The Economics of Biofuels

Tommy Lundgren, Per-Olov Marklund, Runar Brannlund and Bengt Kristrom

International Review of Environmental and Resource Economics, 2008, vol. 2, issue 3, 237-280

Abstract: Biofuels are increasingly regarded as energy sources with the potential to solve diverse problems related to serious concerns, including climate change, environmental degradation, energy supply, and energy security. Here we examine biofuels, primarily biofuels used for transportation (e.g., ethanol and biodiesel), through the lens of modern resource economics and address fundamental questions, such as: Why biofuels? We then review some of the relevant literature and present a framework for analysis drawn mainly from the green accounting literature. The literature reviewed indicates that the effects of policies promoting conversion from fossil fuels to biofuels do not necessarily promote welfare. Our theoretical framework provides indications of possible reasons for this. Based on findings obtained using the framework we propose policies that not only penalize emissions of CO 2 from all sources, but also stimulate biomass growth. Finally, we identify issues for further research.

Keywords: Biofuels; Environmental policy; Green accounting; Welfare economics (search for similar items in EconPapers)
JEL-codes: H23 Q20 Q42 Q54 Q56 (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:now:jirere:101.00000017

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