Land Use and Greenhouse Gas Implications of Biofuels: Role of Technology and Policy

This paper examines the changes in land use in the U.S. likely to be induced by biofuel and climate policies and the implications of these policies for GHG emissions over the 2007–2030 period. The policies considered here include a modified Renewable Fuel Standard (RFS) by itself as well as combined with a cellulosic biofuel tax credit, a carbon price policy, or a low carbon fuel standard (LCFS). We use a dynamic, spatial, multi-market equilibrium model, biofuel and environmental policy analysis model (BEPAM), to trace the impacts of alternative biofuel policies on the mix of biofuel feedstocks, crop prices, land use pattern, and GHG emissions. We endogenously determine the effects of these policies on cropland allocation, food and fuel prices, and the mix of first- and second-generation biofuels. We find that the RFS could be met by diverting 5% of cropland for biofuel production and would result in corn prices increasing by 31% in 2030 relative to the business-as-usual baseline. The reduction in GHG emissions in the U.S. due to the RFS is about 4%; these domestic GHG savings can be severely eroded by emissions due to indirect land use changes and the increase in gasoline consumption in the rest of the world. Supplementing the RFS with a carbon price policy, a cellulosic biofuel tax credit, or a LCFS induces a switch away from corn ethanol to cellulosic biofuels and achieves the mandated level of biofuel production with a smaller adverse impact on crop prices. These supplementary policies enhance the GHG savings achieved by the RFS alone, although through different mechanisms; greater production of cellulosic biofuels with the tax credit and the LCFS but larger reduction in fossil fuel consumption with a carbon tax.