How Do Biofuel Use Mandates Cause Uncertainty? United States Environmental Protection Agency Cellulosic Waiver Options

Seth Meyer and Wyatt Thompson

Applied Economic Perspectives and Policy, 2012, vol. 34, issue 4, 570-586

Abstract: Biofuel policy in the United States sets minimum use mandates for different biofuels, but the cellulosic mandate, introduced in 2010 has been waived and reduced to nearly zero since then. This waiver has shifted the burden of compliance to other biofuels, but other options exist. We examine some alternatives using a structural model of biofuel, agricultural, and mandate markets. Our estimates show that crop price levels, crop and livestock farm income, compliance costs, and greenhouse gas emissions are all sensitive to whether and how the cellulosic mandate is waived. Mandate analysis that does not consider Environmental Protection Agency implementation, or waiver analysis that disregards the hierarchical nature of the mandates could be misleading.

Date: 2012
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