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Land Use and Greenhouse Gas Implications of Biofuels: Role of Technology and Policy

In: Handbook of Bioenergy Economics and Policy: Volume II

Author

Listed:
  • Xiaoguang Chen

    (Southwestern University of Economics and Finance)

  • Madhu Khanna

    (University of Illinois at Urbana-Champaign)

Abstract
This paper examines the changes in land use in the U.S. likely to be induced by biofuel and climate policies and the implications of these policies for GHG emissions over the 2007–2030 period. The policies considered here include a modified Renewable Fuel Standard (RFS) by itself as well as combined with a cellulosic biofuel tax credit, a carbon price policy, or a low carbon fuel standard (LCFS). We use a dynamic, spatial, multi-market equilibrium model, biofuel and environmental policy analysis model (BEPAM), to trace the impacts of alternative biofuel policies on the mix of biofuel feedstocks, crop prices, land use pattern, and GHG emissions. We endogenously determine the effects of these policies on cropland allocation, food and fuel prices, and the mix of first- and second-generation biofuels. We find that the RFS could be met by diverting 5% of cropland for biofuel production and would result in corn prices increasing by 31% in 2030 relative to the business-as-usual baseline. The reduction in GHG emissions in the U.S. due to the RFS is about 4%; these domestic GHG savings can be severely eroded by emissions due to indirect land use changes and the increase in gasoline consumption in the rest of the world. Supplementing the RFS with a carbon price policy, a cellulosic biofuel tax credit, or a LCFS induces a switch away from corn ethanol to cellulosic biofuels and achieves the mandated level of biofuel production with a smaller adverse impact on crop prices. These supplementary policies enhance the GHG savings achieved by the RFS alone, although through different mechanisms; greater production of cellulosic biofuels with the tax credit and the LCFS but larger reduction in fossil fuel consumption with a carbon tax.

Suggested Citation

  • Xiaoguang Chen & Madhu Khanna, 2017. "Land Use and Greenhouse Gas Implications of Biofuels: Role of Technology and Policy," Natural Resource Management and Policy, in: Madhu Khanna & David Zilberman (ed.), Handbook of Bioenergy Economics and Policy: Volume II, pages 213-237, Springer.
    • Handle: RePEc:spr:nrmchp:978-1-4939-6906-7_9
    DOI: 10.1007/978-1-4939-6906-7_9
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    References listed on IDEAS

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    1. Chen, Xiaoguang & Huang, Haixiao & Khanna, Madhu & Önal, Hayri, 2014. "Alternative transportation fuel standards: Welfare effects and climate benefits," Journal of Environmental Economics and Management, Elsevier, vol. 67(3), pages 241-257.
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    Cited by:

    1. Drabik, Dusan, 2011. "The Theory of Biofuel Policy and Food Grain Prices," Working Papers 126615, Cornell University, Department of Applied Economics and Management.
    2. Smeets, Edward & Tabeau, Andrzej & van Berkum, Siemen & Moorad, Jamil & van Meijl, Hans & Woltjer, Geert, 2014. "The impact of the rebound effect of the use of first generation biofuels in the EU on greenhouse gas emissions: A critical review," Renewable and Sustainable Energy Reviews, Elsevier, vol. 38(C), pages 393-403.
    3. Ujjayant Chakravorty & Marie‐Hélène Hubert & Beyza Ural Marchand, 2019. "Food for fuel: The effect of the US biofuel mandate on poverty in India," Quantitative Economics, Econometric Society, vol. 10(3), pages 1153-1193, July.
    4. Ladislav Kristoufek & Karel Janda & David Zilberman, 2012. "Mutual Responsiveness of Biofuels, Fuels and Food Prices," CAMA Working Papers 2012-38, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    5. Ujjayant Chakravorty & Marie‐Hélène Hubert & Michel Moreaux & Linda Nøstbakken, 2017. "Long‐Run Impact of Biofuels on Food Prices," Scandinavian Journal of Economics, Wiley Blackwell, vol. 119(3), pages 733-767, July.
    6. Khanna, Madhu & Wang, Weiwei & Hudiburg, Tara & DeLucia, Evan, 2016. "The Economic Cost of Including the Indirect Land Use Factor in Low Carbon Fuel Policy: Efficiency and Distributional Implications," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 235774, Agricultural and Applied Economics Association.
    7. Ujjayant Chakravorty & Marie-Helene Hubert & Michel Moreaux, 2014. "Land Allocation between Food and Energy," Frontiers of Economics in China-Selected Publications from Chinese Universities, Higher Education Press, vol. 9(1), pages 52-69, March.
    8. Piroli, Giuseppe & Rajcaniova, Miroslava & Ciaian, Pavel & Kancs, d׳Artis, 2015. "From a rise in B to a fall in C? SVAR analysis of environmental impact of biofuels," Renewable and Sustainable Energy Reviews, Elsevier, vol. 49(C), pages 921-930.
    9. Ujjayant Chakravorty & Marie-HéLène Hubert, 2013. "Global Impacts of the Biofuel Mandate under a Carbon Tax," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 95(2), pages 282-288.
    10. Debnath, Deepayan & Whistance, Jarrett & Thompson, Wyatt & Binfield, Julian, 2017. "Complement or substitute: Ethanol’s uncertain relationship with gasoline under alternative petroleum price and policy scenarios," Applied Energy, Elsevier, vol. 191(C), pages 385-397.
    11. Ladislav Kristoufek & Karel Janda & David Zilberman, 2013. "Non-linear Price Transmission between Biofuels, Fuels and Food Commodities," CERGE-EI Working Papers wp481, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    12. Ujjayant Chakravorty & Marie-Hélène Hubert & Beyza Ural Marchand, 2016. "The effect of the US biofuels mandate on poverty in India," Economics Working Paper Archive (University of Rennes & University of Caen) 2016-13, Center for Research in Economics and Management (CREM), University of Rennes, University of Caen and CNRS.
    13. Wang, Kai-Hua & Kan, Jia-Min & Qiu, Lianhong & Xu, Shulin, 2023. "Climate policy uncertainty, oil price and agricultural commodity: From quantile and time perspective," Economic Analysis and Policy, Elsevier, vol. 78(C), pages 256-272.
    14. repec:lic:licosd:37115 is not listed on IDEAS
    15. Antonio M. Bento, Richard Klotz, and Joel R. Landry, 2015. "Are there Carbon Savings from US Biofuel Policies? The Critical Importance of Accounting for Leakage in Land and Fuel Markets," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3).
    16. Drabik, Dušan & de Gorter, Harry, 2013. "Emissions from Indirect Land Use Change: Do they Matter with Fuel Market Leakages?," Review of Agricultural and Applied Economics (RAAE), Faculty of Economics and Management, Slovak Agricultural University in Nitra, vol. 16(2), pages 1-13, September.
    17. Chen, Xiaoguang, 2016. "Economic potential of biomass supply from crop residues in China," Applied Energy, Elsevier, vol. 166(C), pages 141-149.
    18. Ujjayant Chakravorty & Marie-Hélène Hubert & Michel Moreaux & Linda Nøstbakken, 2012. "Do Biofuel Mandates Raise Food Prices?," Economics Working Paper Archive (University of Rennes & University of Caen) 201214, Center for Research in Economics and Management (CREM), University of Rennes, University of Caen and CNRS.
    19. Ji, Xi & Long, Xianling, 2016. "A review of the ecological and socioeconomic effects of biofuel and energy policy recommendations," Renewable and Sustainable Energy Reviews, Elsevier, vol. 61(C), pages 41-52.
    20. Vorotnikova, Ekaterina & Seale, James L, 2014. "U.S. Ethanol Mandate Is a Hidden Subsidy to Corn Producers," 2014 Annual Meeting, February 1-4, 2014, Dallas, Texas 162551, Southern Agricultural Economics Association.

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