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Effects of US biofuel policies on US and world petroleum product markets with consequences for greenhouse gas emissions

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  • Thompson, Wyatt
  • Whistance, Jarrett
  • Meyer, Seth

Abstract

US biofuel policy includes greenhouse gas reduction targets. Regulators do not address the potential that biofuel policy can have indirect impacts on greenhouse gases through its impacts on petroleum product markets, and scientific research only partially addresses this question. We use economic models of US biofuel and agricultural markets and US and world petroleum and petroleum product markets to show that discontinuing biofuel tax credits and ethanol tariff lower biofuel use could lead to increased US petroleum product use, and a reduction in petroleum product use in other parts of the world. The net effect is lower greenhouse gas emissions. Under certain assumptions, we show that biofuel use mandate elimination can have positive or negative impacts on greenhouse gas emissions. The magnitude and the direction of effects depend on how US biofuel trade affects biofuel in other countries with different emissions, context that determines how important use mandates are in the first place, who pays mandate costs, and the price responsiveness of global petroleum supplies and uses. However, our results show that counter-intuitive effects are possible and discourage broad conclusions about the greenhouse gas impacts of removing these elements of US biofuel policy.

Suggested Citation

  • Thompson, Wyatt & Whistance, Jarrett & Meyer, Seth, 2011. "Effects of US biofuel policies on US and world petroleum product markets with consequences for greenhouse gas emissions," Energy Policy, Elsevier, vol. 39(9), pages 5509-5518, September.
  • Handle: RePEc:eee:enepol:v:39:y:2011:i:9:p:5509-5518
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    References listed on IDEAS

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    Cited by:

    1. Maura Allaire and Stephen P. A. Brown, 2015. "The Green Paradox of U.S. Biofuel Subsidies: Impact on Greenhouse Gas Emissions," Economics of Energy & Environmental Policy, International Association for Energy Economics, vol. 0(Number 2).
    2. Whistance, Jarrett & Thompson, Wyatt, 2014. "The role of CAFE standards and alternative-fuel vehicle production credits in U.S. biofuels markets," Energy Policy, Elsevier, vol. 74(C), pages 147-157.
    3. Piroli, Giuseppe & Rajcaniova, Miroslava & Ciaian, Pavel & Kancs, d׳Artis, 2015. "From a rise in B to a fall in C? SVAR analysis of environmental impact of biofuels," Renewable and Sustainable Energy Reviews, Elsevier, vol. 49(C), pages 921-930.
    4. Smeets, Edward & Tabeau, Andrzej & van Berkum, Siemen & Moorad, Jamil & van Meijl, Hans & Woltjer, Geert, 2014. "The impact of the rebound effect of the use of first generation biofuels in the EU on greenhouse gas emissions: A critical review," Renewable and Sustainable Energy Reviews, Elsevier, vol. 38(C), pages 393-403.
    5. 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.
    6. repec:eee:energy:v:141:y:2017:i:c:p:2045-2053 is not listed on IDEAS
    7. Rajagopal, Deepak & Zilberman, David, 2013. "On market-mediated emissions and regulations on life cycle emissions," Ecological Economics, Elsevier, vol. 90(C), pages 77-84.
    8. Boies, Adam M. & McFarlane, Dane & Taff, Steven & Watts, Winthrop F. & Kittelson, David B., 2011. "Implications of local lifecycle analyses and low carbon fuel standard design on gasohol transportation fuels," Energy Policy, Elsevier, vol. 39(11), pages 7191-7201.
    9. Rajagopal, D. & Plevin, R. & Hochman, G. & Zilberman, D., 2015. "Multi-objective regulations on transportation fuels: Comparing renewable fuel mandates and emission standards," Energy Economics, Elsevier, vol. 49(C), pages 359-369.
    10. 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).
    11. repec:eee:enepol:v:113:y:2018:i:c:p:368-375 is not listed on IDEAS
    12. Christensen, Adam & Hobbs, Benjamin, 2016. "A model of state and federal biofuel policy: Feasibility assessment of the California Low Carbon Fuel Standard," Applied Energy, Elsevier, vol. 169(C), pages 799-812.
    13. Christensen, Adam & Siddiqui, Sauleh, 2015. "Fuel price impacts and compliance costs associated with the Renewable Fuel Standard (RFS)," Energy Policy, Elsevier, vol. 86(C), pages 614-624.
    14. de Barros, Marisa Maia & Szklo, Alexandre, 2015. "Petroleum refining flexibility and cost to address the risk of ethanol supply disruptions: The case of Brazil," Renewable Energy, Elsevier, vol. 77(C), pages 20-31.
    15. Ji, Xi & Long, Xianling, 2016. "A review of the ecological and socioeconomic effects of biofuel and energy policy recommendations," Renewable and Sustainable Energy Reviews, Elsevier, vol. 61(C), pages 41-52.
    16. Whistance, Jarrett & Thompson, Wyatt & Meyer, Seth, 2017. "Interactions between California's Low Carbon Fuel Standard and the National Renewable Fuel Standard," Energy Policy, Elsevier, vol. 101(C), pages 447-455.
    17. Debnath, Deepayan & Whistance, Jarrett & Thompson, Wyatt & Binfield, Julian, 2017. "Complement or substitute: Ethanol’s uncertain relationship with gasoline under alternative petroleum price and policy scenarios," Applied Energy, Elsevier, vol. 191(C), pages 385-397.
    18. repec:spr:empeco:v:52:y:2017:i:4:d:10.1007_s00181-016-1112-6 is not listed on IDEAS
    19. Hill, Jason & Tajibaeva, Liaila & Polasky, Stephen, 2016. "Climate consequences of low-carbon fuels: The United States Renewable Fuel Standard," Energy Policy, Elsevier, vol. 97(C), pages 351-353.
    20. Dodder, Rebecca S. & Kaplan, P. Ozge & Elobeid, Amani & Tokgoz, Simla & Secchi, Silvia & Kurkalova, Lyubov A., 2015. "Impact of energy prices and cellulosic biomass supply on agriculture, energy, and the environment: An integrated modeling approach," Energy Economics, Elsevier, vol. 51(C), pages 77-87.

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