities stimulated in other countries. In addition producers in countries where agriculture is subject to greenhouse gas mitigation have expressed concern about their competitive position to countries which are not trying to reduce net emissions. In this study, we examine the competitive effects of differential mitigation efforts on agricultural food production and on international trade. We assume that the average U.S. production cost increase of mitigation compliance would also occur in other complying countries. Three alternative implementation are considered: 1) unilaterally by the U.S., 2) by all