TY - JOUR
T1 - Optimal biofuel supply chain design under consumption mandates with renewable identification numbers
AU - Wang, Xiaolei
AU - Ouyang, Yanfeng
AU - Yang, Hai
AU - Bai, Yun
N1 - Funding Information:
The first author was financially supported by an Overseas Research Award provided by the Hong Kong University of Science and Technology while visiting the Department of Civil and Environmental Engineering at the University of Illinois, Urbana–Champaign. This research was also partially supported by the U.S. National Science Foundation through Grants EFRI-RESIN #0835982 and CMMI #0748067 .
Copyright:
Copyright 2017 Elsevier B.V., All rights reserved.
PY - 2013/11
Y1 - 2013/11
N2 - The Renewable Identification Number (RIN) system is a tracking mechanism that enforces the U.S. Renewable Fuel Standard by monitoring obligated parties' compliance with the biofuel consumption mandates. This paper incorporates the RIN system into the design of a biofuel supply chain that addresses independent decisions of non-cooperative farmers, biofuel manufacturers, and blenders. Game-theoretic models are developed to examine the impacts of the RIN system on individual stakeholders' decisions (e.g., on farmland use, bio-refinery investment, biofuel production) and the competition between food and biofuel industries, in both a perfectly competitive scenario and a monopoly scenario. For the perfectly competitive scenario, Nash equilibrium can be obtained by solving a convex optimization problem. For the monopoly scenario, a bi-level Stackelberg leader-follower model is developed, from which we found that a rigid mandate on blenders may suppress the total biofuel production. To avoid such unintended consequences, a relaxed unit-RIN based penalty scheme is proposed and shown to improve the overall biofuel supply chain performance. Managerial insights are drawn from a numerical case study for the state of Illinois.
AB - The Renewable Identification Number (RIN) system is a tracking mechanism that enforces the U.S. Renewable Fuel Standard by monitoring obligated parties' compliance with the biofuel consumption mandates. This paper incorporates the RIN system into the design of a biofuel supply chain that addresses independent decisions of non-cooperative farmers, biofuel manufacturers, and blenders. Game-theoretic models are developed to examine the impacts of the RIN system on individual stakeholders' decisions (e.g., on farmland use, bio-refinery investment, biofuel production) and the competition between food and biofuel industries, in both a perfectly competitive scenario and a monopoly scenario. For the perfectly competitive scenario, Nash equilibrium can be obtained by solving a convex optimization problem. For the monopoly scenario, a bi-level Stackelberg leader-follower model is developed, from which we found that a rigid mandate on blenders may suppress the total biofuel production. To avoid such unintended consequences, a relaxed unit-RIN based penalty scheme is proposed and shown to improve the overall biofuel supply chain performance. Managerial insights are drawn from a numerical case study for the state of Illinois.
KW - Biofuel
KW - MPEC
KW - Spatial equilibrium
KW - Supply chain network
KW - Tradable credits
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U2 - 10.1016/j.trb.2013.07.008
DO - 10.1016/j.trb.2013.07.008
M3 - Article
AN - SCOPUS:84887816406
SN - 0191-2615
VL - 57
SP - 158
EP - 171
JO - Transportation Research Part B: Methodological
JF - Transportation Research Part B: Methodological
ER -