Does a Renewable Fuel Standard for Biofuels Reduce Climate Costs?
AbstractRecent literature on biofuels has questioned whether biofuels policies are likely to reduce the negative effects of climate change. In this paper we make two contributions to the literature. First, we study the market effects of a renewable fuel standard in a dynamic model taking into account that oil is a non-renewable resource. Second, we model emissions from land use change explicitly when we evaluate the climate effects of the renewable fuel standard. We find that global extraction of oil is postponed as a consequence of the renewable fuel standard. Thus, if emissions from biofuels are negligible, the standard will have beneficial climate effects. Furthermore, we find that the standard also tends to reduce total fuel (i.e., oil plus biofuels) consumption initially. Hence, even if emissions from biofuels are non-negligible, a renewable fuel standard may still reduce climate costs. In fact our simulations show that even for biofuels that are almost as emissions-intensive as oil, a renewable fuel standard has beneficial climate effects.
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Bibliographic InfoPaper provided by Fondazione Eni Enrico Mattei in its series Working Papers with number 2014.32.
Date of creation: Mar 2014
Date of revision:
Blending Mandate; Renewable Fuel Standard; Biofuels; Climate Costs;
Other versions of this item:
- Mads Greaker & Michael Hoel & Knut Einar Rosendahl, 2012. "Does a Renewable Fuel Standard for Biofuels Reduce Climate Costs?," CESifo Working Paper Series 4030, CESifo Group Munich.
- Q27 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Issues in International Trade
- Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
- Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters
This paper has been announced in the following NEP Reports:
- NEP-AGR-2014-04-18 (Agricultural Economics)
- NEP-ALL-2014-04-18 (All new papers)
- NEP-ENE-2014-04-18 (Energy Economics)
- NEP-ENV-2014-04-18 (Environmental Economics)
- NEP-REG-2014-04-18 (Regulation)
- NEP-RES-2014-04-18 (Resource Economics)
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