Skip to main content
SpringerLink
Log in
Book cover

Liquid Biofuels: Emergence, Development and Prospects pp 1–23Cite as

Economic Issues in the Liquid Biofuels Industry

  • Chapter
  • First Online:

Part of the book series: Lecture Notes in Energy ((LNEN,volume 27))

Abstract

Biofuel policies around the world have, in general, been driven by concerns relating to energy security, greenhouse gas (GHG) abatement and regional development. However, in major biofuel markets, these policies have led to market distortions that have problematized the achievement of the longer-term objectives associated with biofuels. In particular, prioritization of certain economic goals, like assisting rural areas, has hindered the achievement of other outcomes, such as decoupling national energy security from fossil fuel prices and achieving the greatest possible emission abatement. A shift towards next-generation equivalents is desirable, but the currently low price of conventional fuel and the high production costs of advanced biofuels currently act as a barrier to commercialization. These barriers are most likely to be overcome as conventional fuel resources become depleted and advanced biofuel technologies mature over time. Until then, government intervention will be crucial in determining the industry’s future.

This is a preview of subscription content, log in via an institution.

Chapter
USD   29.95
Price excludes VAT (USA)
  • Available as PDF
  • Read on any device
  • Instant download
  • Own it forever
eBook
USD   84.99
Price excludes VAT (USA)
  • Available as EPUB and PDF
  • Read on any device
  • Instant download
  • Own it forever
Softcover Book
USD   109.99
Price excludes VAT (USA)
  • Compact, lightweight edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info
Hardcover Book
USD   109.99
Price excludes VAT (USA)
  • Durable hardcover edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info

Tax calculation will be finalised at checkout

Purchases are for personal use only

Learn about institutional subscriptions

Notes

  1. 1.

    These matters are dealt with in detail in chapter “Environmental Issues in the Liquid Biofuels Industry”.

  2. 2.

    Bioethanol energy content is two-thirds that of gasoline, and therefore is referred to as litre of gasoline equivalent (lge).

  3. 3.

    India, Pakistan, Swaziland and Zimbabwe have production costs that are broadly similar to those experienced in Brazil (Demirbas 2009; Dufey 2006).

  4. 4.

    Biodiesel energy content is 10–12 % less than that of diesel, and therefore is referred to as litre of diesel equivalent (lde).

  5. 5.

    de Gorter and Just (2010) have shown that crop prices, i.e. corn prices in the case of the United States, are directly linked to that of bioethanol. A theoretical framework with regard to the relationship between sugar cane prices and bioethanol prices in Brazil or between palm oil/soybean prices and biodiesel prices in the European Union can be formulated easily in a similar way.

  6. 6.

    This seal is awarded to biofuel producers who buy a minimum percentage of feedstock from family farmers, provide technical assistance, and enter into contracts with these farmers.

References

  • AgMRC (2009) The impact of grain ethanol plants on local grain prices. http://www.agmrc.org/renewable_energy/ethanol/the_impact_of_grain_ethanol_plants_on_local_grain_prices.cfm. Accessed 10 Aug 2013

  • AgMRC (2013) Ethanol: prices, trends and markets. http://www.agmrc.org/renewable_energy/ethanol/ethanol-prices-trends-and-markets/. Accessed 8 Aug 2013

  • Ajanovic A (2010) Biofuels versus food production: does biofuels production increase food prices? Energy 36(4):2070–2076

    Article  Google Scholar 

  • Alexandratos N (2008) Food price surges: possible causes, past experiences and relevance for exploring long-term prospects. Popul Dev Rev 34(4):663–697

    Article  Google Scholar 

  • APEC (2010) A study of employment opportunities from biofuel production in APEC economies. Asia-Pacific Economic Cooperation, Singapore

    Google Scholar 

  • Baker E, Keisler JM (2011) Cellulosic biofuels: expert views on prospects for advancement. Energy 36(1):595–605

    Article  Google Scholar 

  • Bardi U (2009) Peak oil: the four stages of a new idea. Energy 34(3):323–326

    Article  Google Scholar 

  • von Blottnitz H, Curran MA (2007) A review of assessments conducted on bio-ethanol as a transportation fuel from a net energy, greenhouse gas, and environmental life-cycle assessment. J Clean Prod 15(7):607–619

    Article  Google Scholar 

  • Bosetti V, Catenacci M, Fiorese G, Verdolini E (2012) Can advanced biofuels deliver? Review of environment, energy and economics (27 Jul 2012). http://re3.feem.it/getpage.aspx?id=4967. Accessed 03 Oct 2013

  • Brennan L, Owende P (2010) Biofuels from microalgae: a review of technologies for production, processing, and extractions of biofuels and co-products. Renew Sustain Energy Rev 14(2):557–577

    Article  Google Scholar 

  • Brown LR (2008) Why ethanol production will drive food prices even higher in 2008. Earth Policy Institute. http://www.earth-policy.org/plan_b_updates/2008/update69. Accessed 13 Jul 2013

  • Ciaian P, Kancs D (2011) Interdependencies in the energy-bioenergy-food price systems: a cointegration analysis. Resour Energy Econ 33(1):326–348

    Article  Google Scholar 

  • Copulos MR (2007) The hidden cost of imported oil—an update. National Defense Council Foundation. http://www.ndcf.org. Accessed 08 Aug 2013

  • Council of Economic Advisers (2008) Searching for alternative energy solutions. Chapter 7 in the Economic Report of the President, Feb. Washington, DC

    Google Scholar 

  • de Gorter H, Just DR (2008a) The welfare economics of the U.S. ethanol consumption mandate and tax credit. Department of Applied Economics and Management, unpublished Working Paper, Cornell University, Ithaca, New York

    Google Scholar 

  • de Gorter H, Just DR (2008b) ‘Water’ in the U.S. ethanol tax credit and mandate: implications for rectangular deadweight costs and the corn-oil price relationship. Rev Agric Econ 30(3):397–410

    Google Scholar 

  • de Gorter H, Just DR (2009a) The welfare economics of a biofuel tax credit and the interaction effects with price contingent farm subsidies. Am J Agric Econ 91(2):477–488

    Article  Google Scholar 

  • de Gorter H, Just DR (2009b) The social costs and benefits of biofuel policies with pre-existing distortions. Paper presented at the issues on U.S. Energy Taxes American Tax Policy Institute conference, Washington, DC

    Google Scholar 

  • de Gorter H, Just DR (2009c) The economics of a blend mandate for biofuels. Am J Agric Econ 91(3):738–750

    Article  Google Scholar 

  • de Gorter H, Just DR (2010) The social costs and benefits of biofuels: the intersection of environmental, energy, and agricultural policy. Appl Econ Perspect Policy 32(1):4–32

    Article  Google Scholar 

  • Delucchi MA, Murphy J (2008) US military expenditures to protect the use of Persian-Gulf oil for motor vehicles. Energy Policy 36(6):2253–2264

    Article  Google Scholar 

  • Demirbas A (2009) Political, economic and environmental impacts of biofuels: a review. Appl Energy 86(Supplement 1):108–117

    Article  Google Scholar 

  • DfID (2007) Biofuels, agriculture and poverty reduction. Program of advisory support services for rural livelihoods, Department for International Development, London

    Google Scholar 

  • Dicks MR, Campiche J, Ugarte DD, Hellwinckel C, Bryant HL, Richardson JW (2009) Land use implications of expanding biofuel demand. J Agric Appl Econ 41(2):435–453

    Google Scholar 

  • Diop D, Blanco M, Flammini A, Schlaifer M, Kropiwnicka M, Markhof M (2013) Assessing the impact of biofuels production on developing countries from the point of view of policy coherence for development. European Commission, Luxembourg

    Google Scholar 

  • DofNavy (2010) USDA, navy sign agreement to encourage the development, use of renewable energy. Department of the Navy, Washington, DC

    Google Scholar 

  • Domac J, Richards K, Risovic (2005) Socio-economic drivers in implementing bioenergy projects. Biomass Bioenergy 28(2):97–106

    Article  Google Scholar 

  • Du X, McPhail L (2012) Inside the black box: the rice linkage and transmission between energy and agricultural markets. Energy J 33(2):171–194

    Article  Google Scholar 

  • Dufey A (2006) Biofuels production, trade and sustainable development: emerging issues. environmental economics programme, sustainable markets discussion Paper No. 2, International Institute for Environment and Development, London

    Google Scholar 

  • Economist (2013) What happened to biofuels?. http://www.economist.com/news/technology-quarterly/21584452-energy-technology-making-large-amounts-fuel-organic-matter-has-proved-be. Accessed 02 Oct 2013

  • EMBO (2009) The economics of biofuels. EMBO Rep 10:551–553

    Article  Google Scholar 

  • Eisentraut A (2010) Sustainable production of biofuels: potential and perspectives in major economies and developing countries. International Energy Agency, Paris

    Book  Google Scholar 

  • European Commission (2008) Commission’s/EU’s response to the high oil and food prices. European Commission MEMO/08/421, Brussels

    Google Scholar 

  • FAO (2008) Growing demand on agriculture and rising prices of commodities: an opportunity for smallholders in low-income, agricultural-based countries? In: Proceeding of the thirty-first session of IFAD’s governing council, 14 Feb 2008

    Google Scholar 

  • Fleay BJ (1995) The decline of the age of oil. Pluto Press Australia, NSW

    Google Scholar 

  • Gardner BL (2007) Fuel ethanol subsidies and farm price support. J Agric Food Ind Organ 5(2):1–22

    Google Scholar 

  • Grant LK (2007) Peak oil as a behavioural problem. Behav Soc Issues 16(1):65–88

    Article  Google Scholar 

  • Hall CAS, Powers R, Schoenberg W (2008) Peak oil, EROI, investments and the economy in an uncertain future. In: Pimentel D (ed) Biofuels. Solar and Wind as Renewable Energy Systems-Benefits and Risks, Springer, Colorado, pp 109–132

    Google Scholar 

  • Hassouneh I, Serra T, Goodwin BK, Gil JM (2011) Non-parametric and parametric modeling of biodiesel, sunflower oil, and crude oil price relationships. Paper presented at the 2011 European Association of Agricultural Economists (EAAE) Congress, Zurich, Switzerland, 30 Aug–2 Sept 2011

    Google Scholar 

  • Hillebrand H, Buttermann G, Behringera JM, Bleuel M (2006) The expansion of renewable energies and employment effects in Germany. Energy Policy 34(18):3484–3494

    Article  Google Scholar 

  • Hirsch RL (2005) Peaking of world oil production: the problem, its mitigation & a risk management perspective, SAIC 2005. http://www.netl.doe.gov/publications/others/pdf/oil_peaking_NETL.pdf. Accessed 12 Aug 2013

  • IEA (2007) Energy technology essentials: an IEA factsheet. IEA, Paris

    Google Scholar 

  • IEA (2008) First- to second-generation biofuel technologies: an overview of current industry and RD&D activities. IEA, Paris

    Google Scholar 

  • IEC (2013) A make-or-break year for cellulosic ethanol. Iowa Energy Center, Iowa

    Google Scholar 

  • IFPEN (2012) Biofuels update: growth in national and international markets. Panorama 2012, IFP Energies Nouvelles, Rueil-Malmaison

    Google Scholar 

  • IFPEN (n.d.) Fuels for the aviation industry. IFP Energies Nouvelles, Rueil-Malmaison. http://www.ifpenergiesnouvelles.com/developpement-industriel/carburants-alternatifs/carburants-pour-l-aeronautique. Accessed 02 Oct 2013

  • Jaeger WK, Egelkraut TM (2011) Biofuel economics in a setting of multiple objectives and unintended consequences. Renew Sustain Energy Rev 15(2):4320–4333

    Article  Google Scholar 

  • Karp A, Richter G (2011) Meeting the challenge of food and energy security. J Exp Bot 62(10):3263–3271

    Article  Google Scholar 

  • Kilsby D (2005) The future of oil for Australian transport. National Committee on Transport, Engineers Australia. http://www.kilsby.com.au/archive/p0704.pdf. Accessed 12 Aug 2013

  • Kristoufek L, Janda K, Zilberman D (2012) Correlations between biofuels and related commodities before and during the food crisis: a taxonomy perspective. Energy Econ 34(5):1380–1391

    Article  Google Scholar 

  • Lapan H, Moschini G (2009) Biofuel policies and welfare: is the stick of mandates better than the carrot of subsidies? Working Paper No. 09010. Department of Economics, Iowa State University, Ames, Iowa

    Google Scholar 

  • Lapan H, Moschini G (2012) Second-best biofuel policies and the welfare effects of quantity mandates and subsidies. J Env Econ Manag 63(2):224–241

    Article  Google Scholar 

  • Leder F, Shapiro JN (2008) This time it’s different: an inevitable decline in world petroleum production will keep oil product prices high, causing military conflicts and shifting wealth and power from democracies to authoritarian regimes. Energy Policy 36(8):2840–2842

    Article  Google Scholar 

  • Lipsky J (2008) Commodity prices and global inflation: remarks at the Council on Foreign Relations. International Monetary Fund, New York

    Google Scholar 

  • Mallory M, Irwin SH, Hayes DJ (2012) How market efficiency and the theory of storage link corn and ethanol markets. Energy Econ 34(6):2157–2166

    Article  Google Scholar 

  • Mandil C, Shihab-Eldin A (2010). Assessment of biofuels potential and limitations. International Energy Forum (IEF). http://www.ief.org/_resources/files/content/events/biofuels-assessment-report/ief-biofuels-report.pdf. Accessed 10 Jul 2013

  • McCormick-Brennan K, Bomb C, Deurwaarder E, Kåberger T (2007) Biofuels for transport in Europe: Lessons from Germany and the UK. Energy Policy 35(4):2256–2267

    Article  Google Scholar 

  • Meyer S, Schmidhuber J, Barreiro-Hurlé J (2013). Global biofuel trade: How uncoordinated biofuel policy fuels resource use and GHG emissions. Issue paper 48, Programme on Agricultural Trade and Sustainable Development, International Centre for Trade and Sustainable Development, Geneva. http://ictsd.org/downloads/2013/05/global-biofuel-trade-how-uncoordinated-biofuel-policy-fuels-resource-use-and-ghg-emissions.pdf. Accessed 08 Aug 2013

  • Mitchell DO (2008) A note on rising food prices. Policy Research Working Paper 4682, Development Prospects Group, World Bank, Washington, DC

    Google Scholar 

  • Moreira JR, Goldemberg J (1999) The alcohol problem. Energy Policy 27(4):229–245

    Article  Google Scholar 

  • Moreno B, López AJ (2008) The effect of renewable energy on employment: the case of Asturias (Spain). Renew Sustain Energy Rev 12(3):732–751

    Article  Google Scholar 

  • Moschini G, Cui J, Lapan H (2012) Economics of biofuels: an overview of policies, impacts and prospects. Working Paper No.12021, May 2012. Iowa State University, Ames, Iowa

    Google Scholar 

  • NREL (2013) Energy analysis: international trade of biofuels. Report No. BR-6A20-56792, May 2013. National renewable energy laboratory http://www.nrel.gov/docs/fy13osti/56792.pdf. Accessed 8 Aug 2013

  • OECD (2009) OECD-FAO agricultural outlook 2009–2018. FAO-OECD, Paris

    Book  Google Scholar 

  • OECD (2011) Agricultural outlook 2011–2020. FAO-OECD, Paris

    Book  Google Scholar 

  • Padula AD, Santos MS, Ferreira L, Borenstein D (2012) The emergence of the biodiesel industry in Brazil: current figures and future prospects. Energy Policy 44(38):395–405

    Article  Google Scholar 

  • Parcell JL, Westhoff PA (2006) Economic effects of biofuel production on states and rural communities. J Agric Appl Econ 32(2):377–387

    Google Scholar 

  • Qantas (2013) Sustainable aviation fuel. http://www.qantas.com.au/travel/airlines/sustainable-aviation-fuel/global/en. Accessed 02 Oct 2013

  • Renner M, McKeown A (2010) Editorial: promises and pitfalls of biofuels jobs. Biofuels 1(1):7–9

    Article  Google Scholar 

  • Reuters (2008). Bad policy, not biofuel, drive food prices.http://www.reuters.com/article/idUSKRA45973520080424. Accessed 8 Aug 2013

  • RFA (2007) Building new horizons: ethanol industry outlook 2007. Renewable Fuels Association, Washington, DC

    Google Scholar 

  • Runge CF, Senauer B (2007) How biofuels could starve the poor. Foreign Aff 86(3):41–53

    Google Scholar 

  • Scaramucci JA, Cunha MP (2007) Bioethanol as a basis for regional development in Brazil: an input–output model with mixed technologies. Paper presented at the 16th input–output conference, Istanbul, Turkey, 2–7 July 2007

    Google Scholar 

  • Searchinger TD, Heimlich R, Houghton RA, Dong F, Elobeid A, Fabiosa J, Tokgoz S, Hayes D, Yu T (2008) Use of US croplands for biofuels increases greenhouse gases through emissions from land-use change. Science 319(5867):1238–1240

    Article  Google Scholar 

  • Searchinger TD, Hamburg SP, Melillo J, Chameides W, Havlik P, Kammen DM, Likens GE, Lubowski RN, Obersteiner M, Oppenheimer MI, Robertson GP, Schlesinger WH, Tilman D (2009) Fixing a critical climate accounting error. Science 326:527–528

    Article  Google Scholar 

  • Shell (2013) Shell and advanced biofuels. http://www.shell.com/global/environment-society/environment/climate-change/biofuels-alternative-energies-transport/biofuels/advanced-biofuels.html. Accessed 02 Oct 2013

  • Tsui KK (2011) More oil, less democracy: evidence from worldwide crude oil discoveries. Econ J 121(551):89–115

    Article  Google Scholar 

  • US EIA (2013) International energy statistics. U.S. Energy Information Administration http://www.eia.gov/cfapps/ipdbproject/IEDIndex3.cfm?tid=79&pid=79&aid=1. Accessed 15 Jul 2013

  • USDA (2010) Next-generation biofuels: near-term challenges and implications for agriculture. Economic Research Service, Washington, DC

    Google Scholar 

  • USDA (2012a) EU-27 annual biofuels report. Report Number: NL1013. http://www.usda-france.fr/media/Biofuels%20Annual_The%20Hague_EU-27_6-25-2012.pdf. Accessed 15 Jul 2013

  • USDA (2012b) Brazil biofuels annual: annual report 2012. Report Number: BR12013. http://gain.fas.usda.gov/Recent%20GAIN%20Publications/Biofuels%20Annual_Sao%20Paulo%20ATO_Brazil_8-21-2012.pdf. Accessed 15 Jul 2013

  • UN (2008) Biofuel production technologies: status, prospects and implications for trade and development. United Nations conference on trade and development, Geneva

    Google Scholar 

  • World Bank (2013) World bank data. http://databank.worldbank.org/data/home.aspx. Accessed 8 Aug 2013

  • Wyman CE (2008) Cellulosic ethanol: a unique sustainable liquid transportation fuel. Mater Res Soc Bull 33(4):381–383

    Article  Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Southern Cross University, Gold Coast, Australia

    Hong To, Suman Sen & Michael B. Charles

Authors
  1. Hong To
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Suman Sen
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Michael B. Charles
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Michael B. Charles .

Editor information

Editors and Affiliations

  1. Agribusiness Center (CEPAN/UFRGS), School of Management, Federal University of Rio Grande do Sul, Porto Alegre, Brazil

    Antonio Domingos Padula

  2. Department of Business Management, State University of Western Paraná, Foz do Iguacu, Brazil

    Manoela Silveira dos Santos

  3. Agribusiness Center (CEPAN/UFRGS), Federal University of Rio Grande do Sul, Porto Alegre, Brazil

    Omar Inácio Benedetti Santos

  4. School of Management, Federal University of Rio Grande do Sul, Porto Alegre, Rio Grande do Sul, Brazil

    Denis Borenstein

Rights and permissions

Reprints and permissions

Copyright information

© 2014 Springer-Verlag London

About this chapter

Cite this chapter

To, H., Sen, S., Charles, M.B. (2014). Economic Issues in the Liquid Biofuels Industry. In: Domingos Padula, A., Silveira dos Santos, M., Benedetti Santos, O., Borenstein, D. (eds) Liquid Biofuels: Emergence, Development and Prospects. Lecture Notes in Energy, vol 27. Springer, London. https://doi.org/10.1007/978-1-4471-6482-1_1

Download citation

  • DOI: https://doi.org/10.1007/978-1-4471-6482-1_1

  • Published:

  • Publisher Name: Springer, London

  • Print ISBN: 978-1-4471-6481-4

  • Online ISBN: 978-1-4471-6482-1

  • eBook Packages: EnergyEnergy (R0)

Publish with us

Policies and ethics

Search

Navigation