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Investment in Cellulosic Biofuel Refineries: Do Waivable Biofuel Mandates Matter?

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Author Info

  • Miao, Ruiqing
  • Hennessy, David A.
  • Babcock, Bruce A.

Abstract

We develop a conceptual model to study the impact of mandate policies on stimulating investment in cellulosic biofuel refineries. In a two-period framework, we compare the first-period investment level (FIL) under three scenarios: laissez-faire, non-waivable mandate (NWM) policy, and waivable mandate (WM) policy. Results show that when plant-level marginal costs are increasing then both NWM policy and WM policy may stimulate FIL. The WM policy has a smaller impact than does the NWM policy. When the plant-level marginal costs are constants, however, WM policy does not increase FIL but does increase the expected profit of more efficient investors.

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Bibliographic Info

Paper provided by Iowa State University, Department of Economics in its series Staff General Research Papers with number 34756.

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Date of creation: 01 May 2012
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Publication status: Published in American Journal of Agricultural Economics, February 2012,
Handle: RePEc:isu:genres:34756

Contact details of provider:
Postal: Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070
Phone: +1 515.294.6741
Fax: +1 515.294.0221
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Web page: http://www.econ.iastate.edu
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Keywords: Investment; cellulosic biofuels; Renewable Identification Numbers; waivable mandate.;

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Cited by:
  1. Moschini, GianCarlo & Cui, Jingbo & Lapan, Harvey, 2012. "Economics of Biofuels: An Overview of Policies, Impacts and Prospects," Staff General Research Papers 35548, Iowa State University, Department of Economics.
  2. Tristan Skolrud & Gregmar Galinato & Suzette Galinato & Richard Shumway & Jonathan Yoder, 2014. "The Role of Market Structure and Federal Renewable Fuel Standards in the Growth of the Cellulosic Biofuel Sector," Working Papers 2014-02, School of Economic Sciences, Washington State University.

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