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The Economics of Biofuels


  • Brännlund, Runar

    () (Department of Economics, Umeå University)

  • Kriström, Bengt

    () (Department of Forest Economics)

  • Lundgren, Tommy

    () (Umeå School of Business)

  • Marklund, Per-Olov

    () (Department of Economics, Umeå University)


Biofuels are increasingly being regarded as an energy source with potential to address problems in several areas, such as those found in the areas of climate change, environmental degradation, energy supply and energy security. We take a look at biofuels through the lens of modern resource economics and begin our survey by asking the question: Why biofuels? We delimit ourselves to biofuels for transportation (e.g. ethanol and biodiesel). We then review some of the literature in the field and put forward a framework for analysis drawn mainly from the green accounting literature. The literature review indicates that the effects of policies promoting conversion from fossil fuels to biofuels are not necessarily welfare improving. Our theoretical framework provided sheds some light on why this might be the case. We propose policies that not only penalize emissions of CO2 from all sources, but also stimulate biomass growth. We end by identifying issues for further research.

Suggested Citation

  • Brännlund, Runar & Kriström, Bengt & Lundgren, Tommy & Marklund, Per-Olov, 2008. "The Economics of Biofuels," Umeå Economic Studies 736, Umeå University, Department of Economics.
  • Handle: RePEc:hhs:umnees:0736

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    Cited by:

    1. Bayramoglu, Basak, 2008. "Efficiency of a Biofuel Subsidy Policy in the Presence of Environmental Externalities," 2008 International Congress, August 26-29, 2008, Ghent, Belgium 44399, European Association of Agricultural Economists.
    2. Eriksson, Mathilda, 2016. "The Role of the Forest in Climate Policy," Umeå Economic Studies 927, Umeå University, Department of Economics.
    3. Lundgren, Tommy & Marklund, Per-Olov, 2011. "Assessing the welfare effects of promoting biomass growth and the use of bioenergy – A simple back-of-an-envelope calculation," CERE Working Papers 2011:11, CERE - the Center for Environmental and Resource Economics.
    4. Brännlund Runar & Carlén Ola & Lundgren Tommy & Marklund Per-Olov, 2012. "The Costs and Benefits of Intensive Forest Management," Journal of Benefit-Cost Analysis, De Gruyter, vol. 3(4), pages 1-25, December.
    5. Henk Folmer, 2009. "OPEC versus Kyoto by Henk Folmer," CESifo Forum, Ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 10(3), pages 23-29, October.

    More about this item


    Biofuels; ethanol; green accounting; energy demand;

    JEL classification:

    • 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

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