Should Zambia Produce Biodiesel from Soybeans? Some Insights from an Empirical Analysis

25 Pages Posted: 20 Apr 2016

See all articles by Harry de Gorter

Harry de Gorter

Cornell University - School of Applied Economics and Management

Dusan Drabik

Cornell University - Charles H. Dyson School of Applied Economics and Management

Govinda R. Timilsina

World Bank - Development Research Group (DECRG)

Date Written: June 1, 2013

Abstract

Facing a huge fiscal burden due to imports of entire petroleum despite the availability of a surplus of agricultural land to produce biofuels, Zambia, a country in Sub-Saharan Africa, has recently introduced a biofuel mandate. But, a number of questions, particularly those related to the economics of biofuels, have not been fully investigated yet. Using an empirical model this study analyzes the economics of meeting the biodiesel mandate through soybean feedstock. The study finds that meeting the biodiesel mandate with biodiesel from soybeans would reduce social welfare because the country's soybean imports would cost more than the expected reduction in petroleum imports. However, if Zambia increases its domestic soybean supply along with its capacity to convert soybean to biodiesel, as well as oil yield, soybean based biodiesel is likely to be welfare-beneficial, even if biodiesel prices are above diesel prices. The study also finds that under current market prices and transportation costs and constraints, the same amount of biodiesel can be produced most cost-effectively with a tax exemption. A blend mandate would be less cost effective, while a biodiesel production subsidy represents the least efficient policy option.

Keywords: Energy Production and Transportation, Markets and Market Access, Renewable Energy, Emerging Markets, Economic Theory & Research

Suggested Citation

de Gorter, Harry and Drabik, Dusan and Timilsina, Govinda R., Should Zambia Produce Biodiesel from Soybeans? Some Insights from an Empirical Analysis (June 1, 2013). World Bank Policy Research Working Paper No. 6498. Available at SSRN: https://ssrn.com/abstract=2284668

Harry De Gorter

Cornell University - School of Applied Economics and Management ( email )

248 Warren Hall
Ithaca, NY 14853
United States
607-255-8076 (Phone)

Dusan Drabik

Cornell University - Charles H. Dyson School of Applied Economics and Management ( email )

331 Warren Hall
Ithaca, NY 14853
United States

HOME PAGE: http://https://sites.google.com/site/dusandrabik83/Home

Govinda R. Timilsina

World Bank - Development Research Group (DECRG) ( email )

1818 H Street NW
MSN3-311
Washington, DC 20433
United States

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