Regional Socioeconomic and Environmental Impacts of Alternative Biofuel Pathways - Completed
This project identified the mix of pathways that best balance economic and environmental considerations. Braden's group applied a model that separates the world into four regions, each different in terms of biofuels, feedstocks, water quality, policies, and costs. From this analysis, better decisions can be made on the most efficient mix of biofuels and feedstocks, with sensitivity to policy measures and technological change.
Braden and his colleagues analyzed the impacts of current and potential U.S. public policies toward biofuels, greenhouse gas and nitrogen emissions, including ethanol production mandates and subsidies. They found that U.S. policies promoting biofuel use impose a $50 billion annual cost in lost domestic consumption. The losses are due chiefly to mandates for minimum amounts of ethanol production; subsidies help to moderate the impacts of the mandates, but they also compromise efforts toward energy independence, greenhouse gas reduction, and reduction in nitrogen discharges. They also found that policies promoting biofuels, particularly corn ethanol, would require a large and perhaps implausible tax on nitrogen to achieve a meaningful reduction in the use of nitrogen fertilizer. However, such a tax would have little impact on GHG emissions or consumer welfare.
Braden's team used the general equilibrium framework to study market-level biofuel feedstock selection subject to GHG and nitrogen pollution policies. His group found that, without production mandates, very high taxes on carbon or nitrogen would be required to stimulate cellulosic ethanol production. A carbon tax will reduce GHGs but induce nitrogen runoff because of an increase in corn ethanol production. An optimal GHG tax would be less than the marginal GHG damage to mitigate increases in nitrogen use.
Published in 2011
Optimal Taxation of Externalities Interacting Through Markets: A Theoretical General Equilibrium Analysis, Xiaolin Ren, Don Fullerton, John Braden, Resource and Energy Economics, 33(3), pp. 496-514, doi: 10.1016/j.reseneeco.2010.10.002, September 2011.