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The Economics of Biofuel Policy and Biotechnology

Author

Listed:
  • Hochman Gal

    (The Technion - Visiting UC Berkeley)

  • Sexton Steven E

    (University of California - Berkeley)

  • Zilberman David D

    (University of California - Berkeley)

Abstract

This paper employs a partial equilibrium trade framework to show that biofuel policy can substitute for traditional agricultural policy intended to boost farm welfare. It also shows how food market volatility can induce periods of boom and bust in the ethanol industry, causing episodes of bankruptcy and reduced capital investment. This paper further models the effects of two specific technological innovations--cellulosic ethanol and agricultural biotechnology--on food and fuel markets and demonstrates that technology can reduce ethanol market volatility. A parameterized model is used to characterize the impacts of biofuels on food and fuel markets.

Suggested Citation

  • Hochman Gal & Sexton Steven E & Zilberman David D, 2008. "The Economics of Biofuel Policy and Biotechnology," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 6(2), pages 1-24, December.
    • Handle: RePEc:bpj:bjafio:v:6:y:2008:i:2:n:8
    DOI: 10.2202/1542-0485.1237
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    References listed on IDEAS

    as
    1. Simla Tokgoz & Amani Elobeid & Jacinto F. Fabiosa & Dermot J. Hayes & Bruce A. Babcock & Tun-Hsiang (Edward) Yu & Fengxia Dong & Chad E. Hart & John C. Beghin, 2007. "Emerging Biofuels: Outlook of Effects on U.S. Grain, Oilseed, and Livestock Markets," Food and Agricultural Policy Research Institute (FAPRI) Publications (archive only) 07-sr101, Center for Agricultural and Rural Development (CARD) at Iowa State University.
    2. Mitchell, Donald, 2008. "A note on rising food prices," Policy Research Working Paper Series 4682, The World Bank.
    3. de Gorter, Harry & Just, David R., 2007. "The economics of U.S. ethanol import tariffs with a consumption mandate and tax credit," MPRA Paper 5504, University Library of Munich, Germany.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Gal Hochman & Scott Kaplan & Deepak Rajagopal & David Zilberman, 2012. "Biofuel and Food-Commodity Prices," Agriculture, MDPI, vol. 2(3), pages 1-10, September.
    2. 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.
    3. Jason Fewell & Cole Gustafson, 2010. "Do lender‐imposed sweeps affect ethanol technology investment?," Agricultural Finance Review, Emerald Group Publishing Limited, vol. 70(2), pages 169-183, August.
    4. 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.
    5. Sarah C. Davis & Derek Kauneckis & Natalie A. Kruse & Kimberley E. Miller & Michael Zimmer & Geoffrey D. Dabelko, 2016. "Closing the loop: integrative systems management of waste in food, energy, and water systems," Journal of Environmental Studies and Sciences, Springer;Association of Environmental Studies and Sciences, vol. 6(1), pages 11-24, March.
    6. Hochman, Gal & Rajagopal, Deepak & Timilsina, Govinda & Zilberman, David, 2011. "The role of inventory adjustments in quantifying factors causing food price inflation," Policy Research Working Paper Series 5744, The World Bank.
    7. Sparks, G.D. & Ortmann, Gerald F. & Lagrange, L., 2010. "An Economic Evaluation of Soybean-Based Biodiesel Production on Commercial Farms in the Soybean-Producing Regions of KwaZulu-Natal: Some Preliminary Results," 2010 AAAE Third Conference/AEASA 48th Conference, September 19-23, 2010, Cape Town, South Africa 95980, African Association of Agricultural Economists (AAAE).
    8. Sparks, G.D. & Ortmann, G.F., 2011. "Global biofuel policies: A review," Agrekon, Agricultural Economics Association of South Africa (AEASA), vol. 50(2), September.
    9. Sparks, G.D. & Ortmann, G.F. & Lagrange, L., 2011. "An Economic Evaluation of Soybean-Based Biodiesel Production on Commercial Farms in Kwazulu-Natal, South Africa," Agrekon, Agricultural Economics Association of South Africa (AEASA), vol. 50(3), September.
    10. Zingbagba, Mark & Nunes, Rubens & Fadairo, Muriel, 2020. "The impact of diesel price on upstream and downstream food prices: Evidence from São Paulo," Energy Economics, Elsevier, vol. 85(C).
    11. Eggert, Håkan & Greaker, Mads & Potter, Emily, 2011. "Policies for Second Generation Biofuels: Current status and future challenges," Working Papers in Economics 501, University of Gothenburg, Department of Economics.
    12. Azad, A.K. & Rasul, M.G. & Khan, M.M.K. & Sharma, Subhash C. & Mofijur, M. & Bhuiya, M.M.K., 2016. "Prospects, feedstocks and challenges of biodiesel production from beauty leaf oil and castor oil: A nonedible oil sources in Australia," Renewable and Sustainable Energy Reviews, Elsevier, vol. 61(C), pages 302-318.
    13. Hakan Eggert & Mads Greaker, 2014. "Promoting Second Generation Biofuels: Does the First Generation Pave the Road?," Energies, MDPI, vol. 7(7), pages 1-16, July.
    14. Cheteni, Priviledge, 2017. "Sustainability development: Biofuels in agriculture," MPRA Paper 80969, University Library of Munich, Germany, revised 24 Jun 2017.
    15. Gal Hochman & Chrysostomos Tabakis, 2020. "Biofuels and Their Potential in South Korea," Sustainability, MDPI, vol. 12(17), pages 1-17, September.
    16. Karel Janda & Ladislav Kristoufek & David Zilberman, 2012. "Biofuels: policies and impacts," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 58(8), pages 372-386.
    17. Ghoddusi, Hamed, 2017. "Price risks for biofuel producers in a deregulated market," Renewable Energy, Elsevier, vol. 114(PB), pages 394-407.
    18. Nicholas Apergis & Sofia Eleftheriou & Dimitrios Voliotis, 2017. "Asymmetric Spillover Effects between Agricultural Commodity Prices and Biofuel Energy Prices," International Journal of Energy Economics and Policy, Econjournals, vol. 7(1), pages 166-177.
    19. 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.
    20. Castiblanco, Carmenza & Moreno, Alvaro & Etter, Andrés, 2015. "Impact of policies and subsidies in agribusiness: The case of oil palm and biofuels in Colombia," Energy Economics, Elsevier, vol. 49(C), pages 676-686.
    21. repec:ags:ijag24:347272 is not listed on IDEAS
    22. Cho, Seojin & Antle, John M., 2019. "Impact of Domestic and Trade Policies on Adoption of a Biofuel Crop in Dryland Wheat-Based Farming Systems in U.S. Pacific Northwest," 2019 Annual Meeting, July 21-23, Atlanta, Georgia 290920, Agricultural and Applied Economics Association.
    23. María Blanco & Marcel Adenäuer & Shailesh Shrestha & Arno Becker, 2012. "Methodology to assess EU Biofuel Policies: The CAPRI Approach," JRC Research Reports JRC80037, Joint Research Centre.
    24. repec:ags:ijag24:347278 is not listed on IDEAS
    25. 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.

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    Keywords

    biofuels; policy; biotechnology;
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