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Title: Analysis of Policy Options for Environmental Objectives through Management of Bt Cotton Adoption in the Southeastern US

Authors: Michele Marra Bryan J. Hubbell US Gerald A. Carlson
Dept. of Agricultural and Resource Economics Environmental Protection Agency Dept. of Agriculturaland Resource Economics
N.C. State University Research Triangle Park N.C. State University
Raleigh, NC North Carolina Raleigh, NC bhubbell@epa.go


This paper examines the potential demand for a new biotechnology, Bt cotton, in the Southeast from information gathered in the first year of commercialization. We combine revealed preference (RP) data on adoption of Bt cotton varieties with stated preference (SP) data on willingness to adopt at varying technology prices using a double-bounded maximum likelihood estimation procedure. While the actual market price for Bt cotton was set at an additional $32/acre above seed costs in 1996, analysis of stated preferences for adoption indicates that non-adopting cotton growers would have been willing to pay, on average, between $15 and $24/acre depending upon education level, location, and experience with pyrethroid insecticide resistance. The combined RP/SP data give average willingness to pay estimates between $22 and $40/acre. Results are used to determine the costs of subsidizing Bt cotton adoption to achieve area-wide insecticide reduction goals. Reducing cotton insecticide applications by 50 percent for the Southeast would require a $14/acre subsidy, with total program costs of $30 million. The estimated subsidy level to achieve the same reduction in herbicide use was higher in the Upper Southeast (North Carolina and South Carolina) than it was in the Lower Southeast (Alabama and Georgia). The predicted demand relationship could also be used to estimate the tax required to reduce Bt cotton use. This might be important for regional management of cotton insect resistance development to Bt.