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Effect of Production Parameters On the Economic Feasibility of a Biofuel Enterprise

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  • Zapata, Samuel D.
  • Ribera, Luis A.
  • Palma, Marco

Abstract

The optimal allocation of resources and efforts is needed to fulfill the latest Renewable Fuel Standard mandate. In order to warranty the success of the nascent cellulose-based biofuel industry, it is crucial to better understand the effects that production parameters have on the economic feasibility of a biofuel enterprise. The main goal of this study is to estimate the impact that the different feedstock production and biofuel conversion parameters have on the probability of economic success. To this aim, an original stochastic financial model is developed to analyze and identify the most economically relevant components of the biofuel production path. Estimation of the model was carried out using Monte Carlo simulation techniques along with parametric maximum likelihood estimation procedures. Results indicate that operational efficiency strategies should concentrate on improving feedstock yields and extending the feedstock growing season.

Suggested Citation

  • Zapata, Samuel D. & Ribera, Luis A. & Palma, Marco, 2016. "Effect of Production Parameters On the Economic Feasibility of a Biofuel Enterprise," 2016 Annual Meeting, February 6-9, 2016, San Antonio, Texas 229804, Southern Agricultural Economics Association.
    • Handle: RePEc:ags:saea16:229804
    DOI: 10.22004/ag.econ.229804
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    References listed on IDEAS

    as
    1. Richardson, James W. & Herbst, Brian K. & Outlaw, Joe L. & Gill, Robert Chope, II, 2007. "Including Risk in Economic Feasibility Analyses: The Case of Ethanol Production in Texas," Journal of Agribusiness, Agricultural Economics Association of Georgia, vol. 25(2), pages 1-18.
    2. Palma, Marco A. & Richardson, James W. & Roberson, Brad E. & Ribera, Luis A. & Outlaw, Joe L. & Munster, Clyde, 2011. "Economic Feasibility of a Mobile Fast Pyrolysis System for Sustainable Bio-crude Oil Production," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association, vol. 14(3), pages 1-16, September.
    3. Monge, Juan J. & Ribera, Luis A. & Jifon, John L. & da Silva, Jorge A. & Richardson, James W., 2014. "Economics and Uncertainty of Lignocellulosic Biofuel Production from Energy Cane and Sweet Sorghum in South Texas," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 46(4), pages 457-485, November.
    4. Richardson, James W. & Lemmer, Wessel J. & Outlaw, Joe L., 2007. "Bio-ethanol Production from Wheat in the Winter Rainfall Region of South Africa: A Quantitative Risk Analysis," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association, vol. 10(2), pages 1-24.
    5. Glenn Hoetker, 2007. "The use of logit and probit models in strategic management research: Critical issues," Strategic Management Journal, Wiley Blackwell, vol. 28(4), pages 331-343, April.
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    More about this item

    Keywords

    Agribusiness; Agricultural Finance; Crop Production/Industries; Production Economics; Research Methods/ Statistical Methods; Resource /Energy Economics and Policy;
    All these keywords.

    JEL classification:

    • Q16 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - R&D; Agricultural Technology; Biofuels; Agricultural Extension Services
    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General

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