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Economic Potential of Biomass-Based Fuels for Greenhouse Gas Emission Mitigation

  • Uwe A. Schneider
  • Bruce A. McCarl

Use of biofuels diminishes fossil fuel combustion, thereby also reducing net greenhouse gas emissions. However, subsidies are needed to make agricultural biofuel production economically feasible. To explore the economic potential of biofuels in a greenhouse gas mitigation market, the authors incorporate data on production and biofuel processing for the designated energy crops--switchgrass, hybrid poplar, and willow--in a U.S. Agricultural Sector Model, along with data on traditional crop-livestock production and processing, and afforestation of cropland. Net emission coefficients on all included agricultural practices are estimated through crop growth simulation models or are taken from the literature. The authors simulate potential emission mitigation policies or markets using hypothetical carbon prices ranging between $0 and $500 per ton of carbon equivalent. At each carbon price level, the Agricultural Sector Model computes the new market equilibrium, revealing agricultural commodity prices, regionally specific production, input use, welfare levels, environmental impacts, and adoption of alternative management practices such as biofuel production. Results indicate there is no role for biofuels below carbon prices of $50 per ton of carbon equivalent. At these incentive levels, emission reductions through reduced soil tillage and afforestation are more cost efficient. At carbon prices above $50, however, biofuels become increasingly important, and at prices above $180 they dominate all other agricultural strategies.

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Paper provided by Center for Agricultural and Rural Development (CARD) at Iowa State University in its series Center for Agricultural and Rural Development (CARD) Publications with number 01-wp280.

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Date of creation: Aug 2001
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Handle: RePEc:ias:cpaper:01-wp280
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  1. Pautsch, Gregory R. & Kurkalova, Lyubov A. & Babcock, Bruce A. & Kling, Catherine L., 2001. "Efficiency of Sequestering Carbon in Agricultural Soils (The)," Staff General Research Papers 1870, Iowa State University, Department of Economics.
  2. Christopher N. MacCracken & James A. Edmonds & Son H. Kim & Ronald D. Sands, 1999. "The Economics of the Kyoto Protocol," The Energy Journal, International Association for Energy Economics, vol. 0(Special I), pages 25-71.
  3. Robert N. Stavins, 1999. "The Costs of Carbon Sequestration: A Revealed-Preference Approach," American Economic Review, American Economic Association, vol. 89(4), pages 994-1009, September.
  4. McCarl, Bruce A. & Schneider, Uwe A., 1999. "Curbing Greenhouse Gases: Agriculture's Role," Choices, Agricultural and Applied Economics Association, vol. 14(1).
  5. Paul Gallagher & Donald Johnson, 1999. "Some New Ethanol Technology: Cost Competition and Adoption Effects in the Petroleum Market," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 89-120.
  6. N. De Liso & G. Filatrella, 1999. "On technology competition," Working Papers 337, Dipartimento Scienze Economiche, Universita' di Bologna.
  7. GR Pautsch & LA Kurkalova & BA Babcock & CL Kling, 2001. "The Efficiency Of Sequestering Carbon In Agricultural Soils," Contemporary Economic Policy, Western Economic Association International, vol. 19(2), pages 123-134, 04.
  8. Alig, Ralph J. & Adams, Darius M. & McCarl, Bruce A., 1998. "Impacts Of Incorporating Land Exchanges Between Forestry And Agriculture In Sector Models," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 30(02), December.
  9. Gallagher, Paul W. & Johnson, Donald, 1999. "Some New Ethanol Technology: Cost Competition and Adoption Effects in the Petroleum Market," Staff General Research Papers 5265, Iowa State University, Department of Economics.
  10. Schneider, Uwe A. & Kumar, Pushpam, 2008. "Greenhouse Gas Mitigation through Agriculture," Choices, Agricultural and Applied Economics Association, vol. 23(1).
  11. Jinxia Wang & Robert Mendelsohn & Ariel Dinar & Jikun Huang & Scott Rozelle & Lijuan Zhang, 2009. "The impact of climate change on China's agriculture," Agricultural Economics, International Association of Agricultural Economists, vol. 40(3), pages 323-337, 05.
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