Biofuels and their By-Products: Global Economic and Environmental Implications

By F. Taheripour, Thomas W. Hertel, W. Tyner, Jayson Beckman, Dileep K. Birur. 2010

330 citations recorded by the source corpus.

The biofuel industry has been rapidly growing around the world in recent years. Several papers have used general equilibrium models and addressed the economy-wide and environmental consequences of producing biofuels at a large scale. They mainly argue that since biofuels are mostly produced from agricultural sources, their effects are largely felt in agricultural markets with major land use and environmental consequences. In this paper, we argue that virtually all of these studies have overstated the impact of liquid biofuels on agricultural markets due to the fact that they have ignored the role of by-products resulting from the production of biofuels. Feed by-products of the biofuel industry, such as Dried Distillers Grains with Solubles (DDGS) and biodiesel by-products (BDBP) such as soy and rapeseed meals, can be used in the livestock industry as substitutes for grains and oilseed meals used in this industry. Hence, their presence mitigates the price impacts of biofuel production on the livestock and food industries. The importance of incorporating by-products of biofuel production in economic models is well recognized by some partial equilibrium analyses of biofuel production. However, to date, this issue has not been tackled by those conducting CGE analysis of biofuels programs. Accordingly, this paper explicitly introduces DDGS and BDBP, the major by-products of grain based ethanol and biodiesel production processes, into a worldwide CGE model and analyzes the economic and environmental impacts of regional and international mandate policies designed to stimulate bioenergy production and use. We first explicitly introduce by-products of biofuel production into the GTAP-BIO database, originally developed by Taheripour et al. (2007). Then we explicitly bring in DDGS and BDBP into the Energy-Environmental version of the Global Trade Analysis Project (GTAP-E) model, originally developed by Burniaux and Truong (2002), and recently modified by McDougall and Golub (2007) and Birur, Hertel, and Tyner (2008). The structure of the GTAP-E model is redesigned to handle the production and consumption of biofuels and their by-products, in particular DDGS, across the world. Unlike many CGE models which are characterized by single product sectors, here grain based ethanol and DDGS jointly are produced by an industry, named EthanolC. The biodiesel industry also produces two products of biodiesel and BDBP jointly. This paper divides the world economy into 22 commodities, 20 industries, and 18 regions and then examines global impacts of the US Energy Independence and Security Act of 2007 and the European Union mandates for promoting biofuel production in the presence of by-products. We show that models with and without by-products demonstrate different portraits from the economic impacts of international biofuel mandates for the world economy in 2015. While both models demonstrate significant changes in the agricultural production pattern across the world, the model with by-products shows smaller changes in the production of cereal grains and larger changes for oilseeds products in the US and EU, and the reverse for Brazil. For example, the US production of cereal grains increases by 10.8% and 16.4% with and without by-products, respectively. The difference between these two numbers corresponds to 646 million bushels of corn. In the presence of by-products, prices change less due to the mandate policies. For example, the model with no by-products predicts that the price of cereal grains grows 22.7% in the US during the time period of 2006 to 2015. The corresponding number for the model with by-products is 14%. The model with no by-products predicts that the price of oilseeds increases by 62.5% in the EU during 2006-2015. In the presence of by-products, this price grows 56.4%. Finally, we show that incorporating DDGS into the model significantly changes the land use consequences of the biofuel mandate polices.

Subfields: Biomedical Engineering, Ecology, Environmental Engineering

View Paper: https://www.semanticscholar.org/paper/1646469ef6dfb0146516d36fec873ee2ac11eefe

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Citations in the corpus

Ethanol Expansion and Indirect Land Use Change in Brazil (2014, background): “Using a global computable general equilibrium model to simulate biofuels expansion, Taheripour et al. (2010) report broad land use changes for Brazil due to biofuels mandates in the USA and the European Union.”
Use and understanding of organic amendments in Australian agriculture: a review (2011, background): “As Taheripour et al. (2010) suggests, returning residues from bioenergy production to agricultural land from which feedstock biomass is harvested may help alleviate soil health issues that arise from the removal of this material, thus improving the efficiency of the system.”
The Impact of Biofuels on Commodity Food Prices: Assessment of Findings (2013, neutral): “This complements the results of Taheripour et al. (2010) and”
Miscanthus: A Promising Biomass Crop (2010, neutral): “impact of large-scale biomass production have been intensely debated and investigated in recent years (Dohleman et al., 2010; Dornburg et al., 2010; Fargione et al., 2008; Hertel et al., 2010; Hill et al., 2009; Kim et al., 2009; Levasseur et al., 2010; Reijnders, 2010; Smeets and Faaij, 2010; Solom”
Validating Energy-Oriented CGE Models (2009, background): “1 See Banse et al. (2008); Berrittella et al. (2005, 2006); Bosello et al. (2007); Gan and Smith (2006); Hertel et al. (2010); Kemfert et al. (2006); Nijkamp et al. (2005); Ronneberger et al. (2006); Rosen (2003); Taheripour et al. (2010).”
Biofuels for all? Understanding the Global Impacts of Multinational Mandates (2008, background): “Taheripour et al. (2008) show that ignoring the by-products of biofuels leads researchers to significantly overstate the impact of mandates.”
Integrating Bioenergy into Computable General Equilibrium Models – A Survey (2010, methodology): “Taheripour et al. (2008) use the database GTAP-BIOB developed in Taheripour et al. (2007).”
The Global Impacts of Biofuel Mandates (2010, background): “Taheripour et al. (2008) show that ignoring the by-products of biofuels leads researchers to significantly overstate the impact of mandates.”
Impacts of the EU biofuel target on agricultural markets and land use: a comparative modelling assessment (2010, methodology): “(2008) and Taheripour et al. (2008), known as GTAP-E, has been specially extended to deal with biofuel and climate change policies.”
Global trade and environmental impact study of the EU biofuels mandate. (2010, methodology): “…model (Burniaux and Truong, of biofuels production on the global agricultural market; Hertel, Tyner, and Birur (2008) looking at the impact of both US and EU biofuel support policies; and Taheripour et al. (2008) which compares the impact of adding by-products to the results of Hertel et al (2008).”
Gasification biochar as a valuable by-product for carbon sequestration and soil amendment (2015, neutral): “On future markets, such parameters have increasing importance, and the sustainability of a particular bioenergy chain will to a large extent depend on the possibilities for its by-products recycling potential [40].”