Do Biofuel Subsidies Reduce Greenhouse Gas Emissions?

R. Quentin Grafton, Tom Kompas and Ngo Long

International and Development Economics Working Papers from International and Development Economics

Abstract: Conventional wisdom suggests that subsidising biofuel production will reduce greenhouse gas (GHG) emissions. This paper shows that in many cases, and for a wide range of parameter values, this is not true. Biofuel subsidies can generate supply-side response by fossil fuel producers that accelerates their rate of extraction, even in the case where fossil fuel extraction costs are stock dependent. Thus, policies designed to reduce GHG emissions may, perversely, hasten climate change.

Pages: 38 pages
Date: 2010
New Economics Papers: this item is included in nep-agr, nep-ene, nep-env, nep-reg and nep-res
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Persistent link: https://EconPapers.repec.org/RePEc:idc:wpaper:idec10-01

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