From a rise in B to a fall in C? Environmental impact of biofuels

This is the first paper that econometrically estimates the impact of the rising Bioenergy production on the global CO2 emissions. We apply a structural vector autoregression (SVAR) approach to time series with annual observation for the world biofuel production and global CO2 emissions from 1961 to 2009. We find that in the medium- to long-run biofuels significantly reduce global CO2 emissions: the CO2 emission elasticities with respect to biofuels range between -0.57 and -0.80. In the short-run, however, biofuels may increase CO2 emissions temporarily (elasticity 0.57). Our findings complement those of life-cycle assessment and simulation models. However, by employing a more holistic approach and obtaining more robust estimates of environmental impact of biofuels, our results are particularly valuable for policy makers.