Three essays on renewable backstop technology

Jittinan Aukayanagul

ISU General Staff Papers from Iowa State University, Department of Economics

Abstract: This dissertation comprises three essays on backstop technology as a key to weak sustainability of commodity resources. Through the use of a basic model of renewable ground water, the first essay separately looks at water scarcity problems posed by growing water demand and stochastic rainfall. The role of artificial ground water recharge in augmenting the ground water supply is examined. The second essay looks at a long-run relationship between the prices of two substitutable resources, ethanol and oil, and tests the hypothesis that the derived demand for fuel ethanol in the US is perfectly elastic. The Johansen and Jesulius multivariate cointegration methodology finds no cointegration between the ethanol price and the gasoline price while the Gregory and Hansen residual-based tests for cointegration in models with regime shifts indicate that the long-run relationship between the ethanol price and the gasoline price exists with a possible structural break. The third essay looks at water recycling in ethanol production as a means to reduce some of the ethanol pressure on the (ground) water resources. Although modern ethanol plants possess sophisticated water treatment techniques for water recycling, water recycling is done only when it is cheaper than obtaining water from the outside source. Since water recycling can lower the cost of production, it may adversely induce production expansion and lead to more outside water being used by the plants. The conditions under which this possibility occurs are examined.

Date: 2009-01-01
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