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On blending mandates, border tax adjustment and import standards for biofuels

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Author Info

  • Eggert, Håkan

    (Department of Economics, School of Business, Economics and Law, Göteborg University)

  • Greaker, Mads

    (Department of Economics, School of Business, Economics and Law, Göteborg University)

Abstract

The transport sector is a major contributor to green house gas (GHG) emissions and its share is increasing. Biofuels may provide an option to replace fossil fuels and generate an increasing worldwide interest. Rich countries like the US and the European Union ha idies for domestic producers, while applying tariffs for some of the foreign producers. Mid income and poor countries do not have binding restrictions on carbon emissions in the Kyoto treaty, but may have great potential for producing biofuels both for domestic and foreign use. In this paper we study trade policies for biofuels. We find that only by combining an import standard with border tax adjustment the government can ensure cost efficient production of biofuels from a global point of view. We also consider a blending mandate. This fundamentally alters the way the market works. For instance, if domestic biofuels production is subsidized, the optimal BTA may be negative.

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File URL: http://hdl.handle.net/2077/21539
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Bibliographic Info

Paper provided by University of Gothenburg, Department of Economics in its series Working Papers in Economics with number 422.

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Length: 25 pages
Date of creation: 09 Dec 2009
Date of revision:
Handle: RePEc:hhs:gunwpe:0422

Contact details of provider:
Postal: Department of Economics, School of Business, Economics and Law, University of Gothenburg, Box 640, SE 405 30 GÖTEBORG, Sweden
Phone: 031-773 10 00
Web page: http://www.handels.gu.se/econ/
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Keywords: Biofuels; Border tax adjustment; Carbon Leakage; Trade policy;

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  1. Ottar MÆstad, 1998. "On the Efficiency of Green Trade Policy," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 11(1), pages 1-18, January.
  2. Searchinger, Timothy & Heimlich, Ralph & Houghton, R. A. & Dong, Fengxia & Elobeid, Amani & Fabiosa, Jacinto F. & Tokgoz, Simla & Hayes, Dermot J. & Yu, Hun-Hsiang, 2008. "Use of U.S. Croplands for Biofuels Increases Greenhouse Gases Through Emissions from Land-Use Change," Staff General Research Papers 12881, Iowa State University, Department of Economics.
  3. Ottar Mæstad, 2001. "Efficient Climate Policy with Internationally Mobile Firms," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 19(3), pages 267-284, July.
  4. Hamelinck, Carlo N & Faaij, Andre P.C., 2006. "Outlook for advanced biofuels," Energy Policy, Elsevier, vol. 34(17), pages 3268-3283, November.
  5. Rajagopal, Deepak & Zilberman, David, 2007. "Review of environmental, economic and policy aspects of biofuels," Policy Research Working Paper Series 4341, The World Bank.
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