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Biofuel Economics in a Setting of Multiple Objectives & Unintended Consequences

Author

Listed:
  • William K. Jaeger

    (Oregon State University)

  • Thorsten M. Egelkraut

    (Oregon State University)

Abstract

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

  • William K. Jaeger & Thorsten M. Egelkraut, 2011. "Biofuel Economics in a Setting of Multiple Objectives & Unintended Consequences," Working Papers 2011.37, Fondazione Eni Enrico Mattei.
  • Handle: RePEc:fem:femwpa:2011.37
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    Citations

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    Cited by:

    1. Sharp, Benjamin E. & Miller, Shelie A., 2014. "Estimating maximum land use change potential from a regional biofuel industry," Energy Policy, Elsevier, vol. 65(C), pages 261-269.
    2. 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.
    3. Ji, Xi & Long, Xianling, 2016. "A review of the ecological and socioeconomic effects of biofuel and energy policy recommendations," Renewable and Sustainable Energy Reviews, Elsevier, vol. 61(C), pages 41-52.
    4. repec:eee:eneeco:v:64:y:2017:i:c:p:45-54 is not listed on IDEAS
    5. Nair, Sujith & Paulose, Hanna, 2014. "Emergence of green business models: The case of algae biofuel for aviation," Energy Policy, Elsevier, vol. 65(C), pages 175-184.
    6. repec:eee:rensus:v:80:y:2017:i:c:p:620-647 is not listed on IDEAS
    7. Roach, Travis, 2015. "Hidden regimes and the demand for carbon dioxide from motor-gasoline," Energy Economics, Elsevier, vol. 52(PB), pages 306-315.
    8. Trumbo, Jennifer L. & Tonn, Bruce E., 2016. "Biofuels: A sustainable choice for the United States' energy future?," Technological Forecasting and Social Change, Elsevier, vol. 104(C), pages 147-161.
    9. repec:eee:rensus:v:79:y:2017:i:c:p:222-247 is not listed on IDEAS

    More about this item

    Keywords

    Biofuel; Biodiesel; Cost-Effectiveness; Indirect Land Use Change Effects; Net Energy; Multiple Objectives; Ethanol; Ghg;

    JEL classification:

    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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