CO2-driven crop comparative advantage and planting decision: Evidence from US cropland

•This study estimates the CO2 effects on crop acreage.•This study finds that an elevation in CO2 levels reduces corn acreage and expands soybean acreage.•Neglecting the acreage shift would skew the impact of CO2 fertilization on corn and soybean production.•The CO2-driven corn acreage shrinkage involve switching to C3 crops, with soybean expansion achieved by replacing C4 crops.•The findings have important implications for multiple sectors and market dynamics. In addition to the well-known per-acre yield benefits, elevated CO2 also influences cropping patterns. An important characteristic of CO2 fertilization is that C3 crops exhibit a more pronounced response to elevated CO2 levels in comparison to C4 crops. Such differential responses of C3 and C4 crops to increasing CO2 levels are likely to alter cropping patterns in favor of C3 crops, as CO2 provides C3 crops with a comparative advantage. This study empirically investigates the CO2 effects on the corn and soybean acreage, the most representative C4 and C3 crops, in the U.S. Employing an instrumental variable that exploits exogenous variation driven by wind, I find that a one-ppm rise in CO2 significantly reduces the corn acreage by 1.19% and increases the soybean acreage by 1.51%. The CO2-driven shrinkage in corn acreage may involve switching to soybeans, spring wheat, and cotton, with CO2-driven soybean expansion achieved by replacing corn and sorghum. Neglecting the CO2-driven acreage shift would lead, according to the forecast simulations, to an underestimation of the CO2 fertilization effect on soybean production and an overestimation of the CO2 fertilization effect on corn production. Given the diverse uses of corn and soybeans, such shifts in their acreage and production could have important implications for multiple sectors and market dynamics.