Economic and Environmental Implications of Biomass Commercialization in Agricultural Processing

Bin Li (), Onur Boyabatlı () and Buket Avcı ()
Additional contact information
Bin Li: Economics and Management School, Wuhan University, Wuhan 430072, China
Onur Boyabatlı: Lee Kong Chian School of Business, Singapore Management University, Singapore 178899, Singapore
Buket Avcı: Lee Kong Chian School of Business, Singapore Management University, Singapore 178899, Singapore

Management Science, 2023, vol. 69, issue 6, 3561-3577

Abstract: Motivated by the agricultural industries, this paper studies the economic and environmental implications of biomass commercialization; that is, converting organic waste into a saleable product from the perspective of a processor that uses a commodity input to produce both a commodity output and biomass. We characterize the economic value of biomass commercialization and examine how input and output spot price uncertainties affect this value. Using a model calibration, we find that lower input spot price variability or higher output spot price variability or correlation between the two spot prices increases this value for a typical palm oil mill. To measure the environmental impact, we use total expected carbon emissions resulting from profit-maximizing decisions and characterize the change in total expected emissions after commercialization. Our analysis reveals that, although higher biomass demand or biomass price always increases the value of biomass commercialization, these changes are not necessarily environmentally beneficial as they may increase the emissions associated with biomass commercialization. We also characterize conditions under which biomass commercialization is environmentally beneficial or harmful; that is, it leads to a reduction or an increase in the total expected emissions, respectively. In comparison with the existing understanding which does not take into account optimization of operational decisions, our analysis highlights two types of misconceptions (and characterizes the specific conditions under which they appear): (i) we would mistakenly think that biomass commercialization is environmentally beneficial when it is not, and (ii) we would mistakenly think that biomass commercialization is environmentally harmful when it is not.

Keywords: biomass; agriculture; commodity; sustainability; emissions; spot price uncertainty; renewable energy; palm oil (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://dx.doi.org/10.1287/mnsc.2022.4518 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:69:y:2023:i:6:p:3561-3577

Access Statistics for this article

More articles in Management Science from INFORMS Contact information at EDIRC.
Bibliographic data for series maintained by Chris Asher ().