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Investment in Cellulosic Biofuel Refineries: Do Waivable Biofuel Mandates Matter?


  • Miao, Ruiqing
  • Hennessy, David A.
  • Babcock, Bruce A.


We develop a conceptual model to study the impact of mandate policies on stimulating investment in cellulosic biofuel refineries. In a two-period framework, we compare the first-period investment level (FIL) under three scenarios: laissez-faire, non-waivable mandate (NWM) policy, and waivable mandate (WM) policy. Results show that when plant-level marginal costs are increasing then both NWM policy and WM policy may stimulate FIL. The WM policy has a smaller impact than does the NWM policy. When the plant-level marginal costs are constants, however, WM policy does not increase FIL but does increase the expected profit of more efficient investors.

Suggested Citation

  • Miao, Ruiqing & Hennessy, David A. & Babcock, Bruce A., 2012. "Investment in Cellulosic Biofuel Refineries: Do Waivable Biofuel Mandates Matter?," Staff General Research Papers Archive 34756, Iowa State University, Department of Economics.
  • Handle: RePEc:isu:genres:34756

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    References listed on IDEAS

    1. Hongli Feng & Bruce A. Babcock, 2010. "Impacts of Ethanol on Planted Acreage in Market Equilibrium," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 92(3), pages 789-802.
    2. Hannu Salonen, 2010. "On the existence of Nash equilibria in large games," International Journal of Game Theory, Springer;Game Theory Society, vol. 39(3), pages 351-357, July.
    3. Gardner, Bruce L., 2003. "Fuel Ethanol Subsidies And Farm Price Support: Boon Or Boondoggle?," Working Papers 28599, University of Maryland, Department of Agricultural and Resource Economics.
    4. Drew Fudenberg & Jean Tirole, 1991. "Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061414, July.
    5. Bryant, Henry L. & Lu, Jiamin & Richardson, James W. & Outlaw, Joe L., 2010. "Long-term Effects of the U.S. Renewable Fuel Standard on World Hunger," 2010 Annual Meeting, July 25-27, 2010, Denver, Colorado 61262, Agricultural and Applied Economics Association.
    6. Lapan, Harvey E. & Moschini, GianCarlo, 2009. "Biofuels Policies and Welfare: Is the Stick of Mandates Better Than the Carrot of Subsidies?," Staff General Research Papers Archive 13076, Iowa State University, Department of Economics.
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    Cited by:

    1. Tristan Skolrud & Gregmar Galinato & Suzette Galinato & Richard Shumway & Jonathan Yoder, 2014. "The Role of Market Structure and Federal Renewable Fuel Standards in the Growth of the Cellulosic Biofuel Sector," Working Papers 2014-02, School of Economic Sciences, Washington State University.
    2. Moschini, GianCarlo & Cui, Jingbo & Lapan, Harvey E., 0. "Economics of Biofuels: An Overview of Policies, Impacts and Prospects," Bio-based and Applied Economics Journal, Italian Association of Agricultural and Applied Economics (AIEAA), issue 3.
    3. repec:eee:enepol:v:113:y:2018:i:c:p:368-375 is not listed on IDEAS
    4. Gabriel E. Lade & C.Y. Cynthia Lin Lawell & Aaron Smith, 2016. "Policy Shocks and Market-Based Regulations: Evidence from the Renewable Fuel Standard," Center for Agricultural and Rural Development (CARD) Publications 16-wp565, Center for Agricultural and Rural Development (CARD) at Iowa State University.
    5. Miao, Ruiqing & Khanna, Madhu, 2015. "Costs of Meeting the Cellulosic Biofuel Mandate with an Energy Crop with Establishment Cost and Yield Risk: Implications for Policy," 2015 Conference, August 9-14, 2015, Milan, Italy 212458, International Association of Agricultural Economists.

    More about this item


    Investment; cellulosic biofuels; Renewable Identification Numbers; waivable mandate.;

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy


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