Scandinavian Working Papers in Economics
Working Papers in Economics,
University of Gothenburg, Department of Economics
No 422: On blending mandates, border tax adjustment and import standards for biofuels
Håkan Eggert and Mads Greaker
Additional contact information
Håkan Eggert: Department of Economics, School of Business, Economics and Law, Göteborg University, Postal: Box 640, SE 40530 GÖTEBORG
Mads Greaker: Department of Economics, School of Business, Economics and Law, Göteborg University, Postal: Box 640, SE 40530 GÖTEBORG
Abstract: The transport sector is a major contributor to green house gas (GHG) emissions and its share is increasing. Biofuels may provide an option to replace fossil fuels and generate an increasing worldwide interest. Rich countries like the US and the European Union ha idies for domestic producers, while applying tariffs for some of the foreign producers. Mid income and poor countries do not have binding restrictions on carbon emissions in the Kyoto treaty, but may have great potential for producing biofuels both for domestic and foreign use. In this paper we study trade policies for biofuels. We find that only by combining an import standard with border tax adjustment the government can ensure cost efficient production of biofuels from a global point of view. We also consider a blending mandate. This fundamentally alters the way the market works. For instance, if domestic biofuels production is subsidized, the optimal BTA may be negative.
Keywords: Biofuels; Border tax adjustment; Carbon Leakage; Trade policy
25 pages, December 9, 2009
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