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Investment in Cellulosic Biofuel Refineries: Do Waivable Biofuel Mandates Matter?

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  • Ruiqing Miao
  • David A. Hennessy
  • Bruce A. Babcock

Abstract

We develop a conceptual model to study the impact of mandate policies on stimulating investment in cellulosic biofuel refineries. In a two-period framework, we compare the first-period investment level (FIL) under three scenarios: laissez-faire, non-waivable mandate (NWM) policy, and waivable mandate (WM) policy. Results show that when plant-level marginal costs are increasing then both NWM policy and WM policy may stimulate FIL. The WM policy has a smaller impact than does the NWM policy. When the plant-level marginal costs are constants, however, WM policy does not increase FIL but does increase the expected profit of more efficient investors. Copyright 2012, Oxford University Press.

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  • Ruiqing Miao & David A. Hennessy & Bruce A. Babcock, 2012. "Investment in Cellulosic Biofuel Refineries: Do Waivable Biofuel Mandates Matter?," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 94(3), pages 750-762.
    • Handle: RePEc:oup:ajagec:v:94:y:2012:i:3:p:750-762
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    1. Hongli Feng & Bruce A. Babcock, 2010. "Impacts of Ethanol on Planted Acreage in Market Equilibrium," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 92(3), pages 789-802.
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    Cited by:

    1. Tristan Skolrud & Gregmar Galinato & Suzette Galinato & Richard Shumway & Jonathan Yoder, 2014. "The Role of Market Structure and Federal Renewable Fuel Standards in the Growth of the Cellulosic Biofuel Sector," Working Papers 2014-02, School of Economic Sciences, Washington State University.
    2. Gabriel E Lade & C -Y Cynthia Lin Lawell & Aaron Smith, 2018. "Policy Shocks and Market-Based Regulations: Evidence from the Renewable Fuel Standard," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 100(3), pages 707-731.
    3. Thompson, Wyatt & Johansson, Robert & Meyer, Seth & Whistance, Jarrett, 2018. "The US biofuel mandate as a substitute for carbon cap-and-trade," Energy Policy, Elsevier, vol. 113(C), pages 368-375.
    4. Moschini, GianCarlo & Cui, Jingbo & Lapan, Harvey E., 2012. "Economics of Biofuels: An Overview of Policies, Impacts and Prospects," Bio-based and Applied Economics Journal, Italian Association of Agricultural and Applied Economics (AIEAA), vol. 1(3), pages 1-28, December.
    5. Miao, Ruiqing & Khanna, Madhu, 2015. "Costs of Meeting the Cellulosic Biofuel Mandate with an Energy Crop with Establishment Cost and Yield Risk: Implications for Policy," 2015 Conference, August 9-14, 2015, Milan, Italy 212458, International Association of Agricultural Economists.
    6. Ye, Fanglin & Paulson, Nicholas & Khanna, Madhu, 2022. "Are renewable energy policies effective to promote technological change? The role of induced technological risk," Journal of Environmental Economics and Management, Elsevier, vol. 114(C).
    7. Madhu Khanna & Ruiqing Miao, 2022. "Inducing the adoption of emerging technologies for sustainable intensification of food and renewable energy production: insights from applied economics," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 66(1), pages 1-23, January.
    8. Ruiqing Miao & David A. Hennessy & Hongli Feng, 2022. "Grassland easement evaluation and acquisition with uncertain conversion and conservation returns," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 70(1), pages 41-61, March.
    9. Jason P. H. Jones & Zidong M. Wang & Bruce A. McCarl & Minglu Wang, 2017. "Policy Uncertainty and the US Ethanol Industry," Sustainability, MDPI, vol. 9(11), pages 1-14, November.
    10. Deepayan Debnath & Madhu Khanna & Deepak Rajagopal & David Zilberman, 2019. "The Future of Biofuels in an Electrifying Global Transportation Sector: Imperative, Prospects and Challenges," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 41(4), pages 563-582, December.

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    More about this item

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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