Are there Carbon Savings from US Biofuel Policies? Accounting for Leakage in Land and Fuel Markets

Antonio Bento (), Richard Klotz and Joel R. Landry

No 104008, 2011 Annual Meeting, July 24-26, 2011, Pittsburgh, Pennsylvania from Agricultural and Applied Economics Association

Abstract: This paper applies the insights of the carbon leakage literature to study the emissions consequences of biofuel policies. We develop a simple analytic framework to decompose the intended emissions impacts of biofuel policy from four sources of carbon leakage: domestic fuel markets, domestic land markets, world land markets and world crude oil markets. A numerical simulation model illustrates the magnitude of each source of leakage for combinations of two current US biofuel policies: the Volumetric Ethanol Excise Tax Credit (VEETC) and the Renewable Fuel Standard (RFS). In the presence of both land and fuel market leakage, current US biofuel policies are unlikely to reduce greenhouse gases. Four of the five policy scenarios we consider lead to increases in greenhouse gas emissions. That is, total leakage was greater than 100%. The single scenario that generates emissions savings, the removal of the VEETC in conjunction with a binding RFS, only does so because negative leakage in the domestic fuel market offset the remaining positive sources of leakage.

Keywords: Agricultural and Food Policy; Land Economics/Use; Resource/Energy Economics and Policy (search for similar items in EconPapers)
Pages: 58
Date: 2011
New Economics Papers: this item is included in nep-agr, nep-cmp, nep-ene and nep-env
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:ags:aaea11:104008

DOI: 10.22004/ag.econ.104008

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