IDEAS home Printed from https://ideas.repec.org/a/ags/aieabj/146276.html
   My bibliography  Save this article

Economics of Biofuels: An Overview of Policies, Impacts and Prospects

Author

Listed:
  • Moschini, GianCarlo
  • Cui, Jingbo
  • Lapan, Harvey E.

Abstract

This paper provides an overview of the economics of biofuels. It starts by describing the remarkable growth of the biofuel industry over the last decade, with emphasis on developments in the United States, Brazil and the European Union, and it identifies the driving role played by some critical policies. After a brief discussion of the motivations that are commonly argued in favor of biofuels and biofuel policies, the paper presents an assessment of the impacts of biofuels from the economics perspective. In particular, the paper explains the basic analytics of biofuel mandates, reviews several existing studies that have estimated the economic impacts of biofuels, presents some insights from a specific model, and outlines an appraisal of biofuel policies and the environmental impacts of biofuels. The paper concludes with an examination of several open issues and the future prospects of biofuels.

Suggested Citation

  • Moschini, GianCarlo & Cui, Jingbo & Lapan, Harvey E., 2012. "Economics of Biofuels: An Overview of Policies, Impacts and Prospects," Bio-based and Applied Economics Journal, Italian Association of Agricultural and Applied Economics (AIEAA), vol. 1(3), pages 1-28, December.
  • Handle: RePEc:ags:aieabj:146276
    DOI: 10.22004/ag.econ.146276
    as

    Download full text from publisher

    File URL: https://ageconsearch.umn.edu/record/146276/files/11143-22610-1-PB.pdf
    Download Restriction: no

    File URL: https://libkey.io/10.22004/ag.econ.146276?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Chen, Xiaoguang & Huang, Haixiao & Khanna, Madhu & Onal, Hayri, 2010. "Meeting the Mandate for Biofuels: Implications for Land Use and Food and Fuel Prices," 2010 Annual Meeting, July 25-27, 2010, Denver, Colorado 61629, Agricultural and Applied Economics Association.
    2. Duffield, James A. & Collins, Keith J., 2006. "Evolution of Renewable Energy Policy," Choices: The Magazine of Food, Farm, and Resource Issues, Agricultural and Applied Economics Association, vol. 21(1), pages 1-6.
    3. Gardner Bruce, 2007. "Fuel Ethanol Subsidies and Farm Price Support," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 5(2), pages 1-22, December.
    4. Amani Elobeid & Simla Tokgoz & Dermot J. Hayes & Bruce A. Babcock & Chad E. Hart, 2006. "Long-Run Impact of Corn-Based Ethanol on the Grain, Oilseed, and Livestock Sectors: A Preliminary Assessment, The," Center for Agricultural and Rural Development (CARD) Publications 06-bp49, Center for Agricultural and Rural Development (CARD) at Iowa State University.
    5. Delucchi, Mark A. & Murphy, James J., 2008. "US military expenditures to protect the use of Persian Gulf oil for motor vehicles," Energy Policy, Elsevier, vol. 36(6), pages 2253-2264, June.
    6. Jingbo Cui & Harvey Lapan & GianCarlo Moschini & Joseph Cooper, 2011. "Welfare Impacts of Alternative Biofuel and Energy Policies," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 93(5), pages 1235-1256.
    7. Hayes, Dermot J. & Babcock, Bruce A. & Fabiosa, Jacinto F. & Tokgoz, Simla & Elobeid, Amani E. & Yu, Tun-Hsiang (Edward) & Dong, Fengxia & Hart, Chad E. & Chavez, Eddie C. & Pan, Suwen & Carriquiry, M, 2009. "Biofuels: Potential Production Capacity, Effects on Grain and Livestock Sectors, and Implications for Food Prices and Consumers," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 41(2), April.
    8. Thaeripour, Farzad & Hertel, Thomas W. & Tyner, Wallace E. & Beckman, Jayson F. & Birur, Dileep K., 2008. "Biofuels and their By-Products: Global Economic and Environmental Implications," 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida 6452, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    9. Geoffrey Heal, 2010. "Reflections--The Economics of Renewable Energy in the United States," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 4(1), pages 139-154, Winter.
    10. Lapan, Harvey & Moschini, GianCarlo, 2012. "Second-best biofuel policies and the welfare effects of quantity mandates and subsidies," Journal of Environmental Economics and Management, Elsevier, vol. 63(2), pages 224-241.
    11. Jerome Dumortier & Dermot J. Hayes & Miguel Carriquiry & Fengxia Dong & Xiaodong Du & Amani Elobeid & Jacinto F. Fabiosa & Simla Tokgoz, 2011. "Sensitivity of Carbon Emission Estimates from Indirect Land-Use Change," Applied Economic Perspectives and Policy, Agricultural and Applied Economics Association, vol. 33(3), pages 428-448.
    12. Carriquiry, Miguel A. & Du, Xiaodong & Timilsina, Govinda R., 2011. "Second generation biofuels: Economics and policies," Energy Policy, Elsevier, vol. 39(7), pages 4222-4234, July.
    13. Keeney, Roman & Hertel, Thomas, 2008. "The Indirect Land Use Impacts of U.S. Biofuel Policies: The Importance of Acreage, Yield, and Bilateral Trade Responses," GTAP Working Papers 2810, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
    14. Harry de Gorter & David R. Just, 2008. "The Economics of a Blend Mandate for Biofuels," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 91(3), pages 738-750.
    15. Kretschmer, Bettina & Peterson, Sonja, 2010. "Integrating bioenergy into computable general equilibrium models -- A survey," Energy Economics, Elsevier, vol. 32(3), pages 673-686, May.
    16. Ian W. H. Parry & Kenneth A. Small, 2005. "Does Britain or the United States Have the Right Gasoline Tax?," American Economic Review, American Economic Association, vol. 95(4), pages 1276-1289, September.
    17. Roman Keeney & Thomas W. Hertel, 2009. "The Indirect Land Use Impacts of United States Biofuel Policies: The Importance of Acreage, Yield, and Bilateral Trade Responses," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 91(4), pages 895-909.
    18. Thomas W. Hertel & Wallace E. Tyner & Dileep K. Birur, 2010. "The Global Impacts of Biofuel Mandates," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 75-100.
    19. Farzad Taheripour, 2008. "Welfare Effects and Unintended Consequences of Ethanol Subsidies ," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 30(3), pages 411-421.
    20. Harry de Gorter & Dusan Drabik & David R. Just, 2011. "The Economics of a Blender's Tax Credit versus a Tax Exemption: The Case of U.S. 'Splash and Dash' Biodiesel Exports to the European Union," Applied Economic Perspectives and Policy, Agricultural and Applied Economics Association, vol. 33(4), pages 510-527.
    21. Lapan, Harvey E. & Moschini, GianCarlo, 2009. "Biofuels policies and welfare: is the stick of mandates better than the carrot of subsidies?," ISU General Staff Papers 200906100700001138, Iowa State University, Department of Economics.
    22. Tol, Richard S. J., 2008. "The Social Cost of Carbon: Trends, Outliers and Catastrophes," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW), vol. 2, pages 1-22.
    23. Simla Tokgoz & Amani Elobeid & Jacinto Fabiosa & Dermot J. Hayes & Bruce A. Babcock & Tun-Hsiang (Edward) Yu & Fengxia Dong & Chad E. Hart, 2008. "Bottlenecks, Drought, and Oil Price Spikes: Impact on U.S. Ethanol and Agricultural Sectors," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 30(4), pages 604-622.
    24. Hope, C. & Newbery, D., 2006. "Calculating The Social Cost Of Carbon," Cambridge Working Papers in Economics 0749, Faculty of Economics, University of Cambridge.
    25. Ruiqing Miao & David A. Hennessy & Bruce A. Babcock, 2012. "Investment in Cellulosic Biofuel Refineries: Do Waivable Biofuel Mandates Matter?," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 94(3), pages 750-762.
    26. Xiaoguang Chen & Haixiao Huang & Madhu Khanna & Hayri Önal, 2011. "Meeting the Mandate for Biofuels: Implications for Land Use, Food, and Fuel Prices," NBER Chapters, in: The Intended and Unintended Effects of US Agricultural and Biotechnology Policies, pages 223-267, National Bureau of Economic Research, Inc.
    27. 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 Archive 12881, Iowa State University, Department of Economics.
    28. Richard S. J. Tol, 2009. "The Economic Effects of Climate Change," Journal of Economic Perspectives, American Economic Association, vol. 23(2), pages 29-51, Spring.
    29. James L. Smith, 2009. "World Oil: Market or Mayhem?," Journal of Economic Perspectives, American Economic Association, vol. 23(3), pages 145-164, Summer.
    30. Harry de Gorter & David R. Just, 2007. "The Welfare Economics of a Biofuel Tax Credit and the Interaction Effects with Price Contingent Farm Subsidies," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 91(2), pages 477-488.
    31. Elobeid, Amani & Tokgoz, Simla & Hayes, Dermot J. & Babcock, Bruce & Hart, Chad E., 2007. "The Long-Run Impact of Corn-Based Ethanol on the Grain, Oilseed, and Livestock Sectors with Implications for Biotech Crops," ISU General Staff Papers 200701010800001003, Iowa State University, Department of Economics.
    32. Timilsina, Govinda R. & Shrestha, Ashish, 2011. "How much hope should we have for biofuels?," Energy, Elsevier, vol. 36(4), pages 2055-2069.
    33. Rajagopal, Deepak & Zilberman, David, 2007. "Review of environmental, economic and policy aspects of biofuels," Policy Research Working Paper Series 4341, The World Bank.
    34. Beghin, John C. & Roland-Holst, David & Van der Mensbrugghe, Dominique, 2002. "Conclusions," Staff General Research Papers Archive 4083, Iowa State University, Department of Economics.
    35. Jayson Beckman & Thomas Hertel & Farzad Taheripour & Wallace Tyner, 2012. "Structural change in the biofuels era," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 39(1), pages 137-156, February.
    36. Madhu Khanna & Amy W. Ando & Farzad Taheripour, 2008. "Welfare Effects and Unintended Consequences of Ethanol Subsidies," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 30(3), pages 411-421.
    37. Martines-Filho, Joao Gomes & Burnquist, Heloisa Lee & Vian, Carlos Eduardo de Freitas, 2006. "Bioenergy and the Rise of Sugarcane-Based Ethanol in Brazil," Choices: The Magazine of Food, Farm, and Resource Issues, Agricultural and Applied Economics Association, vol. 21(2), pages 1-6.
    38. Alison Burrell & Maria Blanco & Stephan Hubertus Gay & Martin Henseler & Aikaterini Kavallari & Robert M'barek & Ignacio Perez & Axel Tonini, 2010. "Impacts of the EU Biofuel Target on Agricultural Markets and Land Use - A Comparative Modelling Assessment," JRC Working Papers JRC58484, Joint Research Centre (Seville site).
    39. Kevin K. Tsui, 2011. "More Oil, Less Democracy: Evidence from Worldwide Crude Oil Discoveries," Economic Journal, Royal Economic Society, vol. 121(551), pages 89-115, March.
    40. Rajagopal, D. & Hochman, G. & Zilberman, D., 2011. "Indirect fuel use change (IFUC) and the lifecycle environmental impact of biofuel policies," Energy Policy, Elsevier, vol. 39(1), pages 228-233, January.
    41. Roberto F. Aguilera & Roderick G. Eggert & Gustavo Lagos C.C. & John E. Tilton, 2009. "Depletion and the Future Availability of Petroleum Resources," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 141-174.
    Full references (including those not matched with items on IDEAS)

    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. A discussion of biofuel policies, as seen from Iowa
      by Economic Logician in Economic Logic on 2012-11-20 21:35:00

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Sesmero, Juan P. & Balagtas, Joseph V. & Pratt, Michelle, 2015. "The Economics of Spatial Competition for Corn Stover," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 40(3), pages 1-17, September.
    2. Sesmero, Juan & Balagtas, Joseph Valdes & Pratt, Michelle, 2014. "Spatial Competition and Economics of Biofuels from Corn Stover," 2014 Annual Meeting, July 27-29, 2014, Minneapolis, Minnesota 170595, Agricultural and Applied Economics Association.
    3. Clancy, Matthew S., 2015. "Combinatorial innovation, evidence from patent data, and mandated innovation," ISU General Staff Papers 201501010800005678, Iowa State University, Department of Economics.
    4. Juan Sesmero & Michelle Pratt & Wallace Tyner, 2015. "Supply Response, Marginal Cost, and Soil Erosion Implications of Stover-based Biofuels," Applied Economic Perspectives and Policy, Agricultural and Applied Economics Association, vol. 37(3), pages 502-523.
    5. Romano, Donato, 2012. "The Bio-based Economy: a New Development Model," Bio-based and Applied Economics Journal, Italian Association of Agricultural and Applied Economics (AIEAA), vol. 1(3), pages 1-3, December.
    6. Nogues, Julio J. & O'Connor, Ernesto, 2020. "Missing WTO rules and a non-functioning Appellate Body: lessons from Argentina's biodiesel exports," MPRA Paper 104058, University Library of Munich, Germany.
    7. Moschini, GianCarlo & Lapan, Harvey & Kim, Hyunseok, 2016. "The Renewable Fuel Standard: Market and Welfare Effects of Alternative Policy Scenarios," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 235721, Agricultural and Applied Economics Association.
    8. JunJie Wu & Christian Langpap, 2015. "The Price and Welfare Effects of Biofuel Mandates and Subsidies," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 62(1), pages 35-57, September.
    9. GianCarlo Moschini & Harvey Lapan & Hyunseok Kim, 2017. "The Renewable Fuel Standard in Competitive Equilibrium: Market and Welfare Effects," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 99(5), pages 1117-1142.
    10. Karel Janda & Ladislav Kristoufek, 2019. "The relationship between fuel and food prices: Methods, outcomes, and lessons for commodity price risk management," CAMA Working Papers 2019-20, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    11. Clancy, Matthew & Moschini, GianCarlo, 2014. "Mandates and the Incentives for Innovation," 2014 Annual Meeting, July 27-29, 2014, Minneapolis, Minnesota 170182, Agricultural and Applied Economics Association.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Janda, Karel & Kristoufek, Ladislav & Zilberman, David, "undated". "Biofuels: review of policies and impacts," CUDARE Working Papers 120415, University of California, Berkeley, Department of Agricultural and Resource Economics.
    2. Karel Janda & Ladislav Kristoufek & David Zilberman, 2011. "Modeling the Environmental and Socio-Economic Impacts of Biofuels," Working Papers IES 2011/33, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Oct 2011.
    3. Cui, Jingbo, 2012. "Three essays on biofuel, environmental economics, and international trade," ISU General Staff Papers 201201010800003311, Iowa State University, Department of Economics.
    4. Cui, Jingbo & Martin, Jeremy I., 2017. "Impacts of US biodiesel mandates on world vegetable oil markets," Energy Economics, Elsevier, vol. 65(C), pages 148-160.
    5. Jingbo Cui & Harvey Lapan & GianCarlo Moschini & Joseph Cooper, 2011. "Welfare Impacts of Alternative Biofuel and Energy Policies," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 93(5), pages 1235-1256.
    6. Condon, Nicole & Klemick, Heather & Wolverton, Ann, 2015. "Impacts of ethanol policy on corn prices: A review and meta-analysis of recent evidence," Food Policy, Elsevier, vol. 51(C), pages 63-73.
    7. JunJie Wu & Christian Langpap, 2015. "The Price and Welfare Effects of Biofuel Mandates and Subsidies," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 62(1), pages 35-57, September.
    8. Antonio M. Bento, Richard Klotz, and Joel R. Landry, 2015. "Are there Carbon Savings from US Biofuel Policies? The Critical Importance of Accounting for Leakage in Land and Fuel Markets," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3).
    9. Wetzstein, M. & Wetzstein, H., 2011. "Four myths surrounding U.S. biofuels," Energy Policy, Elsevier, vol. 39(7), pages 4308-4312, July.
    10. Chen, Xiaoguang & Huang, Haixiao & Khanna, Madhu & Önal, Hayri, 2014. "Alternative transportation fuel standards: Welfare effects and climate benefits," Journal of Environmental Economics and Management, Elsevier, vol. 67(3), pages 241-257.
    11. Vincent Martinet, 2012. "Effect of soil heterogeneity on the welfare economics of biofuel policies," Working Papers 2012/01, INRA, Economie Publique.
    12. Lapan, Harvey & Moschini, GianCarlo, 2012. "Second-best biofuel policies and the welfare effects of quantity mandates and subsidies," Journal of Environmental Economics and Management, Elsevier, vol. 63(2), pages 224-241.
    13. Stephen P. Holland & Jonathan E. Hughes & Christopher R. Knittel & Nathan C. Parker, 2013. "Unintended Consequences of Transportation Carbon Policies: Land-Use, Emissions, and Innovation," NBER Working Papers 19636, National Bureau of Economic Research, Inc.
    14. Huang, Jikun & Yang, Jun & Msangi, Siwa & Rozelle, Scott & Weersink, Alfons, 2012. "Biofuels and the poor: Global impact pathways of biofuels on agricultural markets," Food Policy, Elsevier, vol. 37(4), pages 439-451.
    15. María Blanco & Marcel Adenäuer & Shailesh Shrestha & Arno Becker, 2012. "Methodology to assess EU Biofuel Policies: The CAPRI Approach," JRC Working Papers JRC80037, Joint Research Centre (Seville site).
    16. Hertel, Thomas, 2013. "Global Applied General Equilibrium Analysis Using the Global Trade Analysis Project Framework," Handbook of Computable General Equilibrium Modeling, in: Peter B. Dixon & Dale Jorgenson (ed.), Handbook of Computable General Equilibrium Modeling, edition 1, volume 1, chapter 0, pages 815-876, Elsevier.
    17. Chen, Xiaoguang & Khanna, Madhu & Onal, Hayri, 2009. "The Economic Potential of Second-Generation Biofuels: Implications for Social Welfare, Land Use and Greenhouse Gas Emissions in Illinois," 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin 49484, Agricultural and Applied Economics Association.
    18. Karel Janda & Ladislav Kristoufek, 2019. "The relationship between fuel and food prices: Methods, outcomes, and lessons for commodity price risk management," CAMA Working Papers 2019-20, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    19. Philip Abbott, 2014. "Biofuels, Binding Constraints, and Agricultural Commodity Price Volatility," NBER Chapters, in: The Economics of Food Price Volatility, pages 91-131, National Bureau of Economic Research, Inc.
    20. Gabriel E Lade & C -Y Cynthia Lin Lawell & Aaron Smith, 2018. "Policy Shocks and Market-Based Regulations: Evidence from the Renewable Fuel Standard," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 100(3), pages 707-731.

    More about this item

    Keywords

    Resource /Energy Economics and Policy;

    JEL classification:

    • F1 - International Economics - - Trade
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ags:aieabj:146276. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: https://edirc.repec.org/data/aieaaea.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: AgEcon Search (email available below). General contact details of provider: https://edirc.repec.org/data/aieaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.