This paper will report on the results of a quantitative assessment of how US agriculture and forestry might be affected by opportunities for GHG mitigation, and biofuel production along with energy price increases. Specifically, we examine agricultural sensitivity to carbon equivalent dioxide emission reduction prices and liquid fuel and coal prices.

Major conclusions of this study are:

1. Biofuels and carbon sequestration are the activities that offer the largest contribution from agriculture and forestry.

2. Higher energy prices greatly stimulate biofuel production.

a) At low offset and fuel prices biofuels largely arise from grains while energy crops are supplied for electricity production. While at high prices, cellulosic ethanol becomes much more important.

b) Across the fuel prices when carbon prices are high enough the largest share of carbon offsets come from biomass fired electric power generation.

3. Soil and forestry based carbon sequestration are competitive at low carbon prices.

4. Activity stimulated by carbon and energy price increases generally improves agriculture and forestry producers’ welfare and decreases consumers’ welfare.

5. Agricultural emission offsets and biofuels are competitive with food production and exports leading to higher commodity prices and lower exports.

6. Environmental quality is likely to increase with increases in mitigation efforts and biofuel production in the form of diminished erosion, livestock numbers, and fertilizer use along with altered crop mix.