Does a Renewable Fuel Standard for Biofuels Reduce Climate Costs?
(), Michael Hoel
() and Knut Einar Rosendahl
Abstract: Recent literature on biofuels has questioned whether
biofuels policies are likely to reduce the negative effects of climate
change. Our analysis explicitly takes into account that oil is a
non-renewable natural resource. A blending mandate has no effect on total
cumulative oil extraction. However, extraction of oil is postponed as a
consequence of the renewable fuel standard. Thus, if emissions from
biofuels are negligible, the standard will have beneficial climate effects.
The standard also reduces total fuel (i.e., oil plus biofuels) consumption
initially. Hence, even if emissions from biofuels are non-negligible, a
renewable fuel standard may still reduce climate costs. In fact our
simulations show that even for biofuels that are almost as
emissions-intensive as oil, a renewable fuel standard has beneficial
Keywords: Renewable fuel standard; Blending mandate; Biofuels; Climate costs; Petroleum extraction profi…le; (follow links to similar papers)
JEL-Codes: Q30; Q40; Q50; (follow links to similar papers)
23 pages, April 23, 2014
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