Meeting the Mandate for Biofuels: Implications for Land Use, Food and Fuel Prices

Xiaoguang Chen, Haixiao Huang, Madhu Khanna, Hayri Önal

NBER Working Paper No. 16697
Issued in January 2011
NBER Program(s):Environment and Energy Economics

Biofuel production is being promoted through various policies such as mandates and tax credits. This paper uses a dynamic, spatial, multi-market equilibrium model, Biofuel and Environmental Policy Analysis Model (BEPAM), to estimate the effects of these policies on cropland allocation, food and fuel prices, and the mix of biofuels from corn and cellulosic feedstocks over the 2007-2022 period. We find that the biofuel mandate will increase corn price by 24%, reduce the price of gasoline by 8% in 2022, and increase social welfare by $122 B (0.7%) relative to Business As Usual scenario. The provision of volumetric tax credits that accompany the mandate significantly changes the mix of biofuels produced in favor of cellulosic biofuels and reduces the share of corn ethanol in the cumulative volume of biofuels produced from 50% to 10%. The tax credits reduce the adverse impact of the mandate alone on crop prices and decrease the price of biofuels. However, they impose a welfare cost of $79 B compared to the mandate alone. These results are found to be sensitive to the rate of growth of crop productivity, the costs of production of bioenergy crops, and the availability of marginal land for producing bioenergy crops.

download in pdf format
   (219 K)

email paper

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w16697

Published: Meeting the Mandate for Biofuels: Implications for Land Use, Food, and Fuel Prices, Xiaoguang Chen, Haixiao Huang, Madhu Khanna, Hayri Önal. in The Intended and Unintended Effects of U.S. Agricultural and Biotechnology Policies, Graff Zivin and Perloff. 2012

Users who downloaded this paper also downloaded* these:
Hertel and Beckman w16824 Commodity Price Volatility in the Biofuel Era: An Examination of the Linkage Between Energy and Agricultural Markets
Roberts and Schlenker w15921 Identifying Supply and Demand Elasticities of Agricultural Commodities: Implications for the US Ethanol Mandate
Sexton and Zilberman w16699 How Agricultural Biotechnology Boosts Food Supply and Accomodates Biofuels
Chen, Huang, Khanna, and Onal Meeting the Mandate for Biofuels: Implications for Land Use, Food, and Fuel Prices
Anderson w16371 The Demand for Ethanol as a Gasoline Substitute
NBER Videos

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email:

Contact Us