US agricultural sector analysis on pesticide externalities – the impact of climate change and a Pigovian tax

Residuals from agricultural pesticides threaten the environment and human health. Climate change alters these externalities because it affects pest pressure and pesticide application rates. This study examines damages from pesticide externalities in US agriculture under different climate projections and the effects of alternative regulations. We find divergent impacts of externality regulation and climate change on agricultural production in the US. A Pigovian tax on pesticide externalities generally increases crop production cost, but farm revenue improves because of increased commodity prices. Climate change generally decreases US farm revenue because production increases and prices fall. Results also show a heterogeneous effect of climate change on pest management intensities across major crops.