Biofuels: review of policies and impacts
Karel Janda2011
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Abstract
This paper provides an overview of the environmental, economical, and policy considerations related to biofuels. While the biofuel production and consumption exhibited significant increase over the first decade of the new millennium, this and further increases in biofuel production are driven primarily by government policies. Currently available first generation biofuels are with a few exceptions not economically viable in the absence of fiscal incentives or high oil prices. Also the environmental impacts of biofuels as an alternative to fossil fuels are quite ambiguous. The review of the most recent economic models dealing with biofuels and their economic impacts provides a distinction between structural and reduced form models. The review ofreduced models is structured toward the time series analysis approach to thedependencies between prices of feedstock, biofuels, and fossil fuels.
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Th is paper provides a general overview of the technological, social, environmental, economical, and policy considerations related to biofuels. While the biofuel production and consumption exhibited signifi cant increase over the fi rst decade of the new millennium, this and further increases in biofuel production are driven primarily by government policies. Currently available fi rst generation biofuels are not economically viable in the absence of fi scal incentives or high oil prices (with a few exceptional cases, especially in the case of the most developed Brazilian sugarcane production of ethanol). Also the environmental impacts of biofuels as an alternative to fossil fuels are quite ambiguous. Th e literature review of the most recent economic models dealing with biofuels and their economic impacts provides a distinction between structural and reduced form models. Th e discussion of structural models centres primarily on computable general equilibrium (CGE) models. Th e review of reduced models is structured toward the time series analysis approach to the dependencies between prices of biofuels, prices of agricultural commodities used for the biofuel production and prices of the fossil fuels.
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