The Implications of Alternative Biofuel Policies on Carbon Leakage
We show carbon leakage depends on the type of biofuel policy (tax credit versus mandate), the domestic and foreign gasoline supply and fuel demand elasticities, and on consumption and production shares of world oil markets for the country introducing the biofuel policy. The components of carbon leakage – market leakage and emissions savings – are counteracting: carbon leakage increases with market leakage but decreases with emissions savings. We also distinguish domestic and international leakage where the latter is always positive, but domestic leakage can be negative with a mandate. The IPCC definition of leakage omits domestic leakage, resulting in biased estimates. Leakage with a tax credit always exceeds that of a mandate, while the combination of a mandate and tax credit generates lower leakage than a tax credit alone. In general, a gallon of ethanol (energy equivalent) is found to replace 35 percent of a gallon of gasoline – not 100 percent as assumed by life-cycle accounting. This means ethanol emits 13 percent more carbon than a gallon of gasoline if indirect land use change (iLUC) is not included in the estimated emissions savings effect and 43 percent more when iLUC is included.
|Date of creation:||2011|
|Date of revision:|
|Contact details of provider:|| Web page: http://www.eaae.org|
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Brian C. Murray & Bruce A. McCarl & Heng-Chi Lee, 2004.
"Estimating Leakage from Forest Carbon Sequestration Programs,"
University of Wisconsin Press, vol. 80(1), pages 109-124.
- Brian C. Murray & Bruce A. McCarl & Heng-Chi Lee, 2004. "Estimating Leakage from Forest Carbon Sequestration Programs," UWO Department of Economics Working Papers 20043, University of Western Ontario, Department of Economics, revised Mar 2003.
- Stephen P. Holland & Christopher R. Knittel & Jonathan E. Hughes, 2007.
"Greenhouse Gas Reductions under Low Carbon Fuel Standards?,"
NBER Working Papers
13266, National Bureau of Economic Research, Inc.
- Stephen P. Holland & Jonathan E. Hughes & Christopher R. Knittel, 2009. "Greenhouse Gas Reductions under Low Carbon Fuel Standards?," American Economic Journal: Economic Policy, American Economic Association, vol. 1(1), pages 106-46, February.
- Holland, Stephen P. & Knittel, Christopher R & Hughes, Jonathan E., 2008. "Greenhouse Gas Reductions under Low Carbon Fuel Standards?," Institute of Transportation Studies, Working Paper Series qt9gh5b4rv, Institute of Transportation Studies, UC Davis.
- Holland, Stephen P & Knittel, Christopher R & Hughes, Jonathan E., 2008. "Greenhouse Gas Reductions under Low Carbon Fuel Standards?," Institute of Transportation Studies, Working Paper Series qt0177r7xp, Institute of Transportation Studies, UC Davis.
- Harry de Gorter & David R. Just, 2008. "The Economics of a Blend Mandate for Biofuels," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 91(3), pages 738-750.
- R. Quentin Grafton & Tom Kompas & Ngo Van Long, 2010. "Biofuels Subsidies and the Green Paradox," CESifo Working Paper Series 2960, CESifo Group Munich.
- Drabik, Dusan & de Gorter, Harry, 2010. "Biofuels And Leakages In The Fuel Market," Proceedings Issues, 2010: Climate Change in World Agriculture: Mitigation, Adaptation, Trade and Food Security, June 2010, Stuttgart- Hohenheim, Germany 91265, International Agricultural Trade Research Consortium.
- Harry de Gorter & David R. Just, 2007. "The Welfare Economics of a Biofuel Tax Credit and the Interaction Effects with Price Contingent Farm Subsidies," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 91(2), pages 477-488.
When requesting a correction, please mention this item's handle: RePEc:ags:eaae11:114432. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (AgEcon Search)
If references are entirely missing, you can add them using this form.