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Efficiency of a Biofuel Subsidy Policy in the Presence of Environmental Externalities


  • Bayramoglu, Basak


The object of this paper is to analyze, in a general equilibrium setting with four markets, the efficiency of a biofuel subsidy policy. The analysis takes into account environmental externalities associated both with the production and the consumption of biofuels, as well as associated with the production of agricultural raw material. Our preliminary numerical results, applied to the biodiesel subsidy policy in France, first show that this policy increases the utility of the representative consumer compared to the laissez-faire solution. The same policy action leads, however, to an increased level of agricultural and GHG emissions, in comparison with the laissez-faire solution.

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  • Bayramoglu, Basak, 2008. "Efficiency of a Biofuel Subsidy Policy in the Presence of Environmental Externalities," 2008 International Congress, August 26-29, 2008, Ghent, Belgium 44399, European Association of Agricultural Economists.
  • Handle: RePEc:ags:eaae08:44399

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    References listed on IDEAS

    1. Gardner Bruce, 2007. "Fuel Ethanol Subsidies and Farm Price Support," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 5(2), pages 1-22, December.
    2. Ryan, Lisa & Convery, Frank & Ferreira, Susana, 2006. "Stimulating the use of biofuels in the European Union: Implications for climate change policy," Energy Policy, Elsevier, vol. 34(17), pages 3184-3194, November.
    3. Tyner Wallace E., 2007. "Policy Alternatives for the Future Biofuels Industry," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 5(2), pages 1-13, December.
    4. Ofir D. Rubin & Miguel Carriquiry & Dermot J. Hayes, 2008. "Implied Objectives of U.S. Biofuel Subsidies," Center for Agricultural and Rural Development (CARD) Publications 08-wp459, Center for Agricultural and Rural Development (CARD) at Iowa State University.
    5. Rajagopal, Deepak & Zilberman, David, 2007. "Review of environmental, economic and policy aspects of biofuels," Policy Research Working Paper Series 4341, The World Bank.
    6. Brännlund, Runar & Kriström, Bengt & Lundgren, Tommy & Marklund, Per-Olov, 2008. "The Economics of Biofuels," Umeå Economic Studies 736, Umeå University, Department of Economics.
    7. Lundgren, Tommy & Marklund, Per-Olov & Brannlund, Runar & Kristrom, Bengt, 2008. "The Economics of Biofuels," International Review of Environmental and Resource Economics, now publishers, vol. 2(3), pages 237-280, November.
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    biofuels; subsidy; environment; Environmental Economics and Policy;

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