Abstract

https://ssrn.com/abstract=2195469
 


 



Does a Renewable Fuel Standard for Biofuels Reduce Climate Costs?


Mads Greaker


Statistics Norway

Michael Hoel


University of Oslo; CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Knut Einar Rosendahl


Norwegian University of Life Sciences; Statistics Norway - Research Department

December 28, 2012

CESifo Working Paper Series No. 4030

Abstract:     
Recent contributions have questioned whether biofuels policies actually lead to emissions reductions, and thus lower climate costs. In this paper we make two contributions to the literature. First, we study the market effects of a renewable fuel standard. Opposed to most previous studies we model the supply of fossil fuels taking into account that fossil fuels is a non-renewable resource. Second, we model emissions from land use change explicitly when we evaluate the climate effects of the renewable fuel standard. We find that extraction of fossil fuels most likely will decline initially as a consequence of the standard. Thus, if emissions from biofuels are sufficiently low, the standard will have beneficial climate effects. Furthermore, we find that the standard tends to reduce total fuel (i.e., oil plus biofuels) consumption initially. Hence, even if emissions from biofuels are substantial, climate costs may be reduced. Finally, if only a subset of countries introduce a renewable fuel standard, there will be carbon leakage to the rest of the world. However, climate costs may decline as global extraction of fossil fuels is postponed.

Number of Pages in PDF File: 45

Keywords: biofuel, renewable fuel standard, fossil fuel

JEL Classification: Q200, Q320, Q400, Q420


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Date posted: January 3, 2013  

Suggested Citation

Greaker, Mads and Hoel, Michael and Rosendahl, Knut Einar, Does a Renewable Fuel Standard for Biofuels Reduce Climate Costs? (December 28, 2012). CESifo Working Paper Series No. 4030. Available at SSRN: https://ssrn.com/abstract=2195469

Contact Information

Mads Greaker
Statistics Norway ( email )
N-0033 Oslo
Norway
Michael Hoel (Contact Author)
CESifo (Center for Economic Studies and Ifo Institute for Economic Research)
Poschinger Str. 5
Munich, DE-81679
Germany
HOME PAGE: http://www.CESifo.de

University of Oslo ( email )
P.O. Box 1095 Blindern
N-0317 Oslo
Norway
+ 47 22 85 83 87 (Phone)
+ 47 22 85 50 35 (Fax)
Knut Einar Rosendahl
Norwegian University of Life Sciences ( email )
PO Box 5033
NO-1432 Aas
Norway
+47 64966117 (Phone)
Statistics Norway - Research Department ( email )
Kongens Gt. 6
PO Box 8131 Dep
N-0033 Oslo
Norway
+47 21094954 (Phone)
+47 21094963 (Fax)
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