Global impact of biofuels on agriculture, trade, and environment: A computable general equilibrium analysis

Dileep K Birur, Purdue University

Abstract

This dissertation provides a modeling framework for analyzing the linkages between biofuels, agriculture, international trade, and the environmental consequences in terms of land-use change and greenhouse gas (GHGs) emissions. This study incorporates three types of first generation biofuels (grain ethanol, sugarcane ethanol, and vegetable oil based biodiesel) as energy sources into the GTAP data base and into the production and consumption structures of the GTAP-Energy model. To account for the heterogeneity of land within each region, the disaggregated land endowment is classified into 18 Agro-ecological Zones (AEZs) for each of the land using sectors. The model is validated over the 2001-2006 period with a focus on six main drivers of the biofuel boom: the hike in crude oil prices, replacement of MTBE by ethanol as a gasoline additive in the U.S., and subsidies for ethanol and biodiesel in the U.S. and EU. Using this historical simulation, the key elasticities of energy substitution between biofuels and petroleum products in each region are calibrated. With these parameter settings in place, the model named as “GTAP-BIO” is used for projecting the biofuel economy for 2006. Based on this 2006 baseline, several experiments on biofuel policies are analyzed. An experiment on implementation of U.S. and EU biofuel mandates revealed that large scale production of biofuels by 2015 calls for large increase in cropland to grow feedstock crops, which comes at the expense of accessible forest and pasturelands. An important criticism of the indirect land use change (iLUC) estimates to date is that they have not accounted for the presence of marginal lands such as cropland-pasture and idle-lands. This dissertation also offers a novel framework for analyzing the impact of biofuels production on these marginal lands. Though accessibility of these marginal lands dampens large shifts in cropping pattern, the iLUC emissions were significantly affected mainly due to increase in deforestation when the cropland-pasture is used for cultivation of crops. The U.S. ethanol policy analyses revealed that the mandate dominates the market impacts of ethanol production compared to ethanol incentive policies. Complete removal of U.S. ethanol subsidy and tariff would lead to relatively smaller impact on land use emissions and result in net gain in welfare due to efficient allocation of resources. The global impacts of biofuels on land use are relatively smaller only when they are produced in the regions with comparative advantage.

Degree

Ph.D.

Advisors

Tyner, Purdue University.

Subject Area

Alternative Energy|Economics|Agricultural economics

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