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Land-Use And Greenhouse Gas Implications Of Biofuels: Role Of Technology And Policy

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  • XIAOGUANG CHEN

    () (Research Institute of Economics and Management, Southwestern University of Economics and Finance, Chengdu 610074, China)

  • HAIXIAO HUANG

    () (Energy Biosciences Institute, Institute for Genomic Biology, University of Illinois at Urbana Champaign, 1206 West Gregory Drive, Urbana, IL 61801, USA)

  • MADHU KHANNA

    () (Department of Agricultural and Consumer Economics, University of Illinois at Urbana Champaign, 326 Mumford Hall, 1301 West Gregory Drive, Urbana, IL 61801, USA)

Abstract

This paper examines the changes in land use in the U.S. likely to be induced by biofuel and climate policies and the implications of these policies for greenhouse gas (GHG) emissions over the 2007–2022 period. The policies considered here include a modified Renewable Fuel Standard (RFS) by itself as well as combined with a cellulosic biofuel tax credit or a carbon price policy. We use a dynamic, spatial, multi-market equilibrium model, Biofuel and Environmental Policy Analysis Model (BEPAM), to endogenously determine the effects of these policies on cropland allocation, food and fuel prices, and the mix of first- and second-generation biofuels. We find that the RFS could be met by diverting 6% of cropland for biofuel production and would result in corn prices increasing by 16% in 2002 relative to the business-as-usual baseline. The reduction in GHG emissions in the U.S. due to the RFS is about 2%; these domestic GHG savings can be severely eroded by emissions due to indirect land-use changes and the increase in gasoline consumption in the rest of the world. Supplementing the RFS with a carbon price policy or a cellulosic biofuel tax credit induces a switch away from corn ethanol to cellulosic biofuels and achieves the mandated level of biofuel production with a smaller adverse impact on crop prices. These supplementary policies enhance the GHG savings achieved by the RFS alone, although through different mechanisms; greater production of cellulosic biofuels with the tax credit but larger reduction in fossil fuel consumption with a carbon tax.

Suggested Citation

  • Xiaoguang Chen & Haixiao Huang & Madhu Khanna, 2012. "Land-Use And Greenhouse Gas Implications Of Biofuels: Role Of Technology And Policy," Climate Change Economics (CCE), World Scientific Publishing Co. Pte. Ltd., vol. 3(03), pages 1-25.
  • Handle: RePEc:wsi:ccexxx:v:03:y:2012:i:03:n:s2010007812500133
    DOI: 10.1142/S2010007812500133
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    References listed on IDEAS

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    1. 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.
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    Cited by:

    1. Ladislav Kristoufek & Karel Janda & David Zilberman, 2013. "Non-linear price transmission between biofuels, fuels and food commodities," Working Papers IES 2013/16, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Oct 2013.
    2. 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.
    3. Ujjayant Chakravorty & Marie‐Hélène Hubert & Beyza Ural Marchand, 2019. "Food for fuel: The effect of the US biofuel mandate on poverty in India," Quantitative Economics, Econometric Society, vol. 10(3), pages 1153-1193, July.
    4. Ujjayant Chakravorty & Marie‐Hélène Hubert & Michel Moreaux & Linda Nøstbakken, 2017. "Long‐Run Impact of Biofuels on Food Prices," Scandinavian Journal of Economics, Wiley Blackwell, vol. 119(3), pages 733-767, July.
    5. Ladislav Kristoufek & Karel Janda & David Zilberman, 2012. "Mutual Responsiveness of Biofuels, Fuels and Food Prices," CAMA Working Papers 2012-38, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    6. Khanna, Madhu & Wang, Weiwei & Hudiburg, Tara & DeLucia, Evan, 2016. "The Economic Cost of Including the Indirect Land Use Factor in Low Carbon Fuel Policy: Efficiency and Distributional Implications," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 235774, Agricultural and Applied Economics Association.
    7. Drabik, Dušan & de Gorter, Harry, 2013. "Emissions from Indirect Land Use Change: Do they Matter with Fuel Market Leakages?," Review of Agricultural and Applied Economics (RAAE), Faculty of Economics and Management, Slovak Agricultural University in Nitra, vol. 16(2), pages 1-13, September.
    8. Ujjayant Chakravorty & Marie-Hélène Hubert & Michel Moreaux & Linda Nøstbakken, 2012. "Do Biofuel Mandates Raise Food Prices?," Economics Working Paper Archive (University of Rennes 1 & University of Caen) 201214, Center for Research in Economics and Management (CREM), University of Rennes 1, University of Caen and CNRS.
    9. Vorotnikova, Ekaterina & Seale, James L, 2014. "U.S. Ethanol Mandate Is a Hidden Subsidy to Corn Producers," 2014 Annual Meeting, February 1-4, 2014, Dallas, Texas 162551, Southern Agricultural Economics Association.
    10. Ujjayant Chakravorty & Marie-Hélène Hubert & Beyza Ural Marchand, 2016. "The effect of the US biofuels mandate on poverty in India," Economics Working Paper Archive (University of Rennes 1 & University of Caen) 2016-13, Center for Research in Economics and Management (CREM), University of Rennes 1, University of Caen and CNRS.

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