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Pareto-efficient legal regulation of the (bio)fuel market using a bi-objective optimization model

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  • Hombach, Laura Elisabeth
  • Walther, Grit

Abstract

Blending biofuels into fossil fuels allows for emission reductions in the transportation sector. However, biofuels are not yet competitive due to high production costs and investments and thus, legal requirements like blending quotas or emission thresholds must be issued if biofuels are to contribute to European CO2-reduction goals. Thereby, the aim is to establish Pareto-efficient long-term legal requirements. Against this background, we develop an optimization model for simultaneously minimizing life cycle greenhouse gas emissions and maximizing discounted net present value in order to analyze the overall system of biomass cultivation, (bio)fuel production and blending. The applied ε-constraint approach allows to calculate Pareto-efficient solutions. The model is applied to the German (bio)diesel market. We show that current and past European Union directives are not Pareto-efficient and cause unintended side effects. As results, information about trade-offs between the two objectives (minimizing life cycle greenhouse gas emissions and maximizing discounted net present value) as well as recommendations on the design of the regulation is derived.

Suggested Citation

  • Hombach, Laura Elisabeth & Walther, Grit, 2015. "Pareto-efficient legal regulation of the (bio)fuel market using a bi-objective optimization model," European Journal of Operational Research, Elsevier, vol. 245(1), pages 286-295.
    • Handle: RePEc:eee:ejores:v:245:y:2015:i:1:p:286-295
    DOI: 10.1016/j.ejor.2015.02.039
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    Cited by:

    1. Hombach, Laura Elisabeth & Büsing, Christina & Walther, Grit, 2018. "Robust and sustainable supply chains under market uncertainties and different risk attitudes – A case study of the German biodiesel market," European Journal of Operational Research, Elsevier, vol. 269(1), pages 302-312.
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    6. Fattahi, Mohammad & Govindan, Kannan, 2018. "A multi-stage stochastic program for the sustainable design of biofuel supply chain networks under biomass supply uncertainty and disruption risk: A real-life case study," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 118(C), pages 534-567.
    7. Forouli, Aikaterini & Doukas, Haris & Nikas, Alexandros & Sampedro, Jon & Van de Ven, Dirk-Jan, 2019. "Identifying optimal technological portfolios for European power generation towards climate change mitigation: A robust portfolio analysis approach," Utilities Policy, Elsevier, vol. 57(C), pages 33-42.
    8. Finke, Jonas & Bertsch, Valentin, 2023. "Implementing a highly adaptable method for the multi-objective optimisation of energy systems," Applied Energy, Elsevier, vol. 332(C).
    9. Li, Yanan & Lin, Jun & Qian, Yanjun & Li, Dehong, 2023. "Feed-in tariff policy for biomass power generation: Incorporating the feedstock acquisition process," European Journal of Operational Research, Elsevier, vol. 304(3), pages 1113-1132.
    10. Alexandros Nikas & Angelos Fountoulakis & Aikaterini Forouli & Haris Doukas, 2022. "A robust augmented ε-constraint method (AUGMECON-R) for finding exact solutions of multi-objective linear programming problems," Operational Research, Springer, vol. 22(2), pages 1291-1332, April.
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    13. Farajiamiri, Mina & Meyer, Jörn-Christian & Walther, Grit, 2023. "Multi-objective optimization of renewable fuel supply chains regarding cost, land use, and water use," Applied Energy, Elsevier, vol. 349(C).

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