Vegetable Spirits and Energy Policy

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Abstract

This study investigates the extent to which the 2005 Energy Policy Act, specifically the ethanol mandate, contributed to the rise in farmland values. We use the location of new ethanol plants to identify the capitalization effect of the mandate by these spatially advantaged operations. We use a difference-in-difference propensity score matching estimator to control for the non-random selection of ethanol production facilities. The empirical strategy uses farmland parcel values from the 2001–7 June Agriculture Survey. We find that new ethanol facilities had no effect on nearby farmland values prior to the mandate but had statistically significant effects after the policy.

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