Impact of Switching Production to Bioenergy Crops: The Switchgrass Example January 2005

Scott McDonald () and Karen Thierfelder

No 2005002, Working Papers from The University of Sheffield, Department of Economics

Abstract: This paper reports the results of a series of simulations that evaluate the general equilibrium effects of substituting crude oil by biomass, specifically switchgrass, in the production of petroleum in the USA. The simulations are inspired by debates over the implications for developing countries if agricultural policies in the USA are changed so that agricultural land is transferred from the production of cereals and other crops to biomass production. The results confirm expectations that such a policy shift would raise cereal and other agricultural prices, due to a general reduction in food production in the USA. However, the reduction in the demand for crude oil in the USA causes terms of trade effects that more than offset any potential benefits for developing countries due to the depreciation of their exchange rates, causing a general decline in economic welfare. Moreover, the declines in welfare are proportionately greater for developing countries due to their small levels of production of the commodities whose prices increase with the change in USA agricultural production.

Keywords: Biomass; Energy; Computable General Equilibrium; USA agricultural policy. (search for similar items in EconPapers)
JEL-codes: D58 Q18 Q42 Q43 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2005-01, Revised 2005-01
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