On blending mandates, border tax adjustment and import standards for biofuels

Håkan Eggert and Mads Greaker

No 422, Working Papers in Economics from University of Gothenburg, Department of Economics

Abstract: The transport sector is a major contributor to green house gas (GHG) emissions and its share is increasing. Biofuels may provide an option to replace fossil fuels and generate an increasing worldwide interest. Rich countries like the US and the European Union ha idies for domestic producers, while applying tariffs for some of the foreign producers. Mid income and poor countries do not have binding restrictions on carbon emissions in the Kyoto treaty, but may have great potential for producing biofuels both for domestic and foreign use. In this paper we study trade policies for biofuels. We find that only by combining an import standard with border tax adjustment the government can ensure cost efficient production of biofuels from a global point of view. We also consider a blending mandate. This fundamentally alters the way the market works. For instance, if domestic biofuels production is subsidized, the optimal BTA may be negative.

Keywords: Biofuels; Border tax adjustment; Carbon Leakage; Trade policy (search for similar items in EconPapers)
JEL-codes: F10 H20 Q50 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2009-12-09
New Economics Papers: this item is included in nep-ene, nep-env and nep-res
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