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The role of federal Renewable Fuel Standards and market structure on the growth of the cellulosic biofuel sector

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  • Skolrud, Tristan D.
  • Galinato, Gregmar I.
  • Galinato, Suzette P.
  • Shumway, C. Richard
  • Yoder, Jonathan K.

Abstract

This article examines the effect of the Renewable Fuel Standards and market power on the growth of the cellulosic biofuel sector. We develop a sectoral model to show how changes in the regulations governing cellulosic fuel production affect the equilibrium quantity of cellulosic ethanol. Based on model calibration for Washington State, we find that existing low-cost waivers purchased by obligated parties in lieu of cellulosic fuel production negate the effectiveness of the Renewable Fuel Standard to induce the production and consumption of cellulosic biofuels. However, raising waiver price slightly relative to the status quo significantly increases the equilibrium quantity of cellulosic ethanol. The high cost of cellulosic ethanol production is often cited as the cause of the lack of cellulosic ethanol production, which is used to justify low waiver prices. Our policy message is the converse: the low current waiver price significantly contributes to the cellulosic ethanol market stagnation in the context of the current biofuel policy.

Suggested Citation

  • Skolrud, Tristan D. & Galinato, Gregmar I. & Galinato, Suzette P. & Shumway, C. Richard & Yoder, Jonathan K., 2016. "The role of federal Renewable Fuel Standards and market structure on the growth of the cellulosic biofuel sector," Energy Economics, Elsevier, vol. 58(C), pages 141-151.
    • Handle: RePEc:eee:eneeco:v:58:y:2016:i:c:p:141-151
    DOI: 10.1016/j.eneco.2016.06.024
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    Cited by:

    1. Zhao, Qiankun & Cai, Ximing & Mischo, William & Ma, Liyuan, 2020. "How do the research and public communities view biofuel development?," Renewable and Sustainable Energy Reviews, Elsevier, vol. 133(C).
    2. Wang, Xin & Lim, Michael K. & Ouyang, Yanfeng, 2017. "Food-energy-environment trilemma: Policy impacts on farmland use and biofuel industry development," Energy Economics, Elsevier, vol. 67(C), pages 35-48.
    3. Grace Skogstad, 2020. "Mixed feedback dynamics and the USA renewable fuel standard: the roles of policy design and administrative agency," Policy Sciences, Springer;Society of Policy Sciences, vol. 53(2), pages 349-369, June.
    4. Skolrud, Tristan D. & Galinato, Gregmar I., 2017. "Welfare implications of the renewable fuel standard with an integrated tax-subsidy policy," Energy Economics, Elsevier, vol. 62(C), pages 291-301.
    5. Aui, Alvina & Wang, Yu, 2022. "Post-RFS supports for cellulosic ethanol: Evaluation of economic and environmental impacts of alternative policies," Energy Policy, Elsevier, vol. 170(C).

    More about this item

    Keywords

    Cellulosic biofuel; Renewable Fuel Standards; Waiver; Market structure;
    All these keywords.

    JEL classification:

    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • Q16 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - R&D; Agricultural Technology; Biofuels; Agricultural Extension Services
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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