Welfare Effects of Biofuels Trade Policy in the Presence of Environmental Externalities PDF Download
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Author: Christine L. Crago
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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We develop a stylized model of fuel markets in an open economy and derive the optimal mix of trade and environmental policy instruments for biofuels and gasoline that maximizes social surplus and internalizes externalities from miles and greenhouse gas (GHG) emissions. We use this optimal scenario as a benchmark to compare existing and alternative biofuel policies including the import tariff and the tax credit for ethanol. We show that the optimal tax for fuels is directly related to their GHG emissions intensity while the optimal tariff is inversely related to the excess supply elasticity of imported ethanol. The effect of the tax credit on social surplus is clearly negative, while the impact of the tariff depends on the ability of the US to influence ethanol prices in the world market. Our numerical simulation for the US shows that current ethanol policy of an ethanol tax credit and import tariff increases miles externalities and greenhouse gases and decreases social surplus by $3.6 B relative to non-intervention and by $228 B relative to the optimal scenario.
Author: Christine L. Crago
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
We develop a stylized model of fuel markets in an open economy and derive the optimal mix of trade and environmental policy instruments for biofuels and gasoline that maximizes social surplus and internalizes externalities from miles and greenhouse gas (GHG) emissions. We use this optimal scenario as a benchmark to compare existing and alternative biofuel policies including the import tariff and the tax credit for ethanol. We show that the optimal tax for fuels is directly related to their GHG emissions intensity while the optimal tariff is inversely related to the excess supply elasticity of imported ethanol. The effect of the tax credit on social surplus is clearly negative, while the impact of the tariff depends on the ability of the US to influence ethanol prices in the world market. Our numerical simulation for the US shows that current ethanol policy of an ethanol tax credit and import tariff increases miles externalities and greenhouse gases and decreases social surplus by $3.6 B relative to non-intervention and by $228 B relative to the optimal scenario.
Author: Marie Christine D. Lasco
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Policy intervention in the biofuel market has led to a significant increase in biofuel production and use in the past several years. However, the welfare effect of biofuel policies, specifically the ethanol tax credit for corn ethanol, ethanol import tariff and renewable fuel standard (RFS) mandate has not been adequately examined. Moreover, the environmental impact of these policies, and their impact on fuel taxation has not been sufficiently addressed in the literature. This dissertation examines the market and welfare effects of biofuel policies in the US, specifically those relating to corn and sugarcane ethanol, with the aim of determining the welfare implications of existing policies, and designing second-best optimal policies. In measuring welfare effects, changes in social surplus, as well as environmental externalities are taken into account. In addition, the interaction of fuel and biofuel policies with the broader fiscal system is also considered. This dissertation consists of three papers. In the first paper, a stylized model of the US miles and fuel market, including ethanol trade is developed to quantify the market and welfare effects of biofuel policies in the US. In order to examine the effect of the ethanol tax credit and import tariff, several market scenarios are simulated. The market outcome with the two policies in place are compared to a non-intervention scenario, and an optimal baseline where Pigouvian taxes are levied on fuel and miles. Results show that the effect of the tax credit on social surplus is clearly negative, while the impact of the tariff depends on the ability of the US to influence ethanol prices in the world market. Numerical simulations show that the existing ethanol tax credit and import tariff increase miles externalities and GHG emissions and decrease social welfare by $5.9 B relative to non-intervention and by $235 B relative to the optimal scenario. In the second paper, detailed production data on ethanol production costs in the US and Brazil are used together with a numerical model of US biofuel trade with Brazil to quantify the welfare effect of the US RFS mandate for traditional and advanced biofuel (excluding cellulosic and biomass biodiesel) under various scenarios on the currency exchange rate between the US dollar and Brazilian reais. Numerical results show that in 2015, the cost of the mandate is lower when the US currency is appreciated relative to the Brazilian currency, and when the excess supply elasticity of ethanol from Brazil is more elastic. Relative to a baseline without a mandate but with an ethanol subsidy and import tariff in place, GHG emissions decrease and the welfare effect of the mandate ranges from -$23 to +$5 Billion dollars as the exchange rate varies from US$1 = R$1.81 to US$1 = R$3.11. The third paper analyzes the impact of biofuel policies and biofuel use on the second-best optimal carbon tax for fuels in the presence of a labor tax and a biofuel subsidy. Findings show that when biofuel is part of the fuel mix, the carbon tax has a commodity price effect which arises from tax-induced changes in land rent. The commodity price effect could exacerbate or attenuate the tax interaction effect caused by higher fuel prices, depending on the elasticity of substitution between gasoline and biofuel, the price elasticity of miles demand, and the relative emissions intensity of gasoline and biofuel. Numerical results show that the commodity price effect affects the value of the second-best optimal carbon tax, and that the effect is greater if the elasticity of substitution between gasoline and ethanol is higher, iii miles demand is more price inelastic, and the emissions intensity of biofuel is lower relative to gasoline. In addition, the existence of a fixed biofuel subsidy lead to a greater divergence between the value of the second-best optimal carbon tax with or without biofuels. A carbon tax policy decreases GHG emissions and increases welfare, in contrast to a biofuel subsidy, which also decreases GHG emissions but at a net welfare loss.
Author: Qinwen Tan
Publisher:
ISBN:
Category :
Languages : en
Pages : 110
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Book Description
Reducing greenhouse gas (GHG) emissions is critical to mitigating climate change and achieving greater energy security. The desire to understand what governmental tools and how to apply to protect the local and global environment effectively and efficiently is a core driver for researches in the subfield of environmental economics. Despite the progress made in the modeling of social welfare with environmental externalities, many questions regarding secondbest biofuel policies, interaction between biofuel policies and finance system, and connection between trade and the environment remain unanswered. To date, the indirect, general effects of biofuel policies on the general economy, through "fiscal interaction effects" have largely been ignored. The thesis designs a general equilibrium model to investigate the fiscal interaction effects of tax credit policy. The marginal costs caused by tax credit are higher than the marginal benefits. In the second-best setting with pre-existing fuel tax and labor tax, tax credit is welfare reducing. The optimal second-best tax credit is estimated at the level of $0.22/GEEG ($0.15/gallon), which is 67% lower than the current tax exemption. Monte Carlo analysis shows that the probability of tax credit at $0.22/GEEG or less is 29% and at the current level or less is 72%. Next the thesis analyzes the effects of the quantitative ethanol mandate from both positive and welfare perspectives. Given the pre-existing government distortions, ethanol mandate is welfare enhancing. In the presence of fuel tax and labor tax, the net welfare gain caused by the ethanol mandate is estimated to be 8.61 billion dollars while the net welfare loss caused by tax credit is estimated to 26.87 billion dollars. Consistent with previous studies, the results show that the ethanol mandate dominates tax credit. Last, the thesis analyzes the effects of an ad valorem tariff on the local and global environment and total social welfare using a modified Bertrand duopoly model with environmentally differentiated products. The results show that tariff imposed by the developed country improves the local and global environment while reducing the social welfare. If the developed country has a high environmental standard, the country should restrict its imports of the dirty products. If the less developed country restricts the imports of clean products from the developed country, its social welfare and the local and global environment will get worse compared to a free trade case.
Author: Kristen B. Cooper
Publisher:
ISBN:
Category :
Languages : en
Pages : 58
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Author: Madhu Khanna
Publisher: Springer Science & Business Media
ISBN: 1441903690
Category : Business & Economics
Languages : en
Pages : 435
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Book Description
Concerns about energy security, uncertainty about oil prices, declining oil reserves, and global climate change are fueling a shift towards bioenergy as a renewable alternative to fossil fuels. Public policies and private investments around the globe are aiming to increase local capacity to produce biofuels. A key constraint to the expansion of biofuel production is the limited amount of land available to meet the needs for fuel, feed, and food in the coming decades. Large-scale biofuel production raises concerns about food versus fuel tradeoffs, about demands for natural resources such as water, and about potential impacts on environmental quality. The book is organized into five parts. The introductory part provides a context for the emerging economic and policy challenges related to bioenergy and the motivations for biofuels as an energy source. The second part of the handbook includes chapters that examine the implications of expanded production of first generation biofuels for the allocation of land between food and fuel and for food/feed prices and trade in biofuels as well as the potential for technology improvements to mitigate the food vs. fuel competition for land. Chapters in the third part examine the infrastructural and logistical challenges posed by large scale biofuel production and the factors that will influence the location of biorefineries and the mix of feedstocks they use. The fourth part includes chapters that examine the environmental implications of biofuels, their implications for the design of policies and the unintended environmental consequences of existing biofuel policies. The final part presents economic analysis of the market, social welfare, and distributional effects of biofuel policies.
Author: Adele Finco
Publisher: FrancoAngeli
ISBN: 8820417634
Category : Business & Economics
Languages : en
Pages : 208
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Author: National Research Council
Publisher: National Academies Press
ISBN: 0309187516
Category : Technology & Engineering
Languages : en
Pages : 416
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Book Description
In the United States, we have come to depend on plentiful and inexpensive energy to support our economy and lifestyles. In recent years, many questions have been raised regarding the sustainability of our current pattern of high consumption of nonrenewable energy and its environmental consequences. Further, because the United States imports about 55 percent of the nation's consumption of crude oil, there are additional concerns about the security of supply. Hence, efforts are being made to find alternatives to our current pathway, including greater energy efficiency and use of energy sources that could lower greenhouse gas (GHG) emissions such as nuclear and renewable sources, including solar, wind, geothermal, and biofuels. The United States has a long history with biofuels and the nation is on a course charted to achieve a substantial increase in biofuels. Renewable Fuel Standard evaluates the economic and environmental consequences of increasing biofuels production as a result of Renewable Fuels Standard, as amended by EISA (RFS2). The report describes biofuels produced in 2010 and those projected to be produced and consumed by 2022, reviews model projections and other estimates of the relative impact on the prices of land, and discusses the potential environmental harm and benefits of biofuels production and the barriers to achieving the RFS2 consumption mandate. Policy makers, investors, leaders in the transportation sector, and others with concerns for the environment, economy, and energy security can rely on the recommendations provided in this report.
Author: Joshua S. Graff Zivin
Publisher: University of Chicago Press
ISBN: 0226988031
Category : Art
Languages : en
Pages : 310
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Book Description
Using economic models and empirical analysis, this volume examines a wide range of agricultural and biofuel policy issues and their effects on American agricultural and related agrarian insurance markets. Beginning with a look at the distribution of funds by insurance programs—created to support farmers but often benefiting crop processors instead—the book then examines the demand for biofuel and the effects of biofuel policies on agricultural price uncertainty. Also discussed are genetically engineered crops, which are assuming an increasingly important role in arbitrating tensions between energy production, environmental protection, and the global food supply. Other contributions discuss the major effects of genetic engineering on worldwide food markets. By addressing some of the most challenging topics at the intersection of agriculture and biotechnology, this volume informs crucial debates.
Author: Matthew J. Kotchen
Publisher: University of Chicago Press
ISBN: 0226821749
Category : Business & Economics
Languages : en
Pages : 275
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Book Description
This volume presents six new papers on environmental and energy economics and policy in the United States. Rebecca Davis, J. Scott Holladay, and Charles Sims analyze recent trends in and forecasts of coal-fired power plant retirements with and without new climate policy. Severin Borenstein and James Bushnell examine the efficiency of pricing for electricity, natural gas, and gasoline. James Archsmith, Erich Muehlegger, and David Rapson provide a prospective analysis of future pathways for electric vehicle adoption. Kenneth Gillingham considers the consequences of such pathways for the design of fuel vehicle economy standards. Frank Wolak investigates the long-term resource adequacy in wholesale electricity markets with significant intermittent renewables. Finally, Barbara Annicchiarico, Stefano Carattini, Carolyn Fischer, and Garth Heutel review the state of research on the interactions between business cycles and environmental policy.
Author: Aziz Elbehri
Publisher: Food & Agriculture Organization of the UN (FAO)
ISBN:
Category : Agriculture and energy
Languages : en
Pages : 198
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Book Description
Biofuels global emergence in the last two decades is met with increased concerns over climate change and sustainable development. This report addresses the core issue of biofuel sustainability of biofuels and related feedstocks, drawing from a wide range of sustainability related studies, reports, policy initiatives. The report critically examines the economic, environmental and social sustainability dimensions of biofuels and review the major certification initiatives, schemes and regulations. In doing so, the report relies on extensive review of a number of country case studies covering a broad range of current biofuel-feedstocks systems. The report analysis clearly distinguish feedstock efficiency (in terms of biofuel yields per unit of land) from sustainability, especially under limiting resource (irrigated water) or sensitive areas (carbon stocks). Also, long run economic viability depend on the future policy support, technical innovations in biofuel systems, economics of biofuel supply and demand and trade-offs between food and energy uses as well as feedstock productivity gains. Biofuels can present both advantages and risks for environmental sustainability; the latter being often difficult to measure or monitor and may conflict with economic sustainability unless great strides in productivity gains are achieved. Social sustainability is the weakest link in current biofuel certification schemes owing to intrinsic local factors and as efforts target more few negative social impacts; much less focus is placed on inclusive processes that strengthen marginal stockholders participation and benefits. Biofuel certification schemes need to be more smallholder inclusive, perhaps through policy initiatives. Finally, poor developing countries, especially with abundant land and biomass production potential, need to prioritise food security and poverty reduction. In many cases, biofuel models that encourage small scale integrated bioenergy systems may offer higher rural development impacts. FDI-induced larger-scale biofuel projects, on the other hand, may be suitable in those situations where countries have sufficient industrial capacity, besides land and biomass potential, and when these biofuel projects can be fully integrated into domestic energy strategies that do not conflict with food production potential and food security.
