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Policy intervention in the biofuel market has led to a significant increase in biofuel production and use in the past several years. However, the welfare effect of biofuel policies, specifically the ethanol tax credit for corn ethanol, ethanol import tariff and renewable fuel standard (RFS) mandate has not been adequately examined. Moreover, the environmental impact of these policies, and their impact on fuel taxation has not been sufficiently addressed in the literature. This dissertation examines the market and welfare effects of biofuel policies in the US, specifically those relating to corn and sugarcane ethanol, with the aim of determining the welfare implications of existing policies, and designing second-best optimal policies. In measuring welfare effects, changes in social surplus, as well as environmental externalities are taken into account. In addition, the interaction of fuel and biofuel policies with the broader fiscal system is also considered. This dissertation consists of three papers. In the first paper, a stylized model of the US miles and fuel market, including ethanol trade is developed to quantify the market and welfare effects of biofuel policies in the US. In order to examine the effect of the ethanol tax credit and import tariff, several market scenarios are simulated. The market outcome with the two policies in place are compared to a non-intervention scenario, and an optimal baseline where Pigouvian taxes are levied on fuel and miles. Results show that the effect of the tax credit on social surplus is clearly negative, while the impact of the tariff depends on the ability of the US to influence ethanol prices in the world market. Numerical simulations show that the existing ethanol tax credit and import tariff increase miles externalities and GHG emissions and decrease social welfare by $5.9 B relative to non-intervention and by $235 B relative to the optimal scenario. In the second paper, detailed production data on ethanol production costs in the US and Brazil are used together with a numerical model of US biofuel trade with Brazil to quantify the welfare effect of the US RFS mandate for traditional and advanced biofuel (excluding cellulosic and biomass biodiesel) under various scenarios on the currency exchange rate between the US dollar and Brazilian reais. Numerical results show that in 2015, the cost of the mandate is lower when the US currency is appreciated relative to the Brazilian currency, and when the excess supply elasticity of ethanol from Brazil is more elastic. Relative to a baseline without a mandate but with an ethanol subsidy and import tariff in place, GHG emissions decrease and the welfare effect of the mandate ranges from -$23 to +$5 Billion dollars as the exchange rate varies from US$1 = R$1.81 to US$1 = R$3.11. The third paper analyzes the impact of biofuel policies and biofuel use on the second-best optimal carbon tax for fuels in the presence of a labor tax and a biofuel subsidy. Findings show that when biofuel is part of the fuel mix, the carbon tax has a commodity price effect which arises from tax-induced changes in land rent. The commodity price effect could exacerbate or attenuate the tax interaction effect caused by higher fuel prices, depending on the elasticity of substitution between gasoline and biofuel, the price elasticity of miles demand, and the relative emissions intensity of gasoline and biofuel. Numerical results show that the commodity price effect affects the value of the second-best optimal carbon tax, and that the effect is greater if the elasticity of substitution between gasoline and ethanol is higher, iii miles demand is more price inelastic, and the emissions intensity of biofuel is lower relative to gasoline. In addition, the existence of a fixed biofuel subsidy lead to a greater divergence between the value of the second-best optimal carbon tax with or without biofuels. A carbon tax policy decreases GHG emissions and increases welfare, in contrast to a biofuel subsidy, which also decreases GHG emissions but at a net welfare loss.
We develop a stylized model of fuel markets in an open economy and derive the optimal mix of trade and environmental policy instruments for biofuels and gasoline that maximizes social surplus and internalizes externalities from miles and greenhouse gas (GHG) emissions. We use this optimal scenario as a benchmark to compare existing and alternative biofuel policies including the import tariff and the tax credit for ethanol. We show that the optimal tax for fuels is directly related to their GHG emissions intensity while the optimal tariff is inversely related to the excess supply elasticity of imported ethanol. The effect of the tax credit on social surplus is clearly negative, while the impact of the tariff depends on the ability of the US to influence ethanol prices in the world market. Our numerical simulation for the US shows that current ethanol policy of an ethanol tax credit and import tariff increases miles externalities and greenhouse gases and decreases social surplus by $3.6 B relative to non-intervention and by $228 B relative to the optimal scenario.
Reducing greenhouse gas (GHG) emissions is critical to mitigating climate change and achieving greater energy security. The desire to understand what governmental tools and how to apply to protect the local and global environment effectively and efficiently is a core driver for researches in the subfield of environmental economics. Despite the progress made in the modeling of social welfare with environmental externalities, many questions regarding secondbest biofuel policies, interaction between biofuel policies and finance system, and connection between trade and the environment remain unanswered. To date, the indirect, general effects of biofuel policies on the general economy, through "fiscal interaction effects" have largely been ignored. The thesis designs a general equilibrium model to investigate the fiscal interaction effects of tax credit policy. The marginal costs caused by tax credit are higher than the marginal benefits. In the second-best setting with pre-existing fuel tax and labor tax, tax credit is welfare reducing. The optimal second-best tax credit is estimated at the level of $0.22/GEEG ($0.15/gallon), which is 67% lower than the current tax exemption. Monte Carlo analysis shows that the probability of tax credit at $0.22/GEEG or less is 29% and at the current level or less is 72%. Next the thesis analyzes the effects of the quantitative ethanol mandate from both positive and welfare perspectives. Given the pre-existing government distortions, ethanol mandate is welfare enhancing. In the presence of fuel tax and labor tax, the net welfare gain caused by the ethanol mandate is estimated to be 8.61 billion dollars while the net welfare loss caused by tax credit is estimated to 26.87 billion dollars. Consistent with previous studies, the results show that the ethanol mandate dominates tax credit. Last, the thesis analyzes the effects of an ad valorem tariff on the local and global environment and total social welfare using a modified Bertrand duopoly model with environmentally differentiated products. The results show that tariff imposed by the developed country improves the local and global environment while reducing the social welfare. If the developed country has a high environmental standard, the country should restrict its imports of the dirty products. If the less developed country restricts the imports of clean products from the developed country, its social welfare and the local and global environment will get worse compared to a free trade case.
This report discusses how policymakers should deal with economic distortions on the cost-side of cost-benefit analysis in the area of environmental policies, and assesses the existing Nordic guideline recommendations. The two types of economic distortions are distortions to product markets, which are almost by definition tied to environmental policy interventions, and distortions to labour supply decisions. Drawing on best practices from the literature, we formulate a number of key principles useful for assessing the impact on labour supply decisions and welfare on product markets from policy interventions. Four analytical examples are included to illustrate the importance of these principles for the correct quantification of distortionary impacts, especially the importance of taking into account pre-existing policy induced distortions.
Biofuels global emergence in the last two decades is met with increased concerns over climate change and sustainable development. This report addresses the core issue of biofuel sustainability of biofuels and related feedstocks, drawing from a wide range of sustainability related studies, reports, policy initiatives. The report critically examines the economic, environmental and social sustainability dimensions of biofuels and review the major certification initiatives, schemes and regulations. In doing so, the report relies on extensive review of a number of country case studies covering a broad range of current biofuel-feedstocks systems. The report analysis clearly distinguish feedstock efficiency (in terms of biofuel yields per unit of land) from sustainability, especially under limiting resource (irrigated water) or sensitive areas (carbon stocks). Also, long run economic viability depend on the future policy support, technical innovations in biofuel systems, economics of biofuel supply and demand and trade-offs between food and energy uses as well as feedstock productivity gains. Biofuels can present both advantages and risks for environmental sustainability; the latter being often difficult to measure or monitor and may conflict with economic sustainability unless great strides in productivity gains are achieved. Social sustainability is the weakest link in current biofuel certification schemes owing to intrinsic local factors and as efforts target more few negative social impacts; much less focus is placed on inclusive processes that strengthen marginal stockholders participation and benefits. Biofuel certification schemes need to be more smallholder inclusive, perhaps through policy initiatives. Finally, poor developing countries, especially with abundant land and biomass production potential, need to prioritise food security and poverty reduction. In many cases, biofuel models that encourage small scale integrated bioenergy systems may offer higher rural development impacts. FDI-induced larger-scale biofuel projects, on the other hand, may be suitable in those situations where countries have sufficient industrial capacity, besides land and biomass potential, and when these biofuel projects can be fully integrated into domestic energy strategies that do not conflict with food production potential and food security.
This book presents an overview of the key debates that took place during the Economic and Social Council meetings at the 2007 High-level Segment, at which ECOSOC organized its first biennial Development Cooperation Forum. The discussions also revolved around the theme of the second Annual Ministerial Review, "Implementing the internationally agreed goals and commitments in regard to sustainable development."--P. 4 of cover.
Inclusive Green Growth: The Pathway to Sustainable Development makes the case that greening growth is necessary, efficient, and affordable. Yet spurring growth without ensuring equity will thwart efforts to reduce poverty and improve access to health, education, and infrastructure services.
Featuring an original introduction by the editors, this important collection of essays explores the main issues surrounding the regulation of the environment. The expert contributors illustrate that regulating the environment in the UK is conceptually complex, involves a diverse range of institutions, techniques and methodologies and crosses geographical and national boundaries. In the USA it is more formalised, juridical, adversarial and formally dependent upon legal rules. The articles highlight the fact that despite differences in the UK and the USA's regulatory styles, environmental regulation today has much in common with both traditions.
Global Bioethanol: Evolution, Risks, and Uncertainties explores the conceptual and methodological approaches for the understanding of bioethanol technologies, policies and future perspectives. After a decade of huge investments made by big companies and governments all around the world, it is time to talk about the real conditions in which bioethanol will (or will not) evolve. Uncertainties and certainties are discussed and addressed to understand the futures of global bioethanol. The book analyses the evolution of bioethanol in the world’s energy mix under technological, economic and commercial perspectives. It gives particular emphasis on the innovative trajectories of second-generation ethanol and their potential in different countries and regions. Future scenarios are proposed in order to evaluate the possible outcomes of ethanol in a global perspective. For providing a thorough overview of the bioethanol sector from different points of view, this book is a very useful resource for all involved with biofuels in general and bioethanol in particular, including energy engineers, researchers, consultants, analysts and policy makers. Presents a thorough examination of the uncertainties surrounding bioethanol in the future global energy mix Provides a data-driven and updated picture on the technological, economic, and market trends and scenarios for bioethanol Offers a foresight analysis on the perspectives of bioethanol as a global commodity Includes a prospective about who is going to lead the new trajectories in the global arena