Handbook of Bioenergy Economics and Policy (eBook)

Acknowledgments 5
Contents 6
Contributors 9
Part I Introduction 13
1 Bioenergy Economics and Policy: Introduction and Overview 14
1.1 Next-Generation Energy Technologies: Options and Possibilities 16
1.2 Integration Between Energy and Agricultural Markets 17
1.3 Designing the Infrastructure for Biofuels 19
1.4 Environmental Effects of Biofuels and Biofuel Policies 20
1.5 Economic Effects of Biofuel Policies 22
1.6 In Sum 24
2 Are Biofuels the Best Use of Sunlight? 25
2.1 Introduction 25
2.2 From Solar Energy Input to Useful Energy Output 27
2.3 Biofuel Energy Conversion 28
2.4 Photovoltaic Energy Conversion 30
2.5 Photovoltaics and the Transportation Sector 32
2.6 Comparing the Costs of Energy from Biofuels and Photovoltaics 33
2.7 Concluding Remarks 34
References 34
3 Perennial Grasses as Second-Generation Sustainable Feedstocks Without Conflict with Food Production 36
3.1 Introduction 36
3.2 Ideal Feedstock Characteristics 37
3.3 Perennial Growth Habit 37
3.4 C4 Photosynthetic Pathway 38
3.5 Long Canopy Duration 38
3.6 Limited Pest and Disease Incidence 39
3.7 Nutrient Recycling 39
3.8 High Water Use Efficiency 40
3.9 Low Herbicide Requirement 41
3.10 Noninvasive, Easily Eradicated from Existing Land 41
3.11 Uses Existing Farm Equipment 42
3.12 Feedstock Yield, Greenhouse Gas Mitigation, and the World Food Supply 43
3.13 Conclusion 44
References 44
4 Present and Future Possibilities for the Deconstructionand Utilization of Lignocellulosic Biomass 47
4.1 Introduction: Current State of Technology 47
4.2 Advantages of Lignocellulosic-Based Biofuels 48
4.3 Status of Current Conversion Technologies: Pretreatment 49
4.4 Genomics for Producing New Microbes with Enhanced Characteristics for Fermentation: Synthetic Biology and Production of Advanced Biofuels 53
4.5 Genomics 54
4.6 Systems Biology and Metabolic Engineering 55
4.7 Conclusion 56
References 57
Part II Interactions Between Biofuels, Agricultural Markets and Trade 60
5 Price Transmission in the US Ethanol Market 61
5.1 Introduction 61
5.2 The US Bioenergy Market 62
5.3 Price Relationships in the US Ethanol Industry 64
5.4 Methodology 66
5.5 Results 68
5.6 Concluding Remarks 76
References 76
6 Biofuels and Agricultural Growth: Challenges for Developing Agricultural Economies and Opportunities for Investment 79
6.1 Introduction 79
6.2 Overview of Current Literature 82
6.3 Interactions Between Energy and Food Markets 83
6.4 Drivers of Change in Food Systems 85
6.4.1 Socio-economic Factors 86
6.4.2 Policy Drivers 86
6.5 Quantitative Illustration of Biofuels Impacts on Food 87
6.5.1 Model Specification 87
6.5.2 Baseline Results with Biofuels 89
6.5.3 Impacts of Yield Improvements 92
6.6 Implications for Food Security and Policy 93
References 94
7 Prospects for Ethanol and Biodiesel, 2008 to 2017 and Impacts on Agriculture and Food 97
7.1 Introduction 97
7.2 Assumptions for the Baseline Scenario 98
7.3 Global Land Use and Commodity Stocks 100
7.3.1 US Crops 101
7.4 Key Biofuel Projections 105
7.4.1 Impacts on Livestock 108
7.4.2 Consumer Prices 109
7.5 Alternative Scenarios 110
7.5.1 Impact of the Alternative Scenarios 113
7.6 Prospects for Cellulosic Ethanol 115
References 116
8 The Global Bioenergy Expansion: How Large Are the Food--Fuel Trade-Offs? 118
8.1 Introduction 119
8.2 Stylized Facts on the Global Emergence of Biofuels 121
8.2.1 Biofuels in the United States 121
8.2.2 Biofuels in the World 121
8.2.3 Comparison Among FAPRI Outlooks: Catching Up with Reality and Policy Changes 122
8.3 Land Allocation Effects of Biofuel Expansion 125
8.3.1 US Expansion 125
8.3.2 Global Emergence Scenario 127
8.4 Trade-Offs Among Feed, Feed Crops, and Bioenergy 128
8.5 Trade-Offs Among Food, Food Crops, and Bioenergy 129
8.5.1 Meat and Dairy Consumption 129
8.5.2 Vegetable Oils 131
8.5.3 Sugar 131
8.5.4 Grains 133
8.6 Policies and Exogenous Factors Conditioning the Trade-Offs 133
8.7 Conclusions 135
References 137
9 Demand Behavior and Commodity Price Volatility Under Evolving Biofuel Markets and Policies 138
9.1 Assumptions About Long-Run Ethanol Market Behavior 138
9.2 Changing Market Relationships 141
9.3 Volatility of Markets 144
9.4 Energy Policy and Its Influence on Commodity Price Volatility 145
9.5 Calculating Volatility 148
9.6 Conclusion 152
References 152
Part III Designing the Infrastructure for Biofuels 154
10 Optimizing the Biofuels Infrastructure: Transportation Networks and Biorefinery Locations in Illinois 155
10.1 Introduction 155
10.2 The Biorefinery Connecting Feedstocks and Bioproducts 156
10.3 Biomass Transportation Networks and Biorefinery Locations 157
10.3.1 Road/Highway 158
10.3.2 Railroad 159
10.3.3 Waterways 159
10.3.4 Pipelines 159
10.4 The Optimal Biomass Transportation and Biorefinery Location Problem 160
10.5 Model Description 161
10.6 Model Specification and Data 163
10.6.1 Supply Input of Bioenergy 163
10.6.2 Multimodal Transportation Network and Cost Matrix 163
10.6.3 Cost Structure of Biorefineries 164
10.6.4 Ethanol Demand 165
10.6.5 Livestock Feed Demand 165
10.7 Model Results 165
10.8 Summary and Conclusions 171
10.9 Appendix: Model Notation and Equations 173
10.9.1 Subscripts 173
10.9.2 Factors and Parameters 173
10.9.3 Model Variables and Variable Types 174
Binary Variables 174
Nonnegative Variables 174
References 176
11 The Capital Efficiency Challenge of Bioenergy Models: The Case of Flex Mills in Brazil 178
11.1 Introduction 178
11.2 Literature Review 180
11.2.1 Measures of Capital Utilization 181
11.3 Methodology 182
11.4 Results 185
References 194
Part IV Environmental Effects of Biofuels and Biofuel Policies 196
12 Could Bioenergy Be Used to Harvest the Greenhouse: An Economic Investigation of Bioenergy and Climate Change? 197
12.1 Introduction 197
12.2 Modeling Background 199
12.2.1 Lifecycle Accounting 200
12.2.2 Leakage 201
12.3 Bioenergy Production Possibilities 202
12.3.1 Ethanol 202
12.3.2 Biodiesel 205
12.3.3 Biopower 206
12.4 Economics of Biofeedstock 206
12.5 Predicted Bioenergy Production 207
12.5.1 The Case of Ethanol 207
12.5.2 The Case of Biodiesel 211
12.5.3 The Case of Biopower 212
12.5.4 GHG Mitigation Strategy 214
12.5.5 Food Prices 216
12.6 Concluding Remarks 217
References 219
13 A Simple Framework for Regulation of Biofuels 221
13.1 Introduction 221
13.2 Categorizing Lifecycle Emissions 222
13.2.1 Direct Emissions 223
13.2.2 Indirect Emissions 224
13.3 Calculating Emissions 224
13.3.1 Calculation of Direct Emissions 224
13.3.2 Calculation of Indirect Emissions 227
13.3.3 Ex post Direct Emissions and Ex ante Indirect Emissions 227
13.4 A Target Number and a Framework for Regulation Given Uncertainty 228
13.5 Uncertainty in Calculation of Emissions 229
13.5.1 Modeling Direct Emissions with Uncertainty 229
13.5.2 Uncertainty in Indirect Emissions 230
13.6 Implementing This Framework 230
13.7 Policy 231
13.8 Conclusion 232
References 232
14 Market and Social Welfare Effects of the RenewableFuels Standard 234
14.1 Introduction 234
14.2 Related Literature 236
14.3 Background: Motor-Fuel Technology and Policy 238
14.4 Model 239
14.5 Numerical Analysis Methods and Parameters 243
14.6 Results 244
14.7 Sensitivity Analysis 248
14.8 Conclusions 249
References 251
15 USBrazil Trade in Biofuels: Determinants, Constraints, and Implications for Trade Policy 252
15.1 USBrazil Trade in Biofuels: Determinants, Constraints, and Implications for Trade Policy 252
15.2 Background 254
15.2.1 Related Literature 257
15.3 Welfare Effects of Biofuel Policies in the United States 258
15.3.1 Conceptual Framework 258
15.3.2 Empirical Model 261
15.4 Numerical Simulation Results 262
15.4.1 Welfare Effects with Market Power in Ethanol Trade 262
15.4.2 Welfare Effects with United States as a Price Taker in Ethanol Trade 264
15.5 Conclusions and Policy Implications 265
References 266
16 Food and Biofuel in a Global Environment 268
16.1 Introduction 268
16.2 Trade 269
16.3 Policy Considerations 274
16.3.1 Climate Change Policy 274
16.3.2 Land-Use Policy 277
16.4 Food Policy 280
16.4.1 Policy for Biofuel and Agriculture R& D
16.5 Conclusion 283
References 284
17 Meeting Biofuels Targets: Implications for Land Use, Greenhouse Gas Emissions, and Nitrogen Use in Illinois 288
17.1 Related Literature 290
17.2 The Model 292
17.3 Data 294
17.4 Results 299
17.5 Conclusions 304
References 304
18 Corn Stover Harvesting: Potential Supply and Water Quality Implications 307
18.1 Introduction 307
18.2 Data and Methods 309
18.2.1 Data 309
18.2.2 Economic Modeling 311
18.2.3 Modeling Environmental Impacts 314
18.3 Results and Discussion 315
18.4 Concluding Comments 320
References 321
Part V Economic Effects of Bioenergy Policies 324
19 International Trade Patterns and Policy for Ethanol in the United States 325
19.1 Introduction 325
19.2 Summary of US Ethanol Policy 326
19.2.1 Domestic Policy 327
19.2.2 Trade Policy 328
19.3 Expected Effects of the Tariff on the US Market Under Recent Market Conditions 330
19.3.1 Price Elasticity of Import Demand: Relationship with Other Market Parameters 330
19.4 Ethanol Import Patterns and the Elasticity of Supply of Imports in the United States 334
19.4.1 US Ethanol Imports and Data Sources 334
19.4.2 Statistical Specifications and Estimation Issues 336
19.4.3 Econometric Estimates of the Import Supply Elasticity 337
19.4.4 Interpretation of the Import Data in the Postduty Drawback Period 340
19.5 Implications for Changes in Import Tariff Policy 340
19.6 Further Consequences and Concluding Remarks 342
References 342
20 The Welfare Economics of Biofuel Tax Credits and Mandates 344
20.1 Introduction 344
20.2 Policy Objectives and Instruments 346
20.3 How Tax Credits Affect the Ethanol Market 347
20.4 The Economics of Biofuel Mandates 349
20.4.1 The Effects of a Tax Credit on Gasoline Consumption, CO 2 Emissions, and Miles Traveled 352
20.4.2 The Economics of a Biofuel Mandate and Tax Credit Combined 353
20.5 The Link Between the Corn and Ethanol Markets 355
20.5.1 How the Tax Credit Affects the Taxpayer Costs of Farm Subsidies 357
20.6 Concluding Remarks 358
References 360
21 Biofuels, Policy Options, and Their Implications: Analyses Using Partial and General Equilibrium Approaches 362
21.1 Introduction 362
21.2 Policy Background and the Ethanol Boom 364
21.3 Future Ethanol Expansion and Alternative Policy Options 367
21.3.1 Ethanol Production 368
21.3.2 Corn Production 369
21.3.3 Corn price 369
21.3.4 Corn Exports 371
21.3.5 Policy Costs 371
21.4 Global Biofuels Impacts 373
21.5 Conclusions 378
References 378
22 Welfare and Equity Implications of Commercial Biofuel 381
22.1 Introduction 382
22.2 Price Effects on Poverty and Inequality 384
22.3 Multiplier Estimation of Price Vulnerability 389
22.4 General Equilibrium Estimation of Price Vulnerability 393
22.5 Conclusions and Extensions 395
References 396
23 European Biofuel Policy: How Far Will Public Support Go? 397
23.1 Introduction 397
23.2 Biofuel Development in the EU 398
23.2.1 The Role of Public Policies 398
23.2.2 Biofuels Use in the EU Is Strongly Oriented Toward Biodiesel 402
23.2.3 Trade in Biofuels 403
23.3 How Far Can the EU Public Support to Biofuels Go? 406
23.3.1 Questions on the Future of Biofuel Policy 406
23.3.2 The Pressure on Land Use in the EU 407
23.3.3 Environmental Impacts of Biofuel Production 412
23.4 Conclusion 414
Appendix 415
References 416
24 Conclusions 420
Index 426