Market, welfare and land-use implications of lignocellulosic bioethanol in Hawai'i

Junko Mochizuki, Makena Coffman and John F. Yanagida

Renewable Energy, 2015, vol. 76, issue C, 102-114

Abstract: This article examines land-use, market and welfare implications of lignocellulosic bioethanol production in Hawai'i to satisfy 10% and 20% of the State's gasoline demand in line with the State's ethanol blending mandate and Alternative Fuels Standard (AFS). A static computable general equilibrium (CGE) model is used to evaluate four alternative support mechanisms for bioethanol. Namely: i) a federal blending tax credit, ii) a long-term purchase contract, iii) a state production subsidy financed by a lump-sum tax and iv) a state production subsidy financed by an ad valorem gasoline tax. We find that because Hawaii-produced bioethanol is relatively costly, all scenarios are welfare reducing for Hawaii residents: estimated between −0.14% and −0.32%. Unsurprisingly, Hawaii's economy and its residents fair best under the federal blending tax credit scenario, with a positive impact to gross state product of $49 million. Otherwise, impacts to gross state product are negative (up to −$63 million). We additionally find that Hawaii-based bioethanol is not likely to offer substantial greenhouse gas emissions savings in comparison to imported biofuel, and as such the policy cost per tonne of emissions displaced ranges between $130 and $2100/tonne of CO2e. The policies serve to increase the value of agricultural lands, where we estimate that the value of pasture land could as well.

Keywords: Computable general equilibrium modeling; Lignocellulosic bioethanol; Land use impact; Welfare impact; Greenhouse gas emissions (search for similar items in EconPapers)
Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:eee:renene:v:76:y:2015:i:c:p:102-114

DOI: 10.1016/j.renene.2014.10.071

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