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Biofuels for all? Understanding the Global Impacts of Multinational Mandates

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Author Info

  • Hertel, Thomas W.
  • Tyner, Wallace E.
  • Birur, Dileep K.

Abstract

The recent rise in world oil prices, coupled with heightened interest in the abatement of greenhouse gas emissions, has led to a sharp increase in domestic biofuels production around the world. Previous authors have devoted considerable attention to the impacts of these policies on a country-by-country basis. However, there are also strong interactions among these programs, as they compete in world markets for feedstocks and ultimately for a limited supply of global land. In this paper, we evaluate the interplay between two of the largest biofuels programs, namely the renewable fuel mandates in the US and the EU. We examine how the presence of each of these programs influences the other, and also how their combined impact influences global markets and land use around the world. We begin with an analysis of the origins of the recent bio-fuel boom, using the historical period from 2001-2006 for purposes of model validation. This was a period of rapidly rising oil prices, increased subsidies in the EU, and, in the US, there was a ban on the major competitor to ethanol for gasoline additives. Our analysis of this historical period permits us to evaluate the relative contribution of each of these factors to the global biofuel boom. We also use this historical simulation to establish a 2006 benchmark biofuel economy from which we conduct our analysis of future mandates. Our prospective analysis of the impacts of the biofuels boom on commodity markets focuses on the 2006-2015 time period, during which existing investments and new mandates in the US and EU are expected to substantially increase the share of agricultural products (e.g., corn in the US, oilseeds in the EU, and sugar in Brazil) utilized by the biofuels sector. In the US, this share could more than double from 2006 levels, while the share of oilseeds going to biodiesel in the EU could triple. Having established the baseline 2006-2015 scenario, we proceed to explore the interactions between the US and EU policies. This involves decomposing the contributions of each set of regional policies to the global changes in output and land use. The most dramatic interaction between the two sets of policies is for oilseed production in the US, where the sign of the output change is reversed in the presence of EU mandates (rising rather than falling). In other sectors, the interaction is more modest. However, when it comes to the impacts of these combined mandates on third economies, the two policies combine to have a much greater impact than just the US or just the EU policies alone.

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Bibliographic Info

Paper provided by American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association) in its series 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida with number 6526.

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Date of creation: 2008
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Handle: RePEc:ags:aaea08:6526

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Keywords: Resource /Energy Economics and Policy;

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References

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Citations

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Cited by:
  1. Junko Mochizuki & John F. Yanagida & Makena Coffman, 2013. "Market, Welfare and Land-Use Implications of Lignocellulosic Bioethanol in HawaiÔi," Working Papers 2013-10, University of Hawaii Economic Research Organization, University of Hawaii at Manoa.
  2. Delzeit, Ruth & Britz, Wolfgang & Holm-Müller, Karin, 2011. "Modelling regional input markets with numerous processing plants: The case of green maize for biogas production in Germany," Discussion Papers 162892, University of Bonn, Institute for Food and Resource Economics.
  3. Cororaton, Caesar B. & Timilsina, Govinda R., 2012. "Impacts of large-scale expansion of biofuels on global poverty and income distribution," Policy Research Working Paper Series 6078, The World Bank.
  4. Golub, Alla A. & Hertel, Thomas W. & Rose, Steven K. & Sohngen, Brent, 2008. "Biofuel Growth: Global Greenhouse Gas Emissions Impacts from Changes in Forest Carbon Stocks," 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida 47450, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  5. Cui, Jingbo & Lapan, Harvey E. & Moschini, GianCarlo & Cooper, Joseph C., 2010. "Welfare impacts of alternative biofuel and energy policies," 2010 Annual Meeting, July 25-27, 2010, Denver, Colorado 61138, Agricultural and Applied Economics Association.
  6. Ujjayant Chakravorty & Marie-H�l�ne Hubert & Linda N�stbakken, 2009. "Fuel Versus Food," Annual Review of Resource Economics, Annual Reviews, vol. 1(1), pages 645-663, 09.
    • Chakravorty, Ujjayant & Hubert, Marie-Helene & Nostbakken, Linda, 2009. "Fuel versus Food," Working Papers 2009-20, University of Alberta, Department of Economics.
  7. Louhichi, Kamel, 2012. "Impact of EU biofuel policies on the French arable sector: A micro-level analysis using global market and farm-based supply models," Revue d'Etudes en Agriculture et Environnement, Editions NecPlus, vol. 93(03), pages 233-272, September.
  8. Valeria Costantini & Graziana Dizonno, 2010. "Bioenergy, Agriculture and the Developing Countries," QA - Rivista dell'Associazione Rossi-Doria, Associazione Rossi Doria, issue 1, March.
  9. Yeh, Sonia & Sumner, Daniel A. & Kaffka, Stephen R. & Ogden, J & Jenkins, Bryan M., 2009. "Implementing Performance-Based Sustainability Requirements for the Low Carbon Fuel Standard – Key Design Elements and Policy Considerations," Institute of Transportation Studies, Working Paper Series qt6bw3136s, Institute of Transportation Studies, UC Davis.
  10. Antoine BOUET & Betina DIMARANAN & Hugo VALIN, 2009. "Biofuels in the world markets: A Computable General Equilibrium assessment of environmental costs related to land use changes," Working Papers 6, CATT - UPPA - Université de Pau et des Pays de l'Adour, revised Nov 2009.
  11. Thaeripour, Farzad & Hertel, Thomas W. & Tyner, Wallace E. & Beckman, Jayson F. & Birur, Dileep K., 2008. "Biofuels and their By-Products: Global Economic and Environmental Implications," 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida 6452, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  12. Hertel, Thomas W., 2010. "The Global Supply and Demand for Agricultural Land in 2050: A Perfect Storm in the Making?," 2010 Annual Meeting, July 25-27, 2010, Denver, Colorado 92639, Agricultural and Applied Economics Association.
  13. Lapan, Harvey E. & Moschini, GianCarlo, 2009. "Biofuels Policies and Welfare: Is the Stick of Mandates Better Than the Carrot of Subsidies?," Staff General Research Papers 13076, Iowa State University, Department of Economics.

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