Promoting Biofuels: Implications for Developing Countries

Jörg Peters and Sascha Thielmann

No 38, Ruhr Economic Papers from RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen

Abstract: Interest in biofuels is growing worldwide as concerns about the security of energy supply and climate change are moving into the focus of policy makers. With the exception of bioethanol from Brazil, however, production costs of biofuels are typically much higher than those of fossil fuels.As a result,promotion measures such as tax exemptions or blending quotas are indispensable for ascertaining substantial biofuel demand.With particular focus on developing countries, this paper discusses the economic justification of biofuel promotion instruments and investigates their implications. Based on data from India and Tanzania, we find that substantial biofuel usage induces significant financial costs. Furthermore, acreage availability is a binding natural limitation that could also lead to conflicts with food production.Yet, if carefully implemented under the appropriate conditions, biofuel programs might present opportunities for certain developing countries.

Keywords: Renewable energy; environmental policy; government policy; economic development (search for similar items in EconPapers)
JEL-codes: O38 Q42 Q56 (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (41)

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