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Investment in Cellulosic Biofuel Refineries: Do Waivable Biofuel Mandates Matter?

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  • Ruiqing Miao
  • David A. Hennessy
  • Bruce A. Babcock

Abstract

We develop a conceptual model to study the impact of mandate policies on stimulating investment in cellulosic biofuel refineries. In a two-period framework, we compare the first-period investment level (FIL) under three scenarios: laissez-faire, non-waivable mandate (NWM) policy, and waivable mandate (WM) policy. Results show that when plant-level marginal costs are increasing then both NWM policy and WM policy may stimulate FIL. The WM policy has a smaller impact than does the NWM policy. When the plant-level marginal costs are constants, however, WM policy does not increase FIL but does increase the expected profit of more efficient investors. Copyright 2012, Oxford University Press.

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File URL: http://hdl.handle.net/10.1093/ajae/aar142
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Bibliographic Info

Article provided by Agricultural and Applied Economics Association in its journal American Journal of Agricultural Economics.

Volume (Year): 94 (2012)
Issue (Month): 3 ()
Pages: 750-762

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Handle: RePEc:oup:ajagec:v:94:y:2012:i:3:p:750-762

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Cited by:
  1. Moschini, GianCarlo & Cui, Jingbo & Lapan, Harvey, 2012. "Economics of Biofuels: An Overview of Policies, Impacts and Prospects," Staff General Research Papers 35548, Iowa State University, Department of Economics.

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