Killing two birds with one stone: US and EU biofuel programmes

Jean-Marc Bourgeon and David Tréguer ()

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Abstract: The United States and the European Union have been implementing sizeable biofuel support programmes since the beginning of the decade. Supporting the biofuel industry raises the price of the agricultural feedstock, hence increases the farmer revenue, and reduces the need for direct income support. Thus, for a given objective of agricultural income, the regulator is able to operate a partial substitution between agricultural decoupled payments and the support to the biofuel industry (subsidies or mandatory blending). We detail these effects and derive the biofuel and the environmental policies that maximise social welfare. We also show that for high levels of biofuel production, cross-compliance provisions are a more expensive way of enforcing the environmental policy than fining farmers.

Keywords: MARCHE ENERGETIQUE DUAL; BIOFUEL; INCOME SUPPORT; DUAL ENERGY MARKET; ENVIRONMENTAL ENFORCEMENT; EMISSIONS; MARKETS; POLICY; COSTS (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (5)

Published in European Review of Agricultural Economics, 2010, 37 (3), pp.369-394. ⟨10.1093/erae/jbq025⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01172940

DOI: 10.1093/erae/jbq025

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