Environmental, Social & Economic Impacts programs

Economics of Biofuel Adoption and Impacts

This program incorporates modeling to integrate various types of analysis, each emphasizing a specific, important aspect of biofuel policy and impact assessment. This framework includes the adoption of biofuel technologies, biofuels in a global context, dynamics between fossil fuels and biofuels, water requirements of feedstocks, and risk management, and will determine the magnitude of biofuel impacts on relevant sectors of the economy.

program Highlights

2014 Highlights

We continued our work in several key areas: 1) the impact of biofuel on food prices: we found that the introduction of biofuel mandates had a significant and immediate effect on agricultural commodity prices, especially because it occurred during a period of low inventories. In the longer run, the impact of the introduction of biofuel on food prices was significant, but less substantial than the impact of increased demand; 2) sugarcane in Brazil: we found that biofuel policy in Brazil was motivated by balance of trade and energy independence considerations, and that reform became more market-based after the 1990s as part of the overall liberalization in the economy; 3) agricultural policies: political economic considerations drive U.S. agricultural policy, and we found the American biofuel industry performed quite well. Over the last five years, biofuel policies led to more than a $100 billion reduction in U.S. balance of trade deficit, reduced government expenditure, improved employment in the Midwest, and also contributed to a modest reduction in greenhouse gas emissions; 4) sustainable development: we developed a conceptual framework to analyze and measure sustainable development, defined as improving economic well-being while maintaining environmental quality; 5) an effective means to reduce the cost of biofuel as well as its environmental footprint is building pipelines to convey ethanol once its production capacity increases beyond a critical level. The social value of pipelines is increasing if they are implemented during periods of recession.

2013 Highlights

Our program aims to understand various fundamental economic issues that affect the economics of biofuel. In one area of research, we found that when inventories are thin, the introduction of biofuel, such as in 2008, can have a strong impact on food commodity prices. However, the relative contribution of biofuel to rising food prices in the new millennium is smaller than that of the increases in demand because of economic growth. Another line of research on policies found that inclusion of indirect effects in life-cycle analysis (LCA) of biofuel is limited because of the high degree of uncertainty of estimated parameters and the need to include other types of indirect effects. A third line of research found that developing biofuel pipelines can significantly reduce transportation costs, especially if the pipelines are built in periods of economic recessions, have a large volume, and the cost of GHG emissions saved is enumerated. A fourth line of research on the evolution of biofuel in Brazil found that exchange rate considerations played an important role in the early days, and the increased scarcity of fuel is currently a driving force. The growth of the Brazilian biofuel sector is constrained by regulation and political economic considerations. Another line of research on productivity of biofuel in Brazil finds that average productivity has declined, and average age of sugarcane has increased in recent years because of high costs of credit that reduce the opportunities to rotate the crop. We developed a system to determine optimal rotation and costs. Another effort aims to identify optimal design of contracts between refineries and sugarcane producers, taking into account uncertainty both in terms of price and productivity of sugarcane. We find that there can be gains from insurance contracts to address supply risks, and there is a need to develop contract parameters that allow risk-sharing between farmers and refiners. We also developed two CGE models, one for the U.S. and one for the global economy capable of quantifying the impact of biofuel on labor and assessing the global and domestic demand for transport fuel. 

2012 Highlights

We have analyzed the use of the indirect land-use effects in biotechnology regulations and found that this measure is problematic because of the instability of the land-use change process and the need to include multiple indirect effects once one is considered. We have also quantified the impact of the indirect byproduct of biofuel -- a change in greenhouse gas emissions (GHG) associated with the reduction availability of byproducts of the petroleum-refining process once gasoline and diesel are replaced by biofuel. And we found that this reduces GHG emissions under plausible conditions.

 

We have continued our research on the relationship between food and fuel, and we developed a methodology to analyze linkages between a large number of price series. Both ethanol and biodiesel prices are very weakly connected with other food and fuel commodity prices. In the medium term (monthly data), ethanol prices tend to be more closely linked to food prices, and biodiesel prices tend to be more closely linked to fuel prices. The linkages between biofuel and both food and fuel commodities were stronger after the 2007-08 food-price hikes. We also found that price movements are affected by geography. The introduction of biofuel was the second most important contributor to food-price inflation after economic growth. However, the introduction of biofuel mandates caused a large price shock as it changed expectations and accentuated inventory shortages.

 

In other studies, our work on biofuel policies resulted in a traceable model to assess their impacts. We found that policies such as low-carbon fuel and biofuel mandates have minimal impact on GHG, but biofuel mandates increase fuel security. Our work in Brazil suggests that political economic forces and the subsidizing of gasoline and biofuel are slowing the expansion of the biofuel sector. And our computable general equilibrium models identify significant opportunities for first- and second-generation biofuels in Asia.

2011 Highlights

Zilberman did considerable work in analyzing the food vs. fuel controversy and concluded that biofuels were a contributor, but not the main culprit, for increases in food prices. Zilberman’s group also worked to assess Indirect Land Use Change – ILUC – and its inclusion in evaluating the greenhouse gas effects of biofuels.

2010 Highlights

Zilberman’s group showed that the impact of biofuels under OPEC is different than under competition (the price reduction under OPEC is smaller, but the reduction in fossil fuel production is greater). They investigated the indirect effect of biofuel on Greenhouse Gas (GHG) emissions. Researchers found that ILUC, because of higher food prices, are unstable and vary over time. There are other significant indirect effects through changes in oil prices, OPEC behavior, and production of alternative fuels.

2009 Highlights

Zilberman’s group developed a model to assess the impact of OPEC in the fuel market and its implication for biofuel. Team members found that ignoring OPEC in previous models overestimated the price effect of biofuel, but underestimated the gains that biofuels provide in terms of GHG reduction and reduction in foreign exchange. They also conducted a statistical analysis of the relationship between corn, biofuel, gasoline, and oil. A third study compared the performance of a low carbon fuel standard (LCFS) with a renewable fuel standard (RFS) as tools to regulate biofuel. They found that with the proposed LCFS, introduction of biofuel will lead to much stronger reduction in GHG emissions than with RFS, but the overall cost of LCFS is higher.

 

Publications

Published in 2014

Production of Ethanol from Sugarcane in Brazil: from State Intervention to a Free Market, Márcia Azanha F. D. Morales, David Zilberman, Springer Publishing, Natural Resources and Management Policy, XIII, 221 pp.

 

The Impacts of Biofuels on the Economy, Environment, and Policies, Timilsina, Govinda and David Zilberman, Springer Publishing. Natural Resource Management and Policy, XVIII, 144 pp.

 

Modeling, Dynamics, Optimization and Bioeconomics, Alberto Pinto, and David Zilberman. Springer Publishing, Springer Proceedings in Mathematics and Statistics, XVIII, 753 pp.

 

Biofuel Technologies and Potential, Jay Cheng, Govinda Timilsina, David Zilberman, Book Chapter, “The Impacts of Biofuels on the Economy, Environment, and Policies,” Natural Resource Management and Policy 4: pp. 15-31. Springer Publishing.

 

Impact of Biofuels on Food Prices, Gal Hochman, Deepak Rajagopal, Govinda Timilsina, David Zilberman, Book Chapter, “The Impacts of Biofuels on the Economy, Environment, and Policies,” Natural Resource Management and Policy V. 4, pp. 47-63. Springer Publishing.

 

Political Economy of Biofuels, David Zilberman, Scott Kaplan, Gal Hochman, Deepak Rajagopal, Book Chapter, “The Impacts of Biofuels on the Economy, Environment, and Policies,” Natural Resource Management and Policy 4: pp. 131-144, Springer Publishing.

 

U.S. Biofuels Policy: Few Environmental Benefits but Large Trade Gains, Gal Hochman, Geoff Barrows, David Zilberman, ARE Update V. 17 (2), pp. 1-3, November 2013. 

 

Algae Farming and its Bio-Products, Gal Hochman, David Zilberman, Plants and BioEnergy, pp. 49-64. Springer Publishing.

 

Dynamic Management of Fossil Fuel, Biofuel, and Solar Energy, Scott Kaplan, Charles Séguin, Karl W. Steininger, David Zilberman, Modeling, Dynamics, Optimization and Bioeconomics I, pp. 1-16. Springer Publishing.

 

Modeling the Land Use Change with Biofuels, Madhu Khanna, David Zilberman, Christine Crago, Oxford Handbook of Land Economics, eds. Joshua Duke and JunJie Wu, Oxford University Press.

 

Technology Adoption and Land Use, David Zilberman, Madhu Khanna, Scott Kaplan, Eunice Kim, Oxford Handbook of Land Economics, eds. Joshua Duke and JunJie Wu, Oxford University Press, September 2014. 

 

Price Transmission Between Biofuels, Fuels, and Food Commodities, Ladislav Kristoufek, Karel Janda, David Zilberman, Biofuels, Bioproducts and Biorefining, V. 8 (3), pp. 362-373. 

 

(Comment on) Effects of Ethanol on Vehicle Energy Efficiency and Implications on Ethanol Life-Cycle Greenhouse Gas Analysis, B. Strogen, S. P. Souza, J. R. Lidicker. Environmental Science & Technology, V. 48 (16), pp. 9950-9952.

 

The Political Economy of Innovation and Technological Change, David Zilberman, Environment and Development Economics, V. 19, pp. 314-316.

 

The Economics of Sustainable Development, David Zilberman, American Journal of Agricultural Economics, V. 96 (2) pp. 385-396. The Political Economy of Biofuel, David Zilberman, Gal Hochman, Scott Kaplan, Eunice Kim, Choices, V. 29 (1).

Published in 2013

Regime-Dependent Topological Properties of Biofuels Networks, Ladislav Kristoufek, Karel Janda, David Zilberman, The European Physical Journal B, 86(2), pp. 1-12, doi: 10.1140/epjb/e2012-30871-9, February 6, 2013.

 

Non-Linear Price Transmission Between Biofuels, Fuels, and Food Commodities, Ladislav Kristoufek, Karel Janda, David Zilberman, CERGE EI, Academy of Sciences of the Czech Republic, Working Papers, February 2013.

 

Energy Intensity, Life-Cycle Greenhouse Gas Emissions, and Economic Assessment of Liquid Biofuel Pipelines, Bret Strogen, Arpad Horvath, David Zilberman, Bioresource Technology, 150, pp. 476-485, doi: 10.1016/j.biortech.2013.08.150, 2013.

 

Implications of Market-Mediated Emissions and Uncertainty for Biofuel Policies, D. Rajagopal, R. J. Plevin, Energy Policy, 56, pp. 75-82, doi:10.1016/J.Enpol.2012.09.076, 2013.

 

On Market-Mediated Emissions and Regulations on Life-Cycle Emissions, D. Rajagopal, D. Zilberman, Ecological Economics, 90: pp. 77-84, doi: 10.1016/J.Ecolecon.2013.03.006, 2013.

 

On the Indirect Effect of Biofuel, David Zilberman, Geoff Barrows, Gal Hochman, Deepak Rajagopal, American Journal of Agricultural Economics 95(5), 1332-1337, doi: 10.1093/ajae/aat038, June 24, 2013.

 

Biofuel-Related Price Transmission Literature: A Review, T. Serra, D. Zilberman, Energy Economics, 37, pp. 141-151, doi:10.1016/J.Eneco.2013.02.014, 2013.

 

Continents Divided: Understanding Differences between Europe and North America in Acceptance of GM Crops, David Zilberman, Scott Kaplan, Eunice Kim, Gal Hochman, Gregory Graff, GM Crops and Food: Biotechnology in Agriculture and the Food Chain, doi: 10.4161/gmcr.26981, November 21, 2013.

 

The Impact of Biofuels on Commodity Food Prices: Assessment of Findings, David Zilberman, Gal Hochman, Deepak Rajagopal, Steve Sexton, Govinda Timilsina, American Journal of Agricultural Economics 95(2): 275-281, doi: 10.1093/ajae/aas037.

 

Technology and the Future Bioeconomy, David Zilberman, Eunice Kim, Sam Kirschner, Scott Kaplan, Jeanne Reeves, Agricultural Economics, 44, pp. 95-102, doi: 10.1111/agec.12054

 

The Fuel Market Effects of Biofuel Policies and Implications for Regulations Based on Lifecycle Emissions, Deepak Rajagopal, Environmental Research Letters 8(2): 024013.

 

Published in 2012

Multi-Criteria Comparison of Fuel Policies: Renewable Fuel Mandate, Fuel Emission Standards, and Fuel Carbon Tax, Deepak Rajagopal, Gal Hochman, David Zilberman, UCLA Institute of the Environment and Sustainability (working paper), November 26, 2012.

 

Regime-Dependent Topological Properties of Biofuels Networks,  Ladislav Kristoufek, Karel Janda, David Zilberman, CAMA Working Paper, Centre for Applied Macroeonomic Analysis, Australian National University, November 12, 2012 online.

 

Adoption vs. Adaptation:  With a Emphasis on Climate Change, David Zilberman, Jinhua Zhao, Amir Heiman, Annual Review of Resource Economics 4, pp. 27-53, October 2012.

 

Time-Frequency Dynamics of Biofuels-Fuels-Food System, Lukas Vacha, Karel Janda, Ladislav Kristoufek, David Zilberman, Statistical Finance, arXiv:1209.0900, September 5, 2012.

 

Biofuels: Policies and Impacts, Karel Janda, Ladislav Kristoufek, David Zilberman, Agricultural Economics-Czech, 58(2012), pp. 372-386, 2012.

 

Biofuel and Food-Commodity Prices, Gal Hochman, Scott Kaplan, Deepak Rajagopal, and David Zilberman. Agriculture, 2(3), 272-281; doi: 10.3390/agriculture2030272, 2012.

 

The Impact of Biofuels on Commodity Food Prices: Assessment of Findings, David Zilberman, Gal Hochman, Deepak Rajagopal, Steve Sexton, Govinda Timilsina, American Journal of Agricultural Economics, doi: 10.1093/ajae/aas037, June 7, 2012.

 

Correlations Between Biofuels and Related Commodities Before and During the Food Crisis:  A Taxonomy Perspective, Ladislav Kristoufek, Karel Janda, David Zilberman, Energy Economics 34, pp.1380-1391, June 2012).

 

Published in 2011

The Lessons of Fermentation for the New Bio-Economy, David Zilberman, Eunice Kim, AgBioForum, 14(3), pp. 97-103, 2011.

The Viability of Cattle Ranching Intensification in Brazil as a Strategy to Spare Land and Mitigate Greenhouse Gas Emissions, Avery Cohn, Maria Bowman, David Zilberman, Kate O'Neill, Climate Change Agriculture and Food Security, CCAFS Working Paper #11, CGIAR Research Program on Climate Change, September 2011.

 

Beyond the 'Food or Biofuel' Dilemma, Steve Sexton and David Zilberman, Biofuels, 2(4), pp. 361-363, doi: 10.4155/bfs.11.111, July 2011.

 

Multicriteria Comparison of Fuel Policies: Renewable Fuel Standards, Clean Fuel Standards, and Fuel GHG Tax, Deepak Rajagopal, Gal Hochman, David Zilberman, Working Paper Series, UC Center for Energy and Environmental Economics, WP-012, July 2011.

 

Meeting a Growing Demand for Food and Fuel in a Sustainable Manner, David Zilberman, Gal Hochman, ARE Update, 14(4), pp. 5-8, July 2011.

 

On the Inclusion of Indirect Land use in Biofuel Regulations, David Zilberman, Gal Hochman, Deepak Rajagopal, University of Illinois Law Review, Vol. 2011, pp. 413-434, March 4, 2011.

 

Agricultural Expansion Induced By Biofuels: Comparing Predictions of Market-Equilibrium Models to Historical Trends, Deepak Rajagopal, David Zilberman, UCLA Institute of the Environment and Sustainability, Working Paper Series #5, January 2011.

 

Indirect Fuel Use Change (IFUC) and the Lifecycle Environmental Impact of Biofuel Policies, Deepak Rajagopal, Gal Hochman, David Zilberman, Energy Policy, 39 (1), pps. 228-233, January 2011.

 

How Agricultural Biotechnology Boosts Food Supply and Accommodates Biofuels, Steve Sexton, David Zilberman, National Bureau of Economic Research, Working Paper #16699, January 2011.

Published in 2010

The Effect of Biofuels on Crude Oil Markets, Gal Hochman, Deepak Rajagopal, David Zilberman, AgBioForum, 13(2), pp. 112-118, 2010.

 

Multi-Objective Fuel Policies: Renewable Fuel Standards versus Fuel Greenhouse Gas Intensity Standards, Deepak Rajagopal, Gal Hochman, David Zilberman, UCLA Institute of the Environment and Sustainability, Working Paper Series, October 2010.

 

Handbook of Bioenergy Economics and Policy, Madhu Khanna and David Zilberman editors, Springer Publications, Natural Resource Management and Policy, Vol. 33, 2010. Chapters in:

- Introduction and Overview, Madhu Khanna, Jurgen Scheffran, David Zilberman
- Optimizing the Biofuels Infrastucture: Transportation Networks and Biorefinery Locations in Illinois (Chapter), Seungmo Kang and Hayri Onal, Yanfeng Ouyang, Jurgen Scheffran, U. Deniz Tursun
- A Simple Framework for Regulation of Biofuels, Gal Hochman, Deepak Rajagopal, David Zilberman
- Food and Biofuel in a Global Environment, Gal Hochman, Deepak Rajagopal, David Zilberman

 

Are Biofuels the Culprit? OPEC, Food and Fuel, Gal Hochman, Deepak Rajagopal, David Zilberman, American Economic Review, 100(2), pp. 183-187, May 2010.

 

Indirect Land Use: One Consideration Too Many in Biofuel Regulation, David Zilberman, Gal Hochman, Deepak Rajagopal, Agriculture and Resource Economics Update, 13(4): 4, March/April 2010.

 

Managing R&D Risk in Renewable Energy: Biofuels vs. Alternate Technologies, Gordon Rausser, Reid Stevens, Kiran Torani, AgBioForum, 13(4), pps. 375-381, 2010.

Published in 2009

Model Estimates Food-Versus-Biofuel Trade-off, Deepak Rajagopal, Steven Sexton, Gal Hochman, David Roland-Holst, David Zilberman, California Agriculture, 63(4): pp. 199-201, Oct.-Dec. 2009.

 

Sustainability of Food, Energy and Environment with Biofuels, Madhu Khanna, Gal Hochman, Deepak Rajagopal, Steven Sexton, David Zilberman, CAB Reviews: Perspectives in Agriculture, Veterinary Science, Nutrition and Natural Resources, (Review) 4(028): pp. 1-10, April 3, 2009.

 

Recent Developments in Renewable Technologies: R&D Investment in Advanced Biofuels, Deepak Rajagopal, Steve Sexton, Gal Hochman, David Zilberman, Annual Review of Resource Economics, 1: pp. 621-644, 2009.

 

The Role of Biotechnology in a Sustainable Biofuel Future, Steven Sexton, David Zilberman, Deepak Rajagopal, Gal Hochman, AgBioForum, 12(1): pp. 130-140, 2009.

 

Food or fuel? What European Farmers Can Contribute to Europe’s Transport Energy Requirements and the Doha Round, Jennifer Baka, David Roland-Holst, Energy Policy, 37: pp. 2505-2513, April 5, 2009.

 

Greener Pastures for Globalization: How European Farmers Can Help Save the Planet as well as the Doha Round, Jenn Baka, David Roland-Holst, Giannini Foundation of Agricultural Economics, 11(1), 2009.

 

The Political Economy of Agricultural Biotechnology Policies, Gregory D. Graff, Gal Hochman, David Zilberman, AgBioForum, 12(1): pp. 34-46, 2009.

Published in 2008

Food Versus Fuel: How Biofuels Make Food More Costly and Gasoline Cheaper, Steve Sexton, Deepak Rajagopal, David Zilberman, Gal Hochman, Agriculture and Resource Economics, 12(1), Sept.-Oct. 2008.

 

Interactions Between Water, Energy, Food and Environment: Evolving Perspectives and Policy Issues, Petra Hellegers, David Zilberman, Pasquale Steduto, Peter McCornick, Water Policy, 10 (Supplement 1): pp. 1-10, 2008.

 

Rising Energy Prices and the Economics of Water in Agriculture, David Zilberman, Thomas Sproul, Deepak Rajagopal, Steven Sexton, Petra Hellegers, Water Policy, 10 (Supplement 1): pp. 11-21, 2008.

 

The Economics of Biofuel Policy and Biotechnology, Gal Hochman, Steven Sexton, David Zilberman, Journal of Agricultural and Food Industrial Organization, 6, 2008.

 

 


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