The economics of trade, biofuel, and the environment
AbstractThe introduction of renewable biofuels was associated with global food crisis and unintended environmental consequences. This paper incorporates energy environment and agricultural sector to the classic Hecksher-Ohlin model to address these issues. A household production function model was introduced to model consumer energy choices and concern about externalities related to climate change and open space. The conceptual model links energy and food markets and derives guidelines for the development of climate change and land-use policies. The results suggest that globalization and capital flows increase demand for energy, leading to decline in food production, increase in food prices, and loss of environmental land. Globally optimal outcomes may require introducing an emission tax and a land-use tax. The introduction of these policies may undermine the factor price equalization theorem. Policies that allow enhancing either agriculture productivity (e.g., agriculture biotechnology) or biofuel productivity (e.g., second-generation biofuels), are shown to lessen the resource constraint associated with the cost of introducing renewable energy.
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Bibliographic InfoPaper provided by University of California at Berkeley, Department of Agricultural and Resource Economics and Policy in its series CUDARE Working Paper Series with number 1100.
Length: 29 pages
Date of creation: 2010
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Other versions of this item:
- Hochman, Gal & Sexton, Steven & Zilberman, David D., 2010. "The Economics of Trade, Biofuel, and the Environment," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt5h03r349, Department of Agricultural & Resource Economics, UC Berkeley.
- NEP-AGR-2010-03-28 (Agricultural Economics)
- NEP-ALL-2010-03-28 (All new papers)
- NEP-ENV-2010-03-28 (Environmental Economics)
- NEP-RES-2010-03-28 (Resource Economics)
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- Schmitz, Troy G. & Schmitz, Andrew, 2012. "The Complexities of the Interface between Agricultural Policy and Trade," Estey Centre Journal of International Law and Trade Policy, Estey Centre for Law and Economics in International Trade, vol. 13(1).
- Bouët, Antoine & Dimaranan, Betina V. & Valin, Hugo, 2010. "Modeling the global trade and environmental impacts of biofuel policies," IFPRI discussion papers 1018, International Food Policy Research Institute (IFPRI).
- Hochman, Gal & Rajagopal, Deepak & Timilsina, Govinda & Zilberman, David, 2011. "The role of inventory adjustments in quantifying factors causing food price inflation," Policy Research Working Paper Series 5744, The World Bank.
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