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Biofuel Economics in a Setting of Multiple Objectives & Unintended Consequences

Author

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  • Jaeger, William K.
  • Egelkraut, Thorsten M.
Abstract
This paper examines biofuels from an economic perspective and evaluates the merits of promoting biofuel production in the context of the policies’ multiple objectives, life-cycle implications, pecuniary externalities, and other unintended consequences. The policy goals most often cited are to reduce fossil fuel use and to lower greenhouse gas emissions. But the presence of multiple objectives and various indirect effects complicates normative evaluation. To address some of these complicating factors, we look at several combinations of policy alternatives that achieve the same set of incremental gains along the two primary targeted policy dimensions, making it possible to compare the costs and cost-effectiveness of each combination of policies. For example, when this approach is applied to U.S.-produced biofuels, they are found to be 14 to 31 times as costly as alternatives like raising the gas tax or promoting energy efficiency improvements. The analysis also finds the scale of the potential contributions of biofuels to be extremely small in both the U.S. and EU. Mandated U.S. corn ethanol production for 2025 reduces U.S. petroleum input use by 1.75%, and would have negligible net effects on CO2 emissions; and although EU imports of Brazilian ethanol may look better given the high costs of other alternatives, this option is equivalent, at most, to a 1.20% reduction in EU gasoline consumption.

Suggested Citation

  • Jaeger, William K. & Egelkraut, Thorsten M., 2011. "Biofuel Economics in a Setting of Multiple Objectives & Unintended Consequences," Energy: Resources and Markets 108203, Fondazione Eni Enrico Mattei (FEEM).
    • Handle: RePEc:ags:feemer:108203
    DOI: 10.22004/ag.econ.108203
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    Cited by:

    1. Janda, Karel & Kristoufek, Ladislav & Zilberman, David, "undated". "Biofuels: review of policies and impacts," CUDARE Working Papers 120415, University of California, Berkeley, Department of Agricultural and Resource Economics.
    2. Karel Janda & Ladislav Kristoufek & David Zilberman, 2012. "Biofuels: policies and impacts," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 58(8), pages 372-386.
    3. Moschini, GianCarlo & Cui, Jingbo & Lapan, Harvey E., 2012. "Economics of Biofuels: An Overview of Policies, Impacts and Prospects," Bio-based and Applied Economics Journal, Italian Association of Agricultural and Applied Economics (AIEAA), vol. 1(3), pages 1-28, December.
    4. Ayesha Mushtaq & Muhammad Asif Hanif & Muhammad Zahid & Umer Rashid & Zahid Mushtaq & Muhammad Zubair & Bryan R. Moser & Fahad A. Alharthi, 2021. "Production and Evaluation of Fractionated Tamarind Seed Oil Methyl Esters as a New Source of Biodiesel," Energies, MDPI, vol. 14(21), pages 1-13, November.
    5. Giovanni Alessandro Cappelli & Fabrizio Ginaldi & Davide Fanchini & Sebastiano Andrea Corinzia & Salvatore Luciano Cosentino & Enrico Ceotto, 2021. "Model-Based Assessment of Giant Reed ( Arundo donax L.) Energy Yield in the Form of Diverse Biofuels in Marginal Areas of Italy," Land, MDPI, vol. 10(6), pages 1-24, May.
    6. Pierluigi Coppola & Diego Deponte & Alessandro Vacca & Federico Messa & Fulvio Silvestri, 2022. "Multi-Dimensional Cost-Effectiveness Analysis for Prioritizing Railway Station Investments: A General Framework with an Application to the Italian Case Study," Sustainability, MDPI, vol. 14(9), pages 1-18, April.
    7. de Souza, Lorena Mendes & Mendes, Pietro A.S. & Aranda, Donato A.G., 2018. "Assessing the current scenario of the Brazilian biojet market," Renewable and Sustainable Energy Reviews, Elsevier, vol. 98(C), pages 426-438.
    8. Kim, Yohan & Lee, Joosung & Ahn, Jaemyung, 2019. "Innovation towards sustainable technologies: A socio-technical perspective on accelerating transition to aviation biofuel," Technological Forecasting and Social Change, Elsevier, vol. 145(C), pages 317-329.
    9. Kulisic, Biljana & Dimitriou, Ioannis & Mola-Yudego, Blas, 2021. "From preferences to concerted policy on mandated share for renewable energy in transport," Energy Policy, Elsevier, vol. 155(C).
    10. Karel Janda & Ladislav Kristoufek & David Zilberman, 2011. "Modeling the Environmental and Socio-Economic Impacts of Biofuels," Working Papers IES 2011/33, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Oct 2011.
    11. 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.
    12. Mirzabaev, Alisher & Guta, Dawit & Goedecke, Jann & Gaur, Varun & Börner, Jan & Virchow, Detlef & Denich, Manfred & von Braun, Joachim, 2014. "Bioenergy, Food Security and Poverty Reduction: Mitigating tradeoffs and promoting synergies along the Water- Energy-Food Security Nexus," Working Papers 180421, University of Bonn, Center for Development Research (ZEF).
    13. Iyabo Adeola Olanrele & Adedoyin I. Lawal & Ezekiel Oseni & Ahmed Oluwatobi Adekunle & Bukola, B. Lawal-Adedoyin & Crystal O. Elleke & Racheal Ojeka-John & Henry Nweke-Love, 2020. "Accessing the Impacts of Contemporary Development in Biofuel on Agriculture, Energy and Domestic Economy: Evidence from Nigeria," International Journal of Energy Economics and Policy, Econjournals, vol. 10(5), pages 469-478.
    14. Noel, Michael D. & Roach, Travis, 2017. "Marginal reductions in vehicle emissions under a dual-blend ethanol mandate: Evidence from a natural experiment," Energy Economics, Elsevier, vol. 64(C), pages 45-54.
    15. Stefan Walter, 2018. "The Regional Impact of Biofuel Economics," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 12(3), pages 369-386, August.
    16. Zhao, Qiankun & Cai, Ximing & Mischo, William & Ma, Liyuan, 2020. "How do the research and public communities view biofuel development?," Renewable and Sustainable Energy Reviews, Elsevier, vol. 133(C).
    17. Jagroop Singh & Somesh Kumar Sharma & Rajnish Srivastava, 2019. "AHP-Entropy based priority assessment of factors to reduce aviation fuel consumption," International Journal of System Assurance Engineering and Management, Springer;The Society for Reliability, Engineering Quality and Operations Management (SREQOM),India, and Division of Operation and Maintenance, Lulea University of Technology, Sweden, vol. 10(2), pages 212-227, April.
    18. Sharp, Benjamin E. & Miller, Shelie A., 2014. "Estimating maximum land use change potential from a regional biofuel industry," Energy Policy, Elsevier, vol. 65(C), pages 261-269.
    19. Nair, Sujith & Paulose, Hanna, 2014. "Emergence of green business models: The case of algae biofuel for aviation," Energy Policy, Elsevier, vol. 65(C), pages 175-184.
    20. E, Jiaqiang & Pham, Minhhieu & Zhao, D. & Deng, Yuanwang & Le, DucHieu & Zuo, Wei & Zhu, Hao & Liu, Teng & Peng, Qingguo & Zhang, Zhiqing, 2017. "Effect of different technologies on combustion and emissions of the diesel engine fueled with biodiesel: A review," Renewable and Sustainable Energy Reviews, Elsevier, vol. 80(C), pages 620-647.
    21. Roach, Travis, 2015. "Hidden regimes and the demand for carbon dioxide from motor-gasoline," Energy Economics, Elsevier, vol. 52(PB), pages 306-315.
    22. Trumbo, Jennifer L. & Tonn, Bruce E., 2016. "Biofuels: A sustainable choice for the United States' energy future?," Technological Forecasting and Social Change, Elsevier, vol. 104(C), pages 147-161.
    23. Rajagopal, D. & Plevin, R. & Hochman, G. & Zilberman, D., 2015. "Multi-objective regulations on transportation fuels: Comparing renewable fuel mandates and emission standards," Energy Economics, Elsevier, vol. 49(C), pages 359-369.
    24. Živković, Snežana B. & Veljković, Milan V. & Banković-Ilić, Ivana B. & Krstić, Ivan M. & Konstantinović, Sandra S. & Ilić, Slavica B. & Avramović, Jelena M. & Stamenković, Olivera S. & Veljković, Vlad, 2017. "Technological, technical, economic, environmental, social, human health risk, toxicological and policy considerations of biodiesel production and use," Renewable and Sustainable Energy Reviews, Elsevier, vol. 79(C), pages 222-247.

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