IDEAS home Printed from https://ideas.repec.org/p/ags/eaae11/114432.html
   My bibliography  Save this paper

The Implications of Alternative Biofuel Policies on Carbon Leakage

Author

Listed:
  • Drabik, Dusan
  • de Gorter, Harry
  • Just, David R.

Abstract

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.

Suggested Citation

  • Drabik, Dusan & de Gorter, Harry & Just, David R., 2011. "The Implications of Alternative Biofuel Policies on Carbon Leakage," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland 114432, European Association of Agricultural Economists.
  • Handle: RePEc:ags:eaae11:114432
    DOI: 10.22004/ag.econ.114432
    as

    Download full text from publisher

    File URL: https://ageconsearch.umn.edu/record/114432/files/Drabik_Dusan_61.pdf
    Download Restriction: no

    File URL: https://libkey.io/10.22004/ag.econ.114432?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Brian C. Murray & Bruce A. McCarl & Heng-Chi Lee, 2004. "Estimating Leakage from Forest Carbon Sequestration Programs," Land Economics, University of Wisconsin Press, vol. 80(1), pages 109-124.
    2. 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 106-146, February.
    3. Fischer, Carolyn & Fox, Alan K., 2009. "Combining Rebates with Carbon Taxes: Optimal Strategies for Coping with Emissions Leakage and Tax Interactions," RFF Working Paper Series dp-09-12, Resources for the Future.
    4. Michael Hoel, 2008. "Bush Meets Hotelling: Effects of Improved Renewable Energy Technology on Greenhouse Gas Emissions," CESifo Working Paper Series 2492, CESifo.
    5. 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.
    6. Drabik, Dusan & de Gorter, Harry, 2010. "Biofuels And Leakages In The Fuel Market," 2010: Climate Change in World Agriculture: Mitigation, Adaptation, Trade and Food Security, June 2010, Stuttgart-Hohenheim, Germany 91265, International Agricultural Trade Research Consortium.
    7. Hans-Werner Sinn, 2008. "Public policies against global warming: a supply side approach," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 15(4), pages 360-394, August.
    8. 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.
    9. R. Quentin Grafton & Tom Kompas & Ngo Van Long, 2010. "Biofuels Subsidies and the Green Paradox," CESifo Working Paper Series 2960, CESifo.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Janda, Karel & Kristoufek, Ladislav & Zilberman, David, "undated". "Biofuels: review of policies and impacts," CUDARE Working Papers 120415, University of California, Berkeley, Department of Agricultural and Resource Economics.
    2. Bilgili, Faik & Koçak, Emrah & Bulut, Ümit & Kuşkaya, Sevda, 2017. "Can biomass energy be an efficient policy tool for sustainable development?," Renewable and Sustainable Energy Reviews, Elsevier, vol. 71(C), pages 830-845.
    3. de Gorter, Harry & Drabik, Dusan & Just, David R., 2011. "Modeling Carbon Leakages with Forestation Policies," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland 114450, European Association of Agricultural Economists.
    4. Karel Janda & Ladislav Kristoufek & David Zilberman, 2012. "Biofuels: policies and impacts," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 58(8), pages 372-386.
    5. Drabik, Dusan & de Gorter, Harry & Timilsina, Govinda R., 2016. "Producing biodiesel from soybeans in Zambia: An economic analysis," Food Policy, Elsevier, vol. 59(C), pages 103-109.
    6. Drabik, Dusan, 2011. "The Theory of Biofuel Policy and Food Grain Prices," Working Papers 126615, Cornell University, Department of Applied Economics and Management.
    7. Haroon Bhorat & Ravi Kanbur & Natasha Mayet, 2013. "A Note on Measuring the Depth of Minimum Wage Violation," LABOUR, CEIS, vol. 27(2), pages 192-197, June.
    8. Karel Janda & Ladislav Kristoufek & David Zilberman, 2011. "Modeling the Environmental and Socio-Economic Impacts of Biofuels," Working Papers IES 2011/33, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Oct 2011.
    9. de Gorter, Harry & Drabik, Dusan & Timilsina, Govinda R., 2013. "Should Zambia produce biodiesel from soybeans ? some insights from an empirical analysis," Policy Research Working Paper Series 6498, The World Bank.
    10. Abdul-Manan, Amir F.N., 2017. "Lifecycle GHG emissions of palm biodiesel: Unintended market effects negate direct benefits of the Malaysian Economic Transformation Plan (ETP)," Energy Policy, Elsevier, vol. 104(C), pages 56-65.
    11. Khanna, Madhu & Hector, Nunez & David, Zilberman, 2014. "The Political-Economy of Biofuel and Cheap Oil Policies in Brazil," 2014 Annual Meeting, July 27-29, 2014, Minneapolis, Minnesota 169471, Agricultural and Applied Economics Association.
    12. de Gorter, Harry & Drabik, Dusan & Just, David R., 2011. "Carbon Leakage with Forestation Policies," 2011 Annual Meeting, July 24-26, 2011, Pittsburgh, Pennsylvania 103797, Agricultural and Applied Economics Association.
    13. Ladislav Kristoufek & Karel Janda & David Zilberman, 2013. "Regime-dependent topological properties of biofuels networks," The European Physical Journal B: Condensed Matter and Complex Systems, Springer;EDP Sciences, vol. 86(2), pages 1-12, February.
    14. Oladosu, Gbadebo, 2012. "Estimates of the global indirect energy-use emission impacts of USA biofuel policy," Applied Energy, Elsevier, vol. 99(C), pages 85-96.
    15. Bento, Antonio M. & Klotz, Richard & Landry, Joel R., 2011. "Are there Carbon Savings from US Biofuel Policies? Accounting for Leakage in Land and Fuel Markets," 2011 Annual Meeting, July 24-26, 2011, Pittsburgh, Pennsylvania 104008, Agricultural and Applied Economics Association.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. van der Ploeg, Frederick & Withagen, Cees, 2012. "Too much coal, too little oil," Journal of Public Economics, Elsevier, vol. 96(1), pages 62-77.
    2. van der Ploeg, Frederick & Withagen, Cees, 2012. "Is there really a green paradox?," Journal of Environmental Economics and Management, Elsevier, vol. 64(3), pages 342-363.
    3. Benchekroun, Hassan & Withagen, Cees, 2012. "On price taking behavior in a nonrenewable resource cartel–fringe game," Games and Economic Behavior, Elsevier, vol. 76(2), pages 355-374.
    4. Frederick Van der Ploeg & Cees A. Withagen, 2011. "Too Little Oil, Too Much Coal: Optimal Carbon Tax and when to Phase in Oil, Coal and Renewables," CESifo Working Paper Series 3526, CESifo.
    5. Benchekroun, Hassan & Withagen, Cees, 2012. "On price taking behavior in a nonrenewable resource cartel–fringe game," Games and Economic Behavior, Elsevier, vol. 76(2), pages 355-374.
    6. Ngo Long, 2011. "Dynamic Games in the Economics of Natural Resources: A Survey," Dynamic Games and Applications, Springer, vol. 1(1), pages 115-148, March.
    7. Wang, Min & Zhao, Jinhua, 2018. "Are renewable energy policies climate friendly? The role of capacity constraints and market power," Journal of Environmental Economics and Management, Elsevier, vol. 90(C), pages 41-60.
    8. Karp, Larry & Stevenson, Megan, 2012. "Green industrial policy : trade and theory," Policy Research Working Paper Series 6238, The World Bank.
    9. Hendrik Ritter & Mark Schopf, 2014. "Unilateral Climate Policy: Harmful or Even Disastrous?," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 58(1), pages 155-178, May.
    10. Hart, Rob & Spiro, Daniel, 2011. "The elephant in Hotelling's room," Energy Policy, Elsevier, vol. 39(12), pages 7834-7838.
    11. Frederick van der Ploeg, 2013. "Cumulative Carbon Emissions and the Green Paradox," Annual Review of Resource Economics, Annual Reviews, vol. 5(1), pages 281-300, June.
    12. Smulders, Sjak & Tsur, Yacov & Zemel, Amos, 2012. "Announcing climate policy: Can a green paradox arise without scarcity?," Journal of Environmental Economics and Management, Elsevier, vol. 64(3), pages 364-376.
    13. Bahel, Eric & Marrouch, Walid & Gaudet, Gérard, 2013. "The economics of oil, biofuel and food commodities," Resource and Energy Economics, Elsevier, vol. 35(4), pages 599-617.
    14. Rick Van der Ploeg & Bas Jacobs, 2010. "Precautionary Climate Change Policies And Optimal Redistribution," OxCarre Working Papers 049, Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford.
    15. Miranowski, John A. & Rosburg, Alicia, 2010. "Using Cellulosic Ethanol to ‘Go Green’: What Price for Carbon?," 2010 Annual Meeting, July 25-27, 2010, Denver, Colorado 61395, Agricultural and Applied Economics Association.
    16. Quentin Grafton, R. & Kompas, Tom & Van Long, Ngo, 2012. "Substitution between biofuels and fossil fuels: Is there a green paradox?," Journal of Environmental Economics and Management, Elsevier, vol. 64(3), pages 328-341.
    17. Drabik, Dusan, 2011. "The Theory of Biofuel Policy and Food Grain Prices," Working Papers 126615, Cornell University, Department of Applied Economics and Management.
    18. Michael Hoel, 2011. "The Supply Side of CO 2 with Country Heterogeneity," Scandinavian Journal of Economics, Wiley Blackwell, vol. 113(4), pages 846-865, December.
    19. Jingbo Cui & Harvey Lapan & GianCarlo Moschini & Joseph Cooper, 2011. "Welfare Impacts of Alternative Biofuel and Energy Policies," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 93(5), pages 1235-1256.
    20. Thompson, Wyatt & Meyer, Seth D. & Westhoff, Patrick C., 2010. "Us Biofuel And Climate Policies Duel Over Cellulosic Biomass," 2010: Climate Change in World Agriculture: Mitigation, Adaptation, Trade and Food Security, June 2010, Stuttgart-Hohenheim, Germany 91404, International Agricultural Trade Research Consortium.

    More about this item

    Keywords

    Resource /Energy Economics and Policy;

    JEL classification:

    • Q27 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Issues in International Trade
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ags:eaae11:114432. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: AgEcon Search (email available below). General contact details of provider: https://edirc.repec.org/data/eaaeeea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.