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Biofuels and economic development: A computable general equilibrium analysis for Tanzania

Channing Arndt (), Karl Pauw and James Thurlow

Energy Economics, 2012, vol. 34, issue 6, 1922-1930

Abstract: Biofuels could offer new economic opportunities for low-income countries. We use a recursive dynamic computable general equilibrium model of Tanzania to evaluate different biofuels production options and estimate their impacts on growth and poverty. Our results indicate that maximizing the poverty-reducing effects of biofuels production in countries like Tanzania will require engaging and improving the productivity of smallholder farmers. Evidence shows that cassava-based ethanol production is more profitable than other feedstock options. Cassava also generates more “pro-poor” growth than sugarcane-based systems. However, if smallholder yields can be improved rather than expanding cultivated land, then both sugarcane and cassava out-grower schemes generate similar pro-poor outcomes. We conclude that, in so far as the public investments needed to establish a biofuels industry are consistent with other development needs, then producing biofuels will enhance economic development in countries like Tanzania.

Keywords: Biofuels; Growth; Poverty; CGE model; Tanzania (search for similar items in EconPapers)
JEL-codes: D58 O13 Q42 (search for similar items in EconPapers)
Date: 2012
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DOI: 10.1016/j.eneco.2012.07.020

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