Abstract  The growing uncertainty of available petroleum reserves and the associated environmental impacts from the usage of fossil fuels has led to a worldwide search for renewable energy sources. Biodiesel is currently placed at the forefront as the most viable alternative fuel for compression ignition engines as it can be produced from renewable sources through simple cost-effective transesterification, while being compatible with existing infrastructures. Despite these, biodiesel is still not economically feasible for large-scale adoption at present day, mainly due to the high cost of conventional feedstocks. Governmental policies, fiscal incentives and emissions laws have all shown to encourage the uptake of biodiesel in the early stages of market development. The rapid growth enjoyed by the biodiesel industry thereafter has raised concerns of various ethical issues, which must be addressed if the industry is to maintain its positive growth. The strategies required for a stable and sustained biodiesel industry will predominantly be based on the principles of a free market with minimal artificial interventions from policy makers, and the appropriate technological advances in production techniques and feedstocks options to stay competitive economically. This paper reviews the recent trends in global policies and legislative measures governing the economy of the biodiesel industry, and how these will impact the future outlook of the industry as a whole. Historical backgrounds and pertinent issues on socioeconomical and ethical aspects of the industry are also addressed here.

Abstract  An investigation of Poisson type policy jumps on biodiesel investment considers the theory of investment under uncertainty. The analysis studies the probability of implementing a policy if it is not in effect and the probability of withdrawal if it is in effect. An application models the policy-switching regime of the discontinuous U.S. federal tax credit of $1.00 per gallon on biodiesel. Results support that time inconsistent government policies do lead to market uncertainty. The analysis reveals a pronounced negative impact on decisions to invest in a biodiesel refinery. Results do indicate a consistent policy-switching regime may not be that disruptive to the emerging biodiesel industry. It is policy uncertainty that drives the option-pricing thresholds and a consistent policy switching does not increase the uncertainty.

Abstract  Carbon intensities are calculated under the LCFS on a full life cycle basis. This means that the carbon intensity value assigned to each fuel reflects the GHG emissions associated with that fuel’s production, transport, storage, and use. Traditionally, only these steps, termed direct effects, have been included in the life cycle assessment of transportation fuels. In addition to these direct effects, some fuel production processes generate GHGs indirectly, via intermediate market mechanisms. Stakeholders participating in the LCFS process have suggested that most or all transportation fuels generate varying levels of indirect GHG emissions. To date, however, ARB staff has only identified one indirect effect that has a measurable impact on GHG emissions: land use change effects. A land use change effect is initially triggered when an increase in the demand for a crop-based biofuel begins to drive up prices for the necessary feedstock crop. This price increase causes farmers to devote a larger proportion of their cultivated acreage to that feedstock crop. Supplies of the displaced food and feed commodities subsequently decline, leading to higher prices for those commodities. Some of the options for many farmers to take advantage of these higher commodity prices are to take measures to increase yields, switch to growing crops with higher returns, and to bring non-agricultural lands into production. When new land is converted, such conversions release the carbon sequestered in soils and vegetation. The resulting carbon emissions constitute the “indirect” land use change (iLUC) impact of increased biofuel production. Based on research and published work, most of the land use change impacts result from the diversion of food crops to producing biofuels. During the regulatory process (i.e., workshops and meetings with stakeholders) leading up to the 2009 LCFS Board Hearing, the magnitude of this impact was discussed and also questioned by renewable fuel advocates. Land use change is driven by multiple factors, some of them not related to the production of biofuels. Because the tools for estimating land use change were few and relatively new when the regulation was originally adopted in 2009, biofuel producers argued that land use change impacts should be excluded from carbon intensity values, pending the development of better estimation techniques. Based on its work with land use change academics and researchers, however, ARB staff concluded that the land use impacts of crop-based biofuels were significant, and must be included in LCFS fuel carbon intensities. To exclude them would assume that there is zero impact resulting from the production of biofuels and would allow fuels with carbon intensities that are similar to gasoline and diesel fuel to function as low-carbon fuels under the LCFS. This would delay the development of truly low-carbon fuels, and by not accounting for the GHG emissions from land use change, would jeopardize the achievement of a ten percent reduction in fuel carbon intensity by 2020. Details of ARB’s estimated land use change impacts of biofuel crop production for the 2009 regulation is provided in the ISOR from 20091. Since 2009, there have been numerous peer-reviewed publications, dissertations, and other scientific literature, that have focused on various aspects of indirect land use changes related to biofuels. Staff has reviewed published articles, contracted with academics, and consulted with experts, all of which have led to significant improvements to the GHG modeling methodologies and analysis completed in 2009. Complete details of the updates and results from the current analysis are presented in this section.

Abstract  Argentina is an active participate in the Paris Climate Agreement and COP23, setting out targets to reduce greenhouse gas emissions (GHG) in the future. In its efforts to address climate change, the government has set a special focus on renewable energy through Law 27,191 of 2015, creating conditions to attract and encourage large investment. Investments cover different types of energy, but there is a special interest in wind and solar energy. In support of the above commitment, the country has a biofuels regulatory framework in place since 2007 which sets blend mandates for biodiesel and bioethanol that have been in place since early 2010. After several modifications throughout the years, the current mandate mixes are 12 percent for bioethanol in gasoline and 10 percent for biodiesel in diesel. The Secretariat of Energy sets monthly prices for biodiesel, grain ethanol, and sugarcane ethanol supplied to the oil companies under the mandate. Argentina’s relatively small fuel ethanol industry is expanding to fulfill the mandate (which has increased overtime) and a growing fuel pool. The industry does not export, and there have been no imports in past years because they are prohibited unless authorized (as in the recent past). On the other hand, the Argentine biodiesel industry is one of the largest in the world and its initial growth was mainly supported by exports. In the past ten years, it has had a strong presence in the European Union (EU) and United States. However, exports to the United States were curtailed last year due to high countervailing and anti-dumping duties. Shipments to the EU, which resumed in September 2017, after being prohibited since 2013 due to anti-dumping duties, are flowing normally for now, but the industry believes there is a strong possibility that the EU may enact new duty measures which would again impact sales.

Abstract  This paper examines the extent to which biofuel production has been driven over time by the U.S. Renewable Fuel Standard (RFS) and the extent to which it was driven by non-RFS policies and market forces. While the RFS has played a critical role in providing a secure environment to produce and use more biofuels, at least in the 2000s, it was not the only factor that encouraged the biofuel industry to grow. While the existing literature has successfully identified the key drivers of the growth in biofuels, it basically has failed to properly quantify the impacts and contributions of each of these drivers separately. This paper develops short- and long-run economic analyses, using Partial Equilibrium (PE) and Computable General Equilibrium (CGE) models, to differentiate the economic impacts of the RFS from other drivers that have helped biofuels to grow. Results show: 1) the bulk of the ethanol production prior to 2012 was driven by what was happening in the national and global markets for energy and agricultural commodities and by the federal and sometimes state incentives for biofuel production; 2) the medium-to long-run price impacts of biofuel production were not large; 3) due to biofuel production, regardless of the drivers, real crop prices have increased between 1.1 and 5.5% in 2004–11 with only one-tenth of the price increases were assigned to the RFS, 4) for 2011–16, the long-run price impacts of biofuels were less than the time period of 2004–11, as in the second period biofuel production increased at much slower rate; 5) biofuel production, regardless of the drivers, has increased the US annual farm incomes by $8.3 billion between 2004–11 with an extra additional annual income of $2.3 billion between 2011–2016; 6) the modeling practices provided in this paper assign 28% of the expansion in farm incomes of the period of 2004–2011 and 100% of the extra additional incomes of the period of 2011–16 to the RFS.

Abstract  This paper explores the economic, social and environmental context, drivers and impacts of increased demand for Argentine soy-based biodiesel. It is based on extensive stakeholder interviews in Argentina, including those in government, academia and the third sector; as well as participant observation with communities in soy cultivation areas: and review of relevant academic and grey literatures. Given Argentinas history of political instability and relatively weak levels of environmental protection, there is reason to be sceptical of the likely effectiveness of biofuel sustainability certification as applied to Argentine soy. Direct contracts between feedstock producers and biodiesel retailers may be a more reliable approach to minimise adverse environmental and social impacts than certification alone. (C) 2009 Elsevier Ltd. All rights reserved.

Abstract  Purpose The purpose of this paper is to examine the market impacts of US biofuels and biofuel policies. Design/methodology/approach Two methods of analysis are employed. The first method looks back in time and estimates what US crop prices would have been during the 2005 to 2009 marketing years under two scenarios. The second method of analysis is forward looking and examines the market impacts of the blender tax credit and mandate on the distribution of prices in the 2011 calendar and marketing year. Findings The results developed in the previous two sections show that US ethanol policies modestly increased maize prices from 2006 to 2009 and that market impacts of the policies will be larger under tighter market conditions. Practical implications More flexible US biofuel policy including removing the blenders tax credit, which does not help US biofuel industry as long as the mandates are in place, and relaxing blending mandates when feedstock supplies are low. Originality/value This report makes three contributions to understanding the extent to which US biofuel policies contribute to higher agricultural and food prices. First, estimates of the impact of US ethanol policies on crop and food prices reveal that the impacts of the subsidies were quite modest. The second contribution is to provide estimates of the impact on agricultural commodity prices and food prices from market‐driven expansion of ethanol. The final contribution of this report is improved insight into how current US biofuel policies are expected to affect crop prices in the near future.

Abstract  Global biodiesel production grew by 23% per annum between 2005 and 2015, leading to a seven-fold expansion of the sector in a single decade. Rapid development in the biodiesel sector corresponded to high crude oil prices, but since mid-2014, oil prices have fallen dramatically. This paper assesses the economic and policy factors that underpinned the expansion of biodiesel, and examines the near-term prospects for biodiesel growth under conditions of low fossil fuel prices. We show that the dramatic increase in biodiesel output would not have occurred without strong policy directives, subsidies, and trade policies designed to support agricultural interests, rural economic development, energy security, and climate targets. Given the important role of policy—and the political context within each country that shapes policy objectives, instruments, and priorities—case studies of major biodiesel producing countries are presented as a key element of our analysis. Although the narrative of biodiesel policies in most countries conveys win-win outcomes across multiple objectives, the case studies show that support of particular constituents, such as farm lobbies or energy interests, often dominates policy action and generates large social costs. Looking out to 2020, the paper highlights risks to the biodiesel industry associated with ongoing regulatory and market uncertainties.

Abstract  Structural constancy, both across time and across variable conditions, is a necessary precondition for accurate forecasting. Physical systems exhibit structural constancy, but economic and social systems generally do not. In this paper we examine the effects of policy, technology, and price volatility in commodity markets on the relationship between soybean oil and petroleum prices. An early Energy Information Administration (EIA) forecast of soy-based biodiesel price projected a simple relationship between soybean oil demand and price into the future-a relationship that has little explanatory power over the recent price volatility in oilseed markets. We propose that structural inconstancy and new trading behavior better explain price movements in soybean oil, and we further argue that forecasters must invent new ways of addressing the fundamental epistemological challenge of structural inconstancy in economic and social systems.

Abstract  This study seeks to assess the future impacts of biofuel production on regional agricultural and related sectors over the next decade with a specific focus on the vulnerable regions of developing nations. Using a modification of the GTAP modeling platform to account for the global interactions of regional biofuel and food markets, the analysis shows that biofuel production levels depend on the assumption about the future price of energy and the nature of the substitutability between biofuels and petroleum-based transport fuels. Low energy prices reduce the demand for biofuels and thus require greater government support to meet the desired production targets. At the other extreme, when prices are high and there is scope for substituting biofuels for petroleum-based fuels, the volume of biofuels produced will exceed the mandates. Even when biofuels are being mainly produced in developed countries, our results indicate that there are impact pathways that extend far beyond the borders of the US, Brazil and the EU. Prices of feedstock and non-feedstock commodities rise in developing countries. There is also a rise in value added from the agricultural sector—a gain that is enjoyed by the owners of land and labor, including unskilled. Hence, to the extent that agriculture is a key sector in getting growth started and addressing poverty needs, the emergence of biofuels can (in this way at least) be a positive force.

Abstract  We examined four evolution paths of the biofuel sector using a partial equilibrium world agricultural sector model in CARD that includes the new RFS in the 2007 EISA, a two-way relationship between fossil energy and biofuel markets, and a new trend toward corn oil extraction in ethanol plants. At one extreme, one scenario eliminates all support to the biofuel sector when the energy price is low, while the other extreme assumes no distribution bottleneck in ethanol demand growth when the energy price is high. The third scenario considers a pure market force driving ethanol demand growth because of the high energy price, while the last is a policy-induced shock with removal of the biofuel tax credit when the energy price is high. Standard results hold where the biofuel sector expands with higher energy price, raising the prices of most agricultural commodities through demand side adjustment channels for primary feedstocks and supply side adjustment channels for substitute crops and livestock. On the other hand, the biofuel sector shrinks coupled with opposite impacts on agricultural commodities with the removal of all support including the tax credit. Also, we find that given distribution bottlenecks, cellulosic ethanol crowds marketing channels resulting in a corn-based ethanol price that is discounted. The blenders' credit and consumption mandates provide a price floor for ethanol and for corn. Finally, the tight linkage between the energy and agricultural sectors resulting from the expanding biofuel sector may raise the possibility of spillover effects of OPEC's market power on the agricultural sector.

Abstract  The US Renewable Fuel Standard sets a lower bound on the amount of biofuels used, with consequences for behavior of agricultural commodity markets that currently supply the vast majority of feedstocks for biofuel production. In this article, maize biotechnology is considered taking into account the impacts of US biofuel mandates. The impact of a hypothetical technology that reduces the severity of negative maize yield shocks is estimated using a structural economic model simulated stochastically. The importance of mandated levels of use of biofuels depends on whether they are binding. If biofuel use exceeds mandated levels, then mandates have little impact. If mandates are binding, then the markets' ability to respond to price movements can be reduced. In either case, aggregate maize demand is inelastic in these projections, so yield technology improvements can reduce total revenue to maize production.