Did the Renewable Fuel Standard shift on-farm conservation practices?

Sungmin Cheu and Matthew Gammans

The Renewable Fuel Standard (RFS) marked a watershed moment in US agriculture, creating a large new market for US corn and an opportunity for agriculture to contribute to clean fuel goals. There’s been a great deal of research on the economic and environmental consequences of this policy. One question that isn’t often asked is how the emergence of the U.S. ethanol market affected farmers’ decisions to adopt conservation practices. In our recent paper in Applied Economic Perspectives and Policy, “Cash crop demand and conservation practices: the effect of ethanol expansion on cover cropping”, we analyze recent trends in ethanol production and cover cropping rates to estimate the effect of ethanol’s growth on the share of corn and soy fields that are cover cropped.

Cover cropping is the practice of planting a non-harvested crop over the winter months. Cover crops have many environmental benefits, including controlling soil erosion, improving water quality, and increasing soil carbon sequestration. Despite promotion by USDA programs like EQIP and CSP, adoption remains low: just 5.1% of U.S. cropland was cover cropped in 2017. In our sample of Midwestern states, cover cropping rates are even lower, averaging 1.8% over the 2006-2015 period. We obtain data on regional cover cropping rates from the Operational Tillage Information System (OpTIS) dataset, which uses satellite images to estimate the share of cropland that is covered cropped each winter. Figure 1 shows trends in the share of acreage that is cover cropped over the 10 years following passage of the Renewable Fuel Standard.

Figure 1: Trends in cover cropping by state, 2006-2015

Source. Operational Tillage Information System (OpTIS)

Most corn used for ethanol production is grown within 25 miles of the ethanol refinery. This means that new ethanol refineries boost local demand, leading to slightly higher corn prices received by nearby farmers. McNew and Griffith (2005) estimate that a new ethanol facility increases the local corn price by 12.5 cents per bushel in the upper Midwest. We use the total capacity (measured in million gallons per year), i.e. the maximum amount of ethanol the refineries in an area could produce, as our measure of regional ethanol production. Figure 2 shows how this variable has changed across time and locations as new plants were constructed.

Figure 2: Growth in installed ethanol production capacity, 2006 to 2015

We combine data on cover cropping from the OpTis dataset with data on regional ethanol production published by two ethanol industry groups, the Renewable Fuels Association (RFA) and BBI International (BBI). By comparing how rates of cover cropping change in a region as more ethanol facilities are constructed, while controlling for weather and state-level time trends, we can see how a new ethanol plant affects cover crop planting rates. We find that a new 100 million gallon/year ethanol plant would lead to a 0.35 percentage point decline in the nearby cover cropping rate. For a typical region, this amounts to around 857 fewer acres cover-cropped each year.

So what can we say about the long-run effects of the post-RFS ethanol boom on cover cropping? To answer this, we simulate cover cropping rates with ethanol production fixed at 2005 levels and compare that to simulations that account for the large increase in ethanol production between 2005 and 2015. We find that the “missing” cover cropped acres are clustered in northern Iowa and Illinois, important corn-growing regions that saw a large expansion of ethanol production between 2005 and 2015. In total, we estimate that the post-RFS ethanol buildout reduced cover cropped area by 570,000 acres in 2015—roughly 20% of the USDA’s EQIP enrollment that year. Using COMET-Planner estimates of the carbon benefits of cover cropping, this shortfall translates to 100,000 metric tons of foregone CO₂-equivalent sequestration annually.

Figure 3: Counterfactual changes in cover cropping areas (thousand acres) if ethanol production were fixed at 2005 levels

Our findings suggest that conservation incentives don’t operate in a vacuum. Policies that raise the return to cash crops can reduce the appeal of practices like cover cropping if farmers believe they come with yield risks or management burdens. To be effective, future policies will need to account for this interaction, perhaps by tying low-carbon fuel subsidies more tightly to verified conservation outcomes. On this front, there’s reason for optimism: the 45Z tax credit for sustainable aviation fuel encourages domestic feedstock production, particularly corn and soy, but ties eligibility to a low carbon intensity score, something that practices like cover cropping can help achieve.

Original Paper: Cheu, S. and Gammans, M., 2025. Cash crop demand and conservation practices: The effect of ethanol expansion on cover cropping. Applied Economic Perspectives and Policy.https://onlinelibrary.wiley.com/doi/full/10.1002/aepp.13537

For more information:

Chen, X. and Khanna, M., 2013. Food vs. fuel: The effect of biofuel policies. American Journal of Agricultural Economics, 95(2), pp.289-295.

McNew, K. and Griffith, D., 2005. Measuring the impact of ethanol plants on local grain prices. Applied Economic Perspectives and Policy, 27(2), pp.164-180.

Wallander, S., Smith, D., Bowman, M. and Claassen, R., 2021. Cover crop trends, programs, and practices in the United States.