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Biofuel Economics in a Setting of Multiple Objectives & Unintended Consequences


  • Jaeger, William K.
  • Egelkraut, Thorsten M.


This paper examines biofuels from an economic perspective and evaluates the merits of promoting biofuel production in the context of the policies’ multiple objectives, life-cycle implications, pecuniary externalities, and other unintended consequences. The policy goals most often cited are to reduce fossil fuel use and to lower greenhouse gas emissions. But the presence of multiple objectives and various indirect effects complicates normative evaluation. To address some of these complicating factors, we look at several combinations of policy alternatives that achieve the same set of incremental gains along the two primary targeted policy dimensions, making it possible to compare the costs and cost-effectiveness of each combination of policies. For example, when this approach is applied to U.S.-produced biofuels, they are found to be 14 to 31 times as costly as alternatives like raising the gas tax or promoting energy efficiency improvements. The analysis also finds the scale of the potential contributions of biofuels to be extremely small in both the U.S. and EU. Mandated U.S. corn ethanol production for 2025 reduces U.S. petroleum input use by 1.75%, and would have negligible net effects on CO2 emissions; and although EU imports of Brazilian ethanol may look better given the high costs of other alternatives, this option is equivalent, at most, to a 1.20% reduction in EU gasoline consumption.

Suggested Citation

  • Jaeger, William K. & Egelkraut, Thorsten M., 2011. "Biofuel Economics in a Setting of Multiple Objectives & Unintended Consequences," Energy: Resources and Markets 108203, Fondazione Eni Enrico Mattei (FEEM).
  • Handle: RePEc:ags:feemer:108203
    DOI: 10.22004/ag.econ.108203

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    Cited by:

    1. Kim, Yohan & Lee, Joosung & Ahn, Jaemyung, 2019. "Innovation towards sustainable technologies: A socio-technical perspective on accelerating transition to aviation biofuel," Technological Forecasting and Social Change, Elsevier, vol. 145(C), pages 317-329.
    2. Iyabo Adeola Olanrele & Adedoyin I. Lawal & Ezekiel Oseni & Ahmed Oluwatobi Adekunle & Bukola, B. Lawal-Adedoyin & Crystal O. Elleke & Racheal Ojeka-John & Henry Nweke-Love, 2020. "Accessing the Impacts of Contemporary Development in Biofuel on Agriculture, Energy and Domestic Economy: Evidence from Nigeria," International Journal of Energy Economics and Policy, Econjournals, vol. 10(5), pages 469-478.
    3. Rajagopal, D. & Plevin, R. & Hochman, G. & Zilberman, D., 2015. "Multi-objective regulations on transportation fuels: Comparing renewable fuel mandates and emission standards," Energy Economics, Elsevier, vol. 49(C), pages 359-369.
    4. Zhao, Qiankun & Cai, Ximing & Mischo, William & Ma, Liyuan, 2020. "How do the research and public communities view biofuel development?," Renewable and Sustainable Energy Reviews, Elsevier, vol. 133(C).
    5. Jagroop Singh & Somesh Kumar Sharma & Rajnish Srivastava, 2019. "AHP-Entropy based priority assessment of factors to reduce aviation fuel consumption," International Journal of System Assurance Engineering and Management, Springer;The Society for Reliability, Engineering Quality and Operations Management (SREQOM),India, and Division of Operation and Maintenance, Lulea University of Technology, Sweden, vol. 10(2), pages 212-227, April.

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