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The economics of biofuels,
food and the environment
David Zilberman, Deepak Rajagopal, Steven Sexton, Gal Hochman and Teresa Serra
Presented in the S-1043 regional Research Group-Impacts of trade and Domestic Polices on Competitiveness and Performance of Southern Agriculture
Research leading to this study was supported by the EBI and USDA ERS
Over View
• Background
• On the relationship between oil and energy
• Some numbers
• R&D productivity and biotech
• Biofuels and the environment-LCA
• Biofuel and the future of agriculture
Biofuel And the Food Market-short
term analysis
Crop Quantity
$
Food Demand
Supply
Joint Demand
Biofuel Demand
Ag Expansion
Supply w/ GMO
Market for Food and Energy Crops $
Quantity
The Basic Economics of Biofuel
• Introduction of Biofuels:
▫ Increased food prices; and
▫ Reduces food availability
• The effects can be countered by:
▫ Increased agricultural and conversion productivity
▫ Second generation biofuels
▫ Ag Biotech
Biofuel impacts depend on responsiveness
of quantities to prices
• The less responsive fuel quantities are to fuel price changes higher will be the impact of ethanol on gasoline price
• The more responsive food quantities are to food price changes lesser will be the impact of ethanol on food price
• Therefore we estimate the impact on prices under three different scenarios of responsiveness of supply and demand
Own price supply
elasticities High Mid Low
Corn 0.5 0.4 0.3
Soy 0.5 0.4 0.3
Gas 0.3 0.4 0.5
Own price demand
elasticities
Corn -0.5 -0.4 -0.3
Soy -0.5 -0.4 -0.3
Gas -0.3 -0.4 -0.5
Three scenarios with
three sets of elasticities
About the Scenarios High scenario: Inelastic gas demand and supply;
Elastic corn, soy demand and supply
Low scenario: Elastic gas demand and supply;
Inelastic corn, soy demand and supply
Mid scenario: In between
High scenario should have the highest benefits
due to biofuel consumption while the low
scenario should have the least benefits
Simulating the impact of US
biofuel on food and gas prices
High Mid Low
Change in gas price -2.3% -1.8% -1.4% Change in corn price 18% 24% 39% Change in soy price 11% 15% 24%
• Average US gasoline price in 2007 - $2.84 per gallon
• Average US corn price in 2007 - $4.72 per bushel
• Average US soybean price in 2007 - $10.34 per bushel
Changes show what actual prices were compared to a
scenario that would have existed if there were no biofuels
Net benefits to producers of corn
and soy due to US ethanol supply
in 2007
0
5
10
15
20
25
30
35
40
45
High Mid Low
Ne
t
be
ne
fi
t
in
B
il
li
on
s
of
U
SD
All producers
US Producers
ROW producers
Net benefits to consumers in the
US from US ethanol supply in 2007 (net of subsidy)
-30
-25
-20
-15
-10
-5
0
5
10
15
High Mid Low
Ne
t
be
ne
fi
t
in
B
il
li
on
s
of
US
D
All US consumers
US Gasoline consumers
US Corn,Soy consumers
Net benefits to ROW consumers
from US ethanol supply in 2007
-60
-50
-40
-30
-20
-10
0
10
20
30
40
High Mid Low
Ne
t
be
ne
fi
t
in
B
il
li
on
s
of
U
SD
All ROW consumers
ROW Gasoline consumers
ROW Corn and Soy consumers
Net change in consumer and ag.
producer surplus (net of subsidy)
-20
-15
-10
-5
0
5
10
15
20
High Mid Low
Ne
t
be
ne
fi
t
in
B
il
li
on
s
of
U
SD
Global welfare change
US welfare change
ROW welfare change
Note: Does not include change in surplus for gasoline producers
And the environment
Impact of Opec
• This analysis ignored the fact that opec is a cartel of nation
• Considering OPEC the impacts of biofuel-
▫ The price effect is smaller (-1`%) than under competition
▫ But less gasoline is consumed- OPEC reduces supply
▫ A significant GHG reduction effect
Biofuel Policies: subsidies and mandate • Subsidies- in the US ,of about$.50/gallon, provide
extra incentive to invest in biofuels
• They tend to
▫ increase demand for feed stock
▫ Increase price of food
▫ Reduce food availability
• Because of a tariff - the subsidy is not available to foreign provider of biofuel- Brazil
• But brazil subsidies is own growers
• When food demand is sufficiently high even with subsidy it curtails biofuel production- safety valve for food and source of instability to industry
•
Crop Price
Oil
Price
Initial Breakeven line
With subsidy
With subsidy and
increase in production
efficiency
P0 P1 P2
Gas
price
High subsidy will make biofuel
profitable at higher food prices or
lower gas prices
PG
Biofuel is not profitable with subsidy and
food shortage
Crop Quantity
Price
DF - Food Demand
DT0 - Total Demand
S0 – Crop Supply
E0 – Equilibrium
Market for Food and Energy Crops
Past : Elastic Biofuel Demand
DF S0
DF
E0 P0
Q0
Ds
Biofuel will be produced with mandates
Regard less of fuel demand
Crop Quantity
Now : Inelastic demand from Biofuel Mandate
E0
E1
DT1
DRFS – Biofuel
Mandate Demand
DT1 – New Total Demand
E1 – New Equilibrium
DRFS
P0
Q0
P1
Q1
Biofuel produced because of mandate – raises crop price
Factor affecting ethanol price
dynamics – in US
• Ethanol prices will grow with
▫ corn ( sugar) prices
▫ Subsidies and supply restricting tariffs
▫ Gasoline prices
▫ Mandates size
• They will decline with
▫ Fuel taxes
• Ethanol prices may in turn affect the dynamics of gasoline and corn prices
• We tried to trace the dynamic adjustment between gasoline, ethanol and corn in the US
Dynamic analysis of of co-evolution
of corn ethanol and gasoline prices • We used an threshold-vector error correction models
(TVECM) With data from Nebraska in the US.
• TVECM assume that the transitions are abrupt and discontinuous- affected by heterogeneity and transaction costs that results in lag structures that are estimated.
• They assume a evolved equilibrium
• The weighted adjustment function G( ) is nonlinear function depend on dynamic variation in the system
Pethanol (1G())Plagged gasolineG()PLagged corn
The prices of
biofuel relative to fuel
and food Figure 1. Price Series
The Relative weight of lagged corn and
Gasoline price in changing ethanol prices
Gasoline
matters
Results of econometrics analysis • The price of ethanol is positively related to corn and
gasoline prices. The change in weight of corn or gasoline price is non linear in response to shocks
• Ethanol responses to gasoline price shocks are quicker than reactions to corn price changes. These latter however are bigger in magnitude.
• Weight of Gasoline prices increased in the 2000s
• Ethanol prices
▫ Peak when mandates are binding (MTBE 2006)
▫ During the 2000s when gasoline prices rose ethanol was priced above gasoline when corn price was declining and above it when corn prices was rising
The impact of adverse food supply
shock on biofuel
Adverse food
market shocks
(inventory
demand, lower
supply)-make
corn biofuel
unprofitable- may
lead to
bankruptcies-
industry in
inherently
ubstable
Food and the Volatility of biofuels
prices- • Corn and wheat etahnol and palm biodiesel became
unprofitable because of higher food prices in 2007-8
• Sugar cane ethanol is still profitable- sugar price less volatile- essential value proposition is better
• Refiners lost money buying feed stocks
• Second generation may be competing with food crops on resources but the volatility because of multiple use may not be there
• But contract payment will have to take into account the price variability of competing ( in terms fo land) food crops
Short term vs long term price
effects of biofuels
•The impacts of biofuel on food prices has been
accumulating
•The 16-40 % increases we attribute to biofuel
based on short tem elasticities are lower bounds
•Continuing shortages, negative supply shocks (
Australia) and expectation for higher price may
push for 50-70% price effects as suggested by the
world bank
•But small changes in supply relieving the pressure
could have done wonders
Not all crops are alike
Rice yields increase in 70s because of Green
Revolution; they have stagnated in recent
years R i c e
0
2 0 , 0 0 0
4 0 , 0 0 0
6 0 , 0 0 0
8 0 , 0 0 0
1 0 0 , 0 0 0
1 2 0 , 0 0 0
1 4 0 , 0 0 0
1 6 0 , 0 0 0
1 8 0 , 0 0 0
0 5 1 0 1 5 2 0 2 5 3 0 3 5 4 0
1 9 7 1 / 7 2 t o 2 0 0 7 / 2 0 0 8
Ar
ea
,
St
oc
ks
(
10
00
s
HA
,
MT
)
0
0 . 5
1
1 . 5
2
2 . 5
3
3 . 5
4
4 . 5
Yi
el
d
(M
T/
HA
)
A r e a
E n d in g S t o c k s
Y ie ld
Look at inventories-they declined leading to price pressure
W h e a t
0
5 0 , 0 0 0
1 0 0 , 0 0 0
1 5 0 , 0 0 0
2 0 0 , 0 0 0
2 5 0 , 0 0 0
3 0 0 , 0 0 0
0 5 1 0 1 5 2 0 2 5 3 0 3 5 4 01 9 7 1 / 7 2 t o 2 0 0 7 / 2 0 0 8
Ar
ea
,
St
oc
ks
(
10
00
s
HA
,
MT
)
0
0 . 5
1
1 . 5
2
2 . 5
3
3 . 5
Yi
el
d
(M
T/
HA
)
A r e a
E n d in g S t o c k s
Y ie ld
Wheat also benefited from Green Revolution
and has seen little productivity growth of
late.
Years 1970-2007-source FAO
S o r g h u m
0
1 0 , 0 0 0
2 0 , 0 0 0
3 0 , 0 0 0
4 0 , 0 0 0
5 0 , 0 0 0
6 0 , 0 0 0
0 5 1 0 1 5 2 0 2 5 3 0 3 5 4 01 9 7 1 / 7 2 t o 2 0 0 7 / 2 0 0 8
Ar
ea
,
St
oc
ks
(
10
00
s
HA
,
MT
)
0
0 . 2
0 . 4
0 . 6
0 . 8
1
1 . 2
1 . 4
1 . 6
1 . 8
Yi
el
d
(M
T/
HA
)
A r e a
E n d in g S t o c k s
Y ie ld
Sorghum is the food of the poor. It
has experienced little increase in
yields and a decline in inventories
S o y b e a n
0
1 0 , 0 0 0
2 0 , 0 0 0
3 0 , 0 0 0
4 0 , 0 0 0
5 0 , 0 0 0
6 0 , 0 0 0
7 0 , 0 0 0
8 0 , 0 0 0
9 0 , 0 0 0
1 0 0 , 0 0 0
0 5 1 0 1 5 2 0 2 5 3 0 3 5 4 01 9 7 1 / 7 2 t o 2 0 0 7 / 2 0 0 8
Ar
ea
,
St
oc
ks
(
10
00
s
HA
,
MT
)
0 . 0 0
0 . 5 0
1 . 0 0
1 . 5 0
2 . 0 0
2 . 5 0
3 . 0 0
Yi
el
d
(M
T/
HA
)
A r e a
E n d in g S t o c k s
Y ie ld
Soybean has benefited from GMO
Despite rise in acres yield per acre increased
C o t t o n
0
1 0 , 0 0 0
2 0 , 0 0 0
3 0 , 0 0 0
4 0 , 0 0 0
5 0 , 0 0 0
6 0 , 0 0 0
7 0 , 0 0 0
0 5 1 0 1 5 2 0 2 5 3 0 3 5 4 01 9 7 1 / 7 2 t o 2 0 0 7 / 2 0 0 8
Ar
ea
,
St
oc
ks
(
10
00
s
HA
,
MT
)
0
0 . 1
0 . 2
0 . 3
0 . 4
0 . 5
0 . 6
0 . 7
0 . 8
0 . 9
Yi
el
d
(M
T/
HA
)
A r e a
E n d in g S t o c k s
Y ie ld
Cotton sees sharp increase in productivity
growth around 2000 due to GMO
Corn US:yield increased recently. GMO?
Corn
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
0 5 10 15 20 25 30 35 40
1971/72 to 2007/2008
Are
a, S
toc
ks
(1
00
0s
HA
, M
T)
0
2
4
6
8
10
12
Yie
ld (
MT
/HA
)
Area
Ending Stocks
Yield
Greater Productivity Growth In Top-
Producing Countries That Adopt GMO
Countries that Adopted GMO Non-GMO Countries
0
200
400
600
800
1000
1200
1400
United States
Pakistan
India
China
Brazil
0
200
400
600
800
1000
1200
Greece
Egypt
Burkina Faso
Yields in India double with biotech
Its no wonder Brazil sees considerable yield gains
Crops with high adoption of GMO
did better • Cotton and corn fare better than wheat and rice
• Productivity enhancement is essential to restore reasonable eqilibrium
• Short term use all the tools that work
• Long term invest more in ag research
Biofuel and Climate Change • Biofuel is not fully renewable-energy is needed for producing
inputs, production and processing.
• Processing may lead some biofuels to emits 18% more GHG than gasoline (tar sand emit 1.5 GHG that Saudi oil)
• US Corn ethanol meets between 40% less to 20% more than gasoline- but it better than tar sands
• Sugarcane ethanol emits 60% less than oil much less than corn .
• Wheat ethanol is worse than Corn, palm oil for biodiesel much better
• But impact of Biofuels on climate change is difficult to figure out leading to methodological studies with policy implication
• Key tool life cycle analysis – which distinguished between direct and indirect effects
Greenhouse Gas Emissions from Various Stages of Corn
Ethanol Production in US
(Assuming no land use change emissions)
0%
10%
20%
30%
40%
50%
60%
70%
Irriga
tion
Farm
mac
hine
ry
Tran
spor
t (inp
uts)
Elec
tricity
Pota
ssium
Pesticide
Phos
phor
us
Nat
ural G
as and
LPG
Lim
e
Gas
oline
and
Diese
l (on
far
m)
Nitro
gen
fertilize
r
Tran
spor
t of
feed
stoc
k
Proc
ess he
at (Coa
l+NG)
Oth
er p
roce
ssing
g C
O2e /
lit
Field Emissions
Production and Use
Based on EBAMM data of Farrell et al. (Science 2006)
Direct emissions - Lifecycle of corn
ethanol in US
Illustration - GHG impact of fuel switching
by biorefineries (based on Farrel et-al)
Switching to pure coal based biorefining reduces GHG
benefits by 50%, while switching to pure gas based
biorefining increases GHG benefits by 130% compared
to average case
net GHG displacement based on source of
energy used in biorefining of corn in US
kg CO2e/liter
of ethanol
% change
compared to
average plant
Average plant which uses both coal and gas
today (Farrell et al. Science 2006) 0.18 -
Coal only 0.09 -50%
Gas only 0.42 133%
Illustration - GHG impact of fuel
switching in fertilizer production
Switching to pure coal based nitrogen fertilizer reduces
GHG benefits by 63% compared to average case
net GHG displacement based on source of
fuel used in producing N-fertilizer
kg CO2e/liter
of ethanol
% change
compared to
average plant
Average fertilizer production (90% Gas +10%
coal) (Farrell et al. Science 2006) 0.18 -
Coal only 0.07 -61%
Illustration – Combined effect
There is a net increase in GHG emissions and so there
corn ethanol is worse than gasoline
net GHG displacement based on source of
fuel used in producing N-fertilizer
kg CO2e/liter
of ethanol
% change
compared to
average plant
Average fertilizer production (90% Gas +10%
coal) (Farrell et al. Science 2006) 0.18 -
Coal only -0.01 -106%
A greater than 100% reduction in net GHG displacement
implies overall increase in emissions compared to baseline
LCA ignores behavior
• No induce innovation • Minimal attention to heterogeneity • No input substitution in response to price
changes • No learning by doing • No capacity to deal with impacts of policies
Direct emissions from US Corn Ethanol under various scenarios
0
50
100
150
200
Baseline (Farrell et
al.)
Coal based
processing
Gas based
processing
High efficiency
scenario
GH
G
em
is
si
on
s
in
g
CO
2e
/M
JDirect emissions
Baseline: Emissions from Farrell et al. (Science 2006)
Scenario 1: Coal based biorefining all else equal to Baseline
Scenario 2: Natural gas based biorefining all else equal to Baseline
Scenario 4: NG gas based biorefining, 39% improvement in corn yield, 25% reduction in energy for processing and all else equal to Baseline
Learning by doing result in increased numbers of with highre processing efficiency – so average emission is declining for the same mix of fuel
Gasoline
94
gCO2e/MJ
Indirect Emissions
Emissions accompanying induced expansion or
intensification of agriculture
• Example of extensification is induced conversion of non-cropland such as pastures or forestland to agriculture
• Example of intensification is greater use of energy-intensive inputs like fertilizers in response to increase in output prices
• Unlike direct emissions they cannot be traced to a single biofuel producer and they may occur at locations far away from a biofuel production site
Indirect Emissions
• These effects arise from interaction of markets for several commodities and across the globe
• Land may not be converted directly to be planted with bioenergy crop but planted to a crop displaced by biofuel crop
Corn displaces soy
in US
Reduction in soy exports
from US
Increase in soy acreage
in Brazil displacing
pastures
Forest cleared in Brazil
for pasture land
Results in release of
carbon stored in
trees/soil
Mandate of 56 billion liters of ethanol in US
(assumed to be corn based)
140 million tonnes of corn @ 2.7 gallons of
ethanol per bushel of corn
Global agricultural acreage to expand by 10.8
million hectares
Searchinger et al.’s estimate
• Between 1950 and 1998, global agricultural
output increased 150% while harvested acreage
increased only 13% implying elasticity,
i.e, historically when output increased by 100%
land under agriculture increased by 9%
Using this value, expansion is 3.3 million
hectares
Alternative calculation Land use change can be hypothesized using
historical data on elasticity of acreage with
respect to output
/
0.139%
1.5L Q
L L
Q Q
Indirect emissions
Average indirect emissions due to US Mandate of 56 billion litres of corn Ethanol
0
20
40
60
80
100
120
Searchinger Back of envelope*
GH
G
em
is
si
on
s
in
g
CO
2e
/M
J
*: Back of envelope calculation based on aggregate elasticity of acreage
between 1950 and 1998. Disaggregating elasticities into smaller time periods
and for different crops actually shows variation in elasticities. Needs further
investigation
Biofuels and GHG emission
Scenario 1: Coal based biorefining (increases direct emissions)
Scenario 2: Natural gas based biorefining (lowers direct emissions)
Scenario 3: NG based biorefining and Indirect emissions equal to 1/3rd of Searchinger et al.’s estimate
Scenario 4: NG gas based biorefining, 39% improvement in corn yield, 25% reduction in energy for processing and indirect emissions equaling 1/3rd of Searchinger et al.’s estimate
Comparing Gasoline and US Corn Ethanol
0
50
100
150
200
US Ethanol
Today
Scenario 1 Scenario 2 Scenario 3 Scenario 4
GH
G
em
is
si
on
s
in
g
CO
2e
/M
J
Indirect land use change emissions
Direct EmissionsGasoline
94
gCO2e/MJ
Controlling direct & indirect emissions is crucial
There are many indirect effects of
biofuel • OPEC effect -biofuel reduces OPEC productionmor-
reduces GHG
• Tar-sand effect-biofuel reduces price of oil reduces incentives to Tar sand- and GHG
• Learning by doing improved technology
• Concentrating on one indirect effect is not good policy
GHG of biofuel depends on policy
• Low carbon fuel standards (LFCS) generates less GHG than Renewable fuel standards (RFS)+ Mandates
▫ LCFS – may reduce introduction of tar sand
• Carbon taxes or cap and trade-are more efficient-
▫ Will induce adoption of biofuel if carbon price is high
▫ ALSO-Trigger Pollution reducing innovations
• But require
▫ Political will
▫ Monitoring and enforcement effort
Lifecycle numbers are function of policy A policy such as carbon tax that increases the relative
price of coal could lower the intensity of coal use in
production of biofuel and lower the carbon footprint
Fuel source
Emission intensity
(ton C/Gigajoule)
Energy Price
$/Gigajoule
Coal 28.1 0.735
Gas 15.3 7.419
Carbon tax in $/ton $5/ton $10/ton $15/ton
% increase price of coal relative
to natural gas 17 35 57
% increase GHG benefits
relative to baseline* 117% 228% 383%
* Baseline is direct emissions for corn ethanol from Farrell et al. (Science 2006)
First and Second Generation
biofuels • If processors have to meet higher environmental
standards it will reduce the amount paid for biofuel. • Payment for environmental contributions at the
farm level (carbon sequestration, residue reduction) is likely to affect crop and technology choices—and the geographic distribution of biofuel crops
• But whatever we do, productivity matters. ▫ Except of sugar cane, sweet sorghum, and some oil crops,
the first generation of biofuels have limited capacity to address climate change concerns. We need to be able to process celluloids.
Productivity Matters CROP Harvest-
able Biomass (tons/ acre)
Ethanol (gal/acr
e)
Million acres needed for 35 billion gallons of ethanol
% 2006 harvested
US cropland5
Corn grain1 4 500 70 25.3
Corn stover2 3 300 105 38.5
Corn Total 7 800 40 15.3
Prairie 2 200 210 75.1
Switch-grass 6 600 60 20.7
Miscanthus 17 1700 18 5.8
Source:Steve Long
Food security is the major concern
• Solutions
▫ Food aid fund
▫ Smaller ( flexible mandates)
• Supply expansion in a sustainable (and non exploitive way)
▫ High food prices will lead to supply expansion Eastern Europe where yields are half than the west
Africa and Latin America has regions of unutilized ag production potential
May lead to introduction of second generation biotechnology (Gates) and enhanced development of second generation biofuel
The Future of Biofuel is Dependent
Upon Innovation
• Need better feedstock ▫ Cleaner processing ▫ Higher productivity agriculture ▫ Dissemination and access to technology
• Lessons of electronics and biotech: Emergence of educational industrial complex ▫ Public/private partnership in R&D and infrastructure ▫ Technology transfer, start-ups
• Evolution of industry affected by IPR and regulation ▫ IPR: access, sharing arrangement and enforcement ▫ Regulations: land use, carbon content
Cheap and clean fuel and food
Require more R&D investment and
sound regulations
• Ag research has been deemphasized and over regulated in recent year
• Food productivity- except of some crop stagnating
• Expansion of food and fuel with small or no expansion of land base will be feasible with
▫ Increased productivity of underperforming regions and crops
▫ Increased agricultural knowledge and investment
▫ Improved policies and institutions
▫ Introduction and Adoption of new technologies
The bottom line
• Biofuel already contributes to reduced fuel prices (<3% in 2006 more in 2007), but raises food prices (>20%, maybe up to 50%)
• Largest price increases are in rice and wheat, perhaps due to under-use of new technologies
• Recent growth in agriculture has not been linear in land.
▫ Incentives and technologies led to increased food supply with much less than proportional land expansion
▫ There is ample under-performing or abandoned farmland and degraded or under-utilized land that would allow expansion w/o significant GHG and resource consequences.
▫ It all depends on policy, which reflects our commitment to meeting food, fuel and environmental objectives.
▫ We must consider alternatives: what will happen if we abandon biofuel opportunities
Integration of Agricultural, Energy
and Environmental Policies • Traditional commodity support program becomes redundant
• Biofuel mandates and support:
▫ Should be examined critically- in many cases should be eliminated
▫ Should be linked to environmental performance and food situation ( differentiate based on emissions)
▫ May provide insurance
▫ Government may help establish biofuel industry, then it must compete .
• Food security funds
• Certification of biofuel sources- at both micro and macro levels
• Emphasis on innovation
Can you return the genie to the
bottle? • NO- you can have smaller mandates
▫ But people will prefer their gas tank over other people stomachs
▫ Political economy- cheap food and fuel are cornerstone deliverable of many governments- oil is subsidized
• Biofuel is seen as a opportunity to increase agriculture and rural well
• Feasible Intervenetions
• Improved technologies
• Less market distortions
• More correction for environmental side effects
Biofuel in bigger context
• Biofuel is a part of a bigger puzzle
• Its importance stems from importance of liquid fuel
• Battery development will change it direction (emphasis on feed for power)
• Progress of other power sources
• Introduction of incentive for conservation
• Sound pricing of GHG and the Environment
• Investment in Public transit
• Change in building codes – and population spread
• Will affect value and design of biofuel sector and policies
Biofuel and developing countries
• Not every country needs biofuel policy
• It has no place when biofuels can not compete with existing crops or imposes high environmental costs – (net social benefit is negative )
• It can help countries with underutilized appropriate resources- if introduced with a sound regulatory framework
▫ Many concerns can be addressed –
refineries can buy from cooperatives of small farmers
Pollution control polices can control emission etc
Second generation crop can reduce cost and increased gains
What’s next-in biofuel research:
Industrial organization
•Economics of biofuel and other fuels
•OPEC response to biofuels
•Biofuels and other renewables
•Alternative supply chain design and their
implications
•The innovations systems (R&D,IPR) –and their
impacts on biofuels and other fuels
•Pricing and product and networks design
Adoption and contracts •Adoption of Biofuels varies by locations and
according to economic and biophysical conditions
•Depends on
•contractual features
• Legal framework
•Research needs to quantify these relationships
•Come up with superior contract features (from
various perspectives)
•Sound principles for policy design under various
conditions
•Emphasize risk management issues
Biofuels in the context of global
economy
•Biofuels and the macro economy
•Sensitivity to business cycles and financial
conditions
•Attitudes and acceptance
•Biofuels in the developing world
•Case studies
•Distributional impacts under alternative
designs
•Biodiversity and environmental issues
Combining economics and
geography • Using GIS to identify where biofeul can be
working
• Using CGE to assess prices and quantities
• Assessing various policies to help
▫ Poor-food bank
▫ Environment-Carbon tax- LCA Based regulations
▫ Producers-insurance contracts
Thanks Thanks
Research
leading to this
presentation was
supported byEBI
USDA ERS
World Bank
We thank them
all
EBI
THE EBI
ERS -USDA
The World Bank
We thank them
all
SDA ERS
World Bank
We thank them
all
EBI
USDA ERS
World Bank
We thank them
all
Instability of prices of
biofuel relative to fuel
and food
•Corn is most volatile
•Ethanol is high when
MTBE mandate binds
•Now less profitable
