Growing Complexities: A Cross-Sector Review of U.S. Biofuels Policies and Their Interactions

Abstract

In the midst of concerns about U.S. energy security and climate change, a wider use of biomass and biofuels is promoted as one of the recipes for sustainability. The production and use of biofuels in the United States has rapidly increased in the last several years, promoted by a variety of government policies at the federal, state, and even local level. Many of these policies were crafted with focused objectives in mind and are targeted at specific segments of the biofuels market. Little is known, however, about the potential interactions of such policies and whether they are likely to reinforce or negate one another. In this paper, we provide an overview of the most prominent policies to date that impact the production and use of biofuels and biomass and outline their intended objectives and mechanisms. We focus on three economic sectors, electricity, transportation, and agriculture, and conduct a qualitative analysis of selected policy interactions. In particular, we describe hypothetical policy scenarios corresponding to various combinations of policies and analyze their potential outcomes. Finally, we briefly describe the impacts of those policies on other sectors such as food production, energy and environment, infrastructure, and the economy at large.

Keywords: transportation sector, electricity sector, agriculture, policy analysis, biofuels, biomass, ethanol, policy review

JEL Classification: C61, C68, D58, Q11, Q18, Q20, Q40, R41, R48