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Biofuel Economics in a Setting of Multiple Objectives & Unintended Consequences

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Author Info

  • William K. Jaeger

    (Oregon State University)

  • Thorsten M. Egelkraut

    (Oregon State University)

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    Abstract

    This paper examines biofuels from an economic perspective and evaluates the merits of promoting biofuel production in the context of the policies’ multiple objectives, life-cycle implications, pecuniary externalities, and other unintended consequences. The policy goals most often cited are to reduce fossil fuel use and to lower greenhouse gas emissions. But the presence of multiple objectives and various indirect effects complicates normative evaluation. To address some of these complicating factors, we look at several combinations of policy alternatives that achieve the same set of incremental gains along the two primary targeted policy dimensions, making it possible to compare the costs and cost-effectiveness of each combination of policies. For example, when this approach is applied to U.S.-produced biofuels, they are found to be 14 to 31 times as costly as alternatives like raising the gas tax or promoting energy efficiency improvements. The analysis also finds the scale of the potential contributions of biofuels to be extremely small in both the U.S. and EU. Mandated U.S. corn ethanol production for 2025 reduces U.S. petroleum input use by 1.75%, and would have negligible net effects on CO2 emissions; and although EU imports of Brazilian ethanol may look better given the high costs of other alternatives, this option is equivalent, at most, to a 1.20% reduction in EU gasoline consumption.

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    Bibliographic Info

    Paper provided by Fondazione Eni Enrico Mattei in its series Working Papers with number 2011.37.

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    Date of creation: May 2011
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    Handle: RePEc:fem:femwpa:2011.37

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    Related research

    Keywords: Biofuel; Biodiesel; Cost-Effectiveness; Indirect Land Use Change Effects; Net Energy; Multiple Objectives; Ethanol; Ghg;

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    Cited by:
    1. Sharp, Benjamin E. & Miller, Shelie A., 2014. "Estimating maximum land use change potential from a regional biofuel industry," Energy Policy, Elsevier, vol. 65(C), pages 261-269.
    2. Nair, Sujith & Paulose, Hanna, 2014. "Emergence of green business models: The case of algae biofuel for aviation," Energy Policy, Elsevier, vol. 65(C), pages 175-184.

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