Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/69581
Authors: 
Greaker, Mads
Hoel, Michael
Rosendahl, Knut Einar
Year of Publication: 
2012
Series/Report no.: 
CESifo Working Paper: Energy and Climate Economics 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.
Subjects: 
biofuel
renewable fuel standard
fossil fuel
JEL: 
Q20
Q32
Q40
Q42
Document Type: 
Working Paper

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