Investment in Cellulosic Biofuel Refineries: Do Waivable Biofuel Mandates Matter?
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.
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|Date of creation:||01 May 2012|
|Date of revision:|
|Publication status:||Published in American Journal of Agricultural Economics, February 2012,|
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