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Biofuels in the world markets: A Computable General Equilibrium assessment of environmental costs related to land use changes

Author

Listed:
  • Antoine BOUËT
  • HUGO VALIN
  • Betina DIMARANAN

Abstract

There is rising scepticism about the potential positive environmental impacts of first generation biofuels. Growing biofuels crops could induce diversion of other crops dedicated to food and feed needs. The relocation of production could increase deforestation and bring significant new volumes of carbon into the atmosphere. In this paper, we develop a methodology for assessing indirect land use effects related to biofuels policies in a Computable General Equilibrium framework. We rely on the trade policy model MIRAGE and on the GTAP 7 database, both of which have been modified and improved for this purpose. The model explicitly represents the role of different types of biofuel feedstock crops, energy demand, and carbon emissions. Land use changes are represented at the level of Agro-Ecological Zones in a dynamic framework using land substitution with nesting of Constant Elasticity of Transformation functions and a land supply module taking into account the effects of economic land expansion. In this integrated global approach, we capture the environmental cost of different land conversion due to biofuels in the carbon budget, taking into account both direct and indirect CO2 emissions related to land use change. We apply this methodology in looking at the impacts of biofuel (ethanol) policies for transportation in the United States and in the European Union with and without ethanol trade liberalization. We find that emissions released because of ethanol programs significantly worsen the total carbon balance of biofuel policies. Ethanol trade liberalisation benefits are ambiguous and depend highly on the parameters governing land use change, in Brazil in particular. We conclude by pointing out the critical aspects that have to be refined in order to improve our understanding of the environmental implications of biofuels development.

Suggested Citation

  • Antoine BOUËT & HUGO VALIN & Betina DIMARANAN, 2009. "Biofuels in the world markets: A Computable General Equilibrium assessment of environmental costs related to land use changes," Working Papers 6, CATT - UPPA - Université de Pau et des Pays de l'Adour, revised Nov 2009.
  • Handle: RePEc:tac:wpaper:6
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    File URL: http://gtl.univ-pau.fr/travaux/2332F_6DocWcattBiofuelsWorldMarketsHV_BD_ABouet(2).pdf
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    References listed on IDEAS

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    1. Seale, James & Regmi, Anita & Bernstein, Jason, 2003. "International Evidence on Food Consumption Patterns," Technical Bulletins 184321, United States Department of Agriculture, Economic Research Service.
    2. Gurgel Angelo & Reilly John M & Paltsev Sergey, 2007. "Potential Land Use Implications of a Global Biofuels Industry," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 5(2), pages 1-36, December.
    3. Hertel, Thomas & Tyner, Wally & Birur, Dileep, 2008. "Biofuels for all? Understanding the Global Impacts of Multinational Mandates," GTAP Working Papers 2809, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
    4. Burniaux, Jean-Marc & Truong Truong, 2002. "GTAP-E: An Energy-Environmental Version of the GTAP Model," GTAP Technical Papers 923, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
    5. Golub, Alla & Hertel, Thomas & Sohngen, Brent, 2008. "Land Use Modeling in Recursively-Dynamic GTAP Framework," GTAP Working Papers 2609, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
    6. Lee, Huey-Lin & Hertel, Thomas & Rose, Steven & Avetisyan, Misak, 2008. "An Integrated Global Land Use Data Base for CGE Analysis of Climate Policy Options," GTAP Working Papers 2603, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
    7. Yvan Decreux & Hugo Valin, 2007. "MIRAGE, Updated Version of the Model for Trade Policy Analysis: Focus on Agriculture and Dynamics," Working Papers 2007-15, CEPII research center.
    8. Banse, Martin & van Meijl, Hans & Tabeau, Andrzej A. & Woltjer, Geert B., 2008. "Impact of EU Biofuel Policies on World Agricultural and Food Markets," 107th Seminar, January 30-February 1, 2008, Sevilla, Spain 6476, European Association of Agricultural Economists.
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    Citations

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    Cited by:

    1. Dimaranan, Betina V. & Laborde, David, 2012. "Ethanol Trade Policy and Global Biofuel Mandates," 2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil 126869, International Association of Agricultural Economists.
    2. Bureau, Jean-Christophe & Treguer, David & Valin, Hugo, 2010. "Biofuel Programs And Farm Support: New Tools For Old Policies?," 14th ICABR Conference, June 16-18, 2010, Ravello, Italy 188081, International Consortium on Applied Bioeconomy Research (ICABR).
    3. Laborde, David & Valin, Hugo, 2010. "Modelling Indirect Land Use Effects Of Biofuels:," 14th ICABR Conference, June 16-18, 2010, Ravello, Italy 188100, International Consortium on Applied Bioeconomy Research (ICABR).
    4. Jean-Christophe Bureau & Sébastien Jean, 2013. "Trade liberalization in the bio-economy: coping with a new landscape," Agricultural Economics, International Association of Agricultural Economists, vol. 44(s1), pages 173-182, November.
    5. Antoine Bouët & Guillaume P. Gruère, 2011. "Refining Opportunity Cost Estimates of Not Adopting GM Cotton: An Application in Seven Sub-Saharan African Countries," Applied Economic Perspectives and Policy, Agricultural and Applied Economics Association, vol. 33(2), pages 260-279.

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    Keywords

    Agricultural economics; Biofuels; Indirect land use change; Trade liberalisation;

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