Land Use and Greenhouse Gas Implications of Biofuels: Role of Technology and Policy

Chen, X., H. Huang and M. Khanna. 2012. “Land Use and Greenhouse Gas Implications of Biofuels: Role of Technology and Policy”. Climate Change Economics. 3, 1250013

40 Pages Posted: 9 Feb 2012 Last revised: 21 Mar 2015

Xiaoguang Chen

Southwestern University of Finance and Economics

Haixiao Huang

NV Energy

Madhu Khanna

University of Illinois at Urbana-Champaign - Department of Agricultural and Consumer Economics

Date Written: February 8, 2012

Abstract

This paper examines the changes in land use in the U.S. likely to be induced by biofuel and climate policies and the implications of these policies for GHG emissions over the 2007-2022 period. The policies considered here include a modified Renewable Fuel Standard (RFS) by itself as well as combined with a cellulosic biofuel tax credit or a carbon price policy. We use a dynamic, spatial, multi-market equilibrium model, Biofuel and Environmental Policy Analysis Model (BEPAM), to endogenously determine the effects of these policies on cropland allocation, food and fuel prices, and the mix of first- and second-generation biofuels. We find that the RFS could be met by diverting 6% of cropland for biofuel production and would result in corn prices increasing by 16% in 2002 relative to the business-as-usual baseline. The reduction in GHG emissions in the U.S. due to the RFS is about 2%; these domestic GHG savings can be severely eroded by emissions due to indirect land use changes and the increase in gasoline consumption in the rest of the world. Supplementing the RFS with a carbon price policy or a cellulosic biofuel tax credit induces a switch away from corn ethanol to cellulosic biofuels and achieves the mandated level of biofuel production with a smaller adverse impact on crop prices. These supplementary policies enhance the GHG savings achieved by the RFS alone, although through different mechanisms; greater production of cellulosic biofuels with the tax credit but larger reduction in fossil fuel consumption with a carbon tax.

Keywords: Biofuel policies, Land use, Greenhouse gas

Suggested Citation

Chen, Xiaoguang and Huang, Haixiao and Khanna, Madhu, Land Use and Greenhouse Gas Implications of Biofuels: Role of Technology and Policy (February 8, 2012). Chen, X., H. Huang and M. Khanna. 2012. “Land Use and Greenhouse Gas Implications of Biofuels: Role of Technology and Policy”. Climate Change Economics. 3, 1250013. Available at SSRN: https://ssrn.com/abstract=2001520 or http://dx.doi.org/10.2139/ssrn.2001520

Xiaoguang Chen (Contact Author)

Southwestern University of Finance and Economics ( email )

No55 Guanghuacun Street
RIEM, SWUFE
Chengdu, Sichuan 610074
China

Haixiao Huang

NV Energy ( email )

Las Vegas, NV 89117
United States
(217) 766-2437 (Phone)

Madhu Khanna

University of Illinois at Urbana-Champaign - Department of Agricultural and Consumer Economics ( email )

1301 W. Gregory Drive
Urbana, IL 61801
United States

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