Environmental, Economic and Policy Aspects of Biofuels

Second-best biofuel policies and the welfare effects of quantity mandates and subsidies

“…The price of RINs in this setup would be proportional to the difference between the supply prices of ethanol and gasoline in our setup, and hence can readily be calculated. 21 The zero profit condition, a hallmark of equilibrium under perfect competition, of course also applies to the previous section's case when the mandate is not binding-it is readily verified that the arbitrage conditions in (10) imply just that. 22 Ando et al [2], by contrast, model ethanol mandates as quantity constraints on the fuel industry (meeting the mandate is essentially treated as a large fixed initial cost).…”

“…Hence, the cost to the firm of providing a gallon of fuel is kðp s e ÀbÞþð1ÀkÞp s g which, under competitive conditions must equal the fuel price consumers pay less the tax on fuel, that is (p f À t). 21 Thus, with an exogenous mandate the equilibrium condition may be written as…”

“…where H40 and K 40 were defined in (20) and (21). Hence, the iso-tax revenue condition dT¼ 0 yields dx g /dx e ¼ ÀK/Ho0.…”

“…Environmental motivations are rooted in the worldwide concern about global climate change, and the role played by greenhouse gas (GHG) emissions that are produced with most energy consumption. The hope is that biorenewable fuels might alleviate the environmental impact of energy consumption [21]. Separately, there is a desire to decrease the dependence of the United States on foreign energy sources.…”

Impacts of biofuels on climate change, water use, and land use

“…Analysts multiply emissions of CH 4 and N 2 O by their respective GWPs and add the result to estimated emissions of CO 2 to produce a measure of total lifecycle CO 2 e GHG emissions. Several recent reviews discuss life cycle assessment (LCA) of biofuels, results from biofuel lifecycle analyses (LCAs), and issues in biofuel LCA 7–17 . Here, I discuss problems with the CO 2 e metric, well‐known and emerging issues in conventional LCAs, and other potentially important issues.…”