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Do Biofuel Subsidies Reduce Greenhouse Gas Emissions?

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  • R. Quentin Grafton
  • Tom Kompas
  • Ngo Van Long

Abstract

Conventional wisdom suggests that subsidising biofuel production will reduce greenhouse gas (GHG) emissions. This paper shows that in many cases, and for a wide range of parameter values, this is not true. Biofuel subsidies can generate supply-side response by fossil fuel producers that accelerates their rate of extraction, even in the case where fossil fuel extraction costs are stock dependent. Thus, policies designed to reduce GHG emissions may, perversely, hasten climate change.

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File URL: https://crawford.anu.edu.au/degrees/idec/working_papers/IDEC10-01.pdf
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Bibliographic Info

Paper provided by International and Development Economics in its series International and Development Economics Working Papers with number idec10-01.

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Length: 38 pages
Date of creation: 2010
Date of revision:
Handle: RePEc:idc:wpaper:idec10-01

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  1. Bahel, Eric & Marrouch, Walid & Gaudet, Gérard, 2013. "The economics of oil, biofuel and food commodities," Resource and Energy Economics, Elsevier, vol. 35(4), pages 599-617.
  2. Hans-Werner Sinn, 2007. "Public Policies against Global Warming," NBER Working Papers 13454, National Bureau of Economic Research, Inc.
  3. Murray C. Kemp & Ngo Van Long, 2007. "Extracting Several Resource Deposits of Unknown Size: Optimal Order," CIRANO Working Papers 2007s-10, CIRANO.
  4. Gérard Gaudet, 2007. "Natural resource economics under the rule of Hotelling," Canadian Journal of Economics, Canadian Economics Association, vol. 40(4), pages 1033-1059, November.
  5. 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.
  6. Santiago J. Rubio & Luisa Escriche, 1998. "- Strategic Pigouvian Taxation, Stock Externalities And Polluting Non-Renewable Resources," Working Papers. Serie EC 1998-23, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  7. Bandyopadhyay, Subhayu & Bhaumik, Sumon K. & Wall, Howard J., 2009. "Biofuel Subsidies: An Open-Economy Analysis," IZA Discussion Papers 4584, Institute for the Study of Labor (IZA).
  8. Sinn, Hans-Werner, . "Das grüne Paradoxon ; Plädoyer für eine illusionsfreie Klimapolitik," Monographs in Economics, University of Munich, Department of Economics, number 19627, April.
  9. Long, Ngo Van & Sinn, Hans-Werner, 1985. "Surprise Price Shifts, Tax Changes and the Supply Behaviour of Resource Extracting Firms," Australian Economic Papers, Wiley Blackwell, vol. 24(45), pages 278-89, December.
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  1. The Green Paradox
    by David Stern in Stochastic Trend on 2010-12-12 11:17:00

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