Lecture 18.
The economics of biofuels

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What we want to learn about this topic

Lecture 17 examined some of the 'positive', albeit still controversial, issues around biofuels:

• What are the main technologies for the production of biofuels?
• What is the economic viability of biofuel production, and how does this relate to oil and feedstock prices?
• What are the main policies in place to promote biofuel production and consumption?
• What will be the likely impact of expanded biofuel production on agricultural land use and agricultural markets?

In this lecture, we examine some of the more normative issues in the debate on biofuels:

• Are subsidies to biofuel production an efficient way of reducing carbon emissions?
• Will expanded production of biofuels hurt the poor in developing countries?
• What are the welfare impacts of trade policies in the biofuel sector?
• How can be ensure that increased biofuel production is environmentally sustainable?

Short introduction to the issues

Reading suggestions

Surveys

Bamière, L., Bureau, J.C., Guindé, L., Guyomard, H., Jacquet, F. and Tregeur, D., 2007, Prospects for Biofuels in the EU : Imports or Local Production ?, TradeAG Draft Working Paper 2007.

Doornbosch R. and Steenblik, R., 2007, Biofuels: Is the Cure Worse than the Disease, Paper prepared for the OECD Round Table on Sustainable Development SG/SD/RT(2007)3, Paris, OECD.
(sceptical view of the advantages of biofuels; Steenblik is associated with the Global Subsidies Initiative)

Food vs. Fuel and the implications for the poor in developing countries

Jank, M., Kutas, G., Fernando do Ameral, L and Nassar, A., 2007. EU and US Policies on Biofuels: Potential Impacts on Developing Countries, German Marshall Fund.

Trade policies

Kojima, M., Mitchell, D. and Ward, W., 2007. Considering Trade Policies for Liquid Biofuels, Renewable Energy Special Report 004/07, World Bank.
(good overview but relatively lengthy report)

Environmental impacts

Doornbosch R. and Steenblik, R., 2007, Biofuels: Is the Cure Worse than the Disease, Paper prepared for the OECD Round Table on Sustainable Development SG/SD/RT(2007)3, Paris, OECD.
(sceptical view of the advantages of biofuels; Steenblik is associated with the Global Subsidies Initiative- read press article)

Supplementary reading

Websites

EU Commission DG Energy webpage on bioenergy. It also has a specific page on biofuels with links to the member state progress reports towards the targets in the 2003 biofuels directive.

EU Commission DG Agri webpage on biofuels

US Department of Agriculture bioenergy website

Global Subsidies Initiative
(has completed a series of report on government support to biofuels in different OECD countries, including the EU, which can be access through this website)