EEP101_lecture23_biofuel

EEP101_lecture23_biofuel - David Zilbermand Agricultural...

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The Economics of Biofuel EEP 101, Spring 2008 David Zilbermand Agricultural and Resource Economics | UC Berkeley
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Why Biofuel ? Increase in demand for fuel 18 cars/1000 people in China vs. 800 in US Tata’s Nano car  Constrained supply of oil Tar sands, CTLs have their own problem Concern about climate change Limited capacity to induce conservation (minimal  support for carbon tax, CAFÉ and LCFS have  limited capacity for change)  Biofuel are not new- take advantage of human  skill -farming
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Biofuel And the Food Market Crop Quantity $ Food Demand Supply Joint Demand Biofuel Demand Ag Expansion Supply w/ GMO Market for Food and Energy Crops $ Quantity
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The Basic Economics of Biofuel Introduction of Biofuels: Increased food prices; and  Reduces food availability The effects can be countered by: Increased agricultural and conversion productivity Second generation biofuels Ag Biotech.
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Impacts depend on responsiveness of  quantities to prices The less responsive fuel quantities are to fuel price  changes higher will be the impact of ethanol on  gasoline price The more responsive food quantities are to food price  changes lesser will be the impact of ethanol on food  price Therefore we estimate the impact on prices under  three different scenarios of responsiveness of supply  and demand
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Simulating the impacts Three Scenarios: High – elastic food S (0.75) and D (-0.75),  inelastic gasoline S (0.25) and D (-0.25) Low – inelastic food S (0.3) and D (-0.3), elastic  gasoline S (0.75) and D (0.75) Mid – S (0.5) and D (-0.5)
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Simulating the impacts The estimated impact of 5 billion gallons of  ethanol on gasoline and crop prices under the  three scenarios: High Mid Low % change in gasoline price -3% -2% -1% % change in corn price 5% 7% 13% % change in soy price 2% 3% 7%
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Net Benefits of 2006 Biofuel Supply
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Net Benefits to US Consumers
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Net Benefits to ROW Consumers
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Net Benefits to Soy and Corn  Producers
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Biofuel and High Energy Price  Impacts on Water High energy prices:  May increase water availability--because of increased demand for  hydroelectric energy.  Will lead to adoption of improved irrigation and pumping  technologies with increased precision.
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EEP101_lecture23_biofuel - David Zilbermand Agricultural...

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