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Promoting Biofuels: Implications for Developing Countries

  • Jörg Peters

    ()

  • Sascha Thielmann

Interest in biofuels is growing worldwide as concerns about the security of energy supply and climate change are moving into the focus of policy makers. With the exception of bioethanol from Brazil, however, production costs of biofuels are typically much higher than those of fossil fuels.As a result,promotion measures such as tax exemptions or blending quotas are indispensable for ascertaining substantial biofuel demand.With particular focus on developing countries, this paper discusses the economic justification of biofuel promotion instruments and investigates their implications. Based on data from India and Tanzania, we find that substantial biofuel usage induces significant financial costs. Furthermore, acreage availability is a binding natural limitation that could also lead to conflicts with food production.Yet, if carefully implemented under the appropriate conditions, biofuel programs might present opportunities for certain developing countries.

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Paper provided by Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen in its series Ruhr Economic Papers with number 0038.

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Length: 20 pages
Date of creation: Jan 2008
Date of revision:
Handle: RePEc:rwi:repape:0038
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  1. Frondel, Manuel & Peters, Jorg, 2007. "Biodiesel: A new Oildorado?," Energy Policy, Elsevier, vol. 35(3), pages 1675-1684, March.
  2. Ian W. H. Parry & Kenneth A. Small, 2005. "Does Britain or the United States Have the Right Gasoline Tax?," American Economic Review, American Economic Association, vol. 95(4), pages 1276-1289, September.
  3. David M. Newbery, 2005. "Why Tax Energy? Towards a More Rational Policy," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 1-40.
  4. Dannenberg, Astrid & Mennel, Tim & Moslener, Ulf, 2007. "What Does Europe Pay for Clean Energy? Review of Macroeconomic Simulation Studies," ZEW Discussion Papers 07-019, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  5. Newbery, D., 2005. "Why Tax Energy? Towards a More Rational Energy Policy," Cambridge Working Papers in Economics 0508, Faculty of Economics, University of Cambridge.
  6. McDonald, Scott & Robinson, Sherman & Thierfelder, Karen, 2006. "Impact of switching production to bioenergy crops: The switchgrass example," Energy Economics, Elsevier, vol. 28(2), pages 243-265, March.
  7. Ryan, Lisa & Convery, Frank & Ferreira, Susana, 2006. "Stimulating the use of biofuels in the European Union: Implications for climate change policy," Energy Policy, Elsevier, vol. 34(17), pages 3184-3194, November.
  8. Bergstrom, Theodore C, 1982. "On Capturing Oil Rents with a National Excise Tax," American Economic Review, American Economic Association, vol. 72(1), pages 194-201, March.
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