The Implications of Alternative Biofuel Policies on Carbon Leakage

Dusan Drabik (), Harry de Gorter () and David Just

No 114432, 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland from European Association of Agricultural Economists

Abstract: We show carbon leakage depends on the type of biofuel policy (tax credit versus mandate), the domestic and foreign gasoline supply and fuel demand elasticities, and on consumption and production shares of world oil markets for the country introducing the biofuel policy. The components of carbon leakage – market leakage and emissions savings – are counteracting: carbon leakage increases with market leakage but decreases with emissions savings. We also distinguish domestic and international leakage where the latter is always positive, but domestic leakage can be negative with a mandate. The IPCC definition of leakage omits domestic leakage, resulting in biased estimates. Leakage with a tax credit always exceeds that of a mandate, while the combination of a mandate and tax credit generates lower leakage than a tax credit alone. In general, a gallon of ethanol (energy equivalent) is found to replace 35 percent of a gallon of gasoline – not 100 percent as assumed by life-cycle accounting. This means ethanol emits 13 percent more carbon than a gallon of gasoline if indirect land use change (iLUC) is not included in the estimated emissions savings effect and 43 percent more when iLUC is included.

Keywords: Resource/Energy; Economics; and; Policy (search for similar items in EconPapers)
Pages: 12
Date: 2011
New Economics Papers: this item is included in nep-ene and nep-env
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Citations: View citations in EconPapers (4)

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Related works:
Working Paper: The Implications of Alternative Biofuel Policies on Carbon Leakage (2010)
Working Paper: The Implications of Alternative Biofuel Policies on Carbon Leakage (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:eaae11:114432

DOI: 10.22004/ag.econ.114432

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