Working papers in Transport Economics
Johanna Jussila Hammes
A biofuel mandate and a low carbon fuel standard with ‘double counting’
Abstract: European Union’s (EU) energy legislation from 2009 is
still being implemented in the Member States. We study analytically the
Renewable Energy Directive and the Fuel Quality Directive’s provisions for
the transport sector. The former Directive imposes a biofuel mandate and
allows double counting of some biofuels. The latter Directive imposes a Low
Carbon Fuel Standard (LCFS). We show that either the biofuel mandate or the
LCFS is redundant. Double counting makes the biofuel mandate easier to
fulfil but also depresses the price of biofuels. Production of the doubly
counted biofuels increases nevertheless and production of the
single-counted biofuels falls. Given the type of technical change studied,
double counting spurs technical development of the doubly counted biofuels.
The LCFS directs support towards those biofuels with lowest life-cycle
carbon emissions. The redundant policy instrument, the biofuel mandate or
the LCFS, only creates costs but no benefits and should be abolished.
Double counting makes the biofuel mandate non-cost-efficient and should be
Keywords: Biofuel mandate; Low carbon fuel standard; Double counting; Technical change; European energy legislation; (follow links to similar papers)
JEL-Codes: D61; H21; H23; (follow links to similar papers)
37 pages, October 24, 2014
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