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Should Zambia produce biodiesel from soybeans ? some insights from an empirical analysis

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  • de Gorter, Harry
  • Drabik, Dusan
  • Timilsina, Govinda R.

Abstract

Facing a huge fiscal burden due to imports of entire petroleum despite the availability of a surplus of agricultural land to produce biofuels, Zambia, a country in Sub-Saharan Africa, has recently introduced a biofuel mandate. But, a number of questions, particularly those related to the economics of biofuels, have not been fully investigated yet. Using an empirical model this study analyzes the economics of meeting the biodiesel mandate through soybean feedstock. The study finds that meeting the biodiesel mandate with biodiesel from soybeans would reduce social welfare because the country's soybean imports would cost more than the expected reduction in petroleum imports. However, if Zambia increases its domestic soybean supply along with its capacity to convert soybean to biodiesel, as well as oil yield, soybean based biodiesel is likely to be welfare-beneficial, even if biodiesel prices are above diesel prices. The study also finds that under current market prices and transportation costs and constraints, the same amount of biodiesel can be produced most cost-effectively with a tax exemption. A blend mandate would be less cost effective, while a biodiesel production subsidy represents the least efficient policy option.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 6498.

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Date of creation: 01 Jun 2013
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Handle: RePEc:wbk:wbrwps:6498

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Keywords: Energy Production and Transportation; Markets and Market Access; Renewable Energy; Emerging Markets; Economic Theory&Research;

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  1. Drabik, Dusan & de Gorter, Harry & Just, David R., 2011. "The Implications of Alternative Biofuel Policies on Carbon Leakage," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland, European Association of Agricultural Economists 114432, European Association of Agricultural Economists.
  2. Rajcaniova, Miroslava & Drabik, Dusan & Ciaian, Pavel, 2013. "How policies affect international biofuel price linkages," Energy Policy, Elsevier, Elsevier, vol. 59(C), pages 857-865.
  3. Havranek, Tomas & Irsova, Zuzana & Janda, Karel, 2012. "Demand for gasoline is more price-inelastic than commonly thought," Energy Economics, Elsevier, Elsevier, vol. 34(1), pages 201-207.
  4. Drabik, Dusan, 2011. "The Theory of Biofuel Policy and Food Grain Prices," Working Papers, Cornell University, Department of Applied Economics and Management 126615, Cornell University, Department of Applied Economics and Management.
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