Economic Potential of Biomass Based Fuels for Greenhouse Gas Emission Mitigation
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Use of biofuels diminishes fossil fuel combustion thereby also reducing net greenhouse gas emissions. However, subsidies are needed to make agricultural biofuel production economically feasible. To explore the economic potential of biofuels in a greenhouse gas mitigation market, we incorporate data on production and biofuel processing for the designated energy crops switchgrass, hybrid poplar, and willow in an U.S. Agricultural Sector Model along with data on traditional crop-livestock production and processing, and afforestation of cropland. Net emission coefficients on all included agricultural practices are estimated through crop growth simulation models or taken from the literature. Potential emission mitigation policies or markets are simulated via hypothetical carbon prices. At each carbon price level, the Agricultural Sector Model computes the new market equilibrium, revealing agricultural commodity prices, regionally specific production, input use, and welfare levels, environmental impacts, and adoption of alternative management practices such as biofuel production. Results indicate no role for biofuels below carbon prices of $40 per ton of carbon equivalent. At these incentive levels, emission reductions via reduced soil tillage and afforestation are more cost efficient. For carbon prices above $70, biofuels dominate all other agricultural mitigation strategies.
Environmental and Resource Economics
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