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Measuring Indirect Land Use Change with Biofuels: Implications for Policy

Author

Listed:
  • Madhu Khanna

    (Department of Agricultural and Consumer Economics and
    Energy Biosciences Institute, University of Illinois Urbana-Champaign, Urbana, Illinois 68101)

  • Christine L. Crago

    (Energy Biosciences Institute, University of Illinois Urbana-Champaign, Urbana, Illinois 68101)

Abstract

The indirect land use change (ILUC) effect of biofuels has called into question the greenhouse gas (GHG) mitigation benefit of biofuels compared with that of fossil fuels. This article reviews the various economic modeling approaches being used to assess the ILUC effect and discusses the key factors that influence estimates of its magnitude. We find that there is considerable variability in the magnitude of ILUC associated with a biofuel pathway across studies and within a study, depending on underlying model parameters. These estimates are sensitive to the scale of biofuel production, the mix of policies and biofuels considered, variations in the parametric assumptions that govern price transmission through international trade, and the ease of changes in land use at the intensive and extensive margins. We discuss the challenges in implementing policies to address ILUC.

Suggested Citation

  • Madhu Khanna & Christine L. Crago, 2012. "Measuring Indirect Land Use Change with Biofuels: Implications for Policy," Annual Review of Resource Economics, Annual Reviews, vol. 4(1), pages 161-184, August.
    • Handle: RePEc:anr:reseco:v:4:y:2012:p:161-184
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    File URL: http://www.annualreviews.org/doi/abs/10.1146/annurev-resource-110811-114523
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