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

Abstract

The Acid Rain Program (ARP) cut sulfur dioxide (SO2) emissions from power plants in the United States, with considerable benefits. We show this also reduced ambient sulfate levels, which lowered agriculture productivity through decreased soil sulfur. Using plant-level SO2 emissions and an atmospheric transport model, we estimate the relationship between airborne sulfate levels and yields for corn and soybeans. We estimate crop revenue losses for these two crops at around $1–$1.5 billion per year, with accompanying decreases in land value. Back-of-the-envelope calculations of the costs to replace lost sulfur suggest producer responses were limited and suboptimal. (JEL Q15, Q24, Q53, Q58)