Stacking low carbon policies on the renewable fuels standard: Economic and greenhouse gas implications

Haixiao Huang, Madhu Khanna, Hayri Önal, Xiaoguang Chen

Research output: Contribution to journalArticle

Abstract

This paper examines the economic and GHG implications of stacking a low carbon fuel standard (LCFS) with and without a carbon price policy on the Renewable Fuel Standard (RFS). We compare the performance of various policy combinations for food and fuel prices, fuel mix and fuel consumption. We also analyze the economic costs and benefits of alternative policy combinations and their distributional effects for consumers and producers in the transportation and agricultural sector in the US. Using a dynamic, multi-market, partial equilibrium model of the transportation and agricultural sectors, we find that combining the RFS with an LCFS policy leads to a reduction in first generation biofuels and an increase in second generation biofuels compared to the RFS alone. This policy combination also achieves greater reduction in GHG emissions even after considering offsetting market mediated effects. Imposition of a carbon price with the RFS and LCFS policy primarily induces fuel conservation and achieves larger GHG emissions reduction compared to the other policy scenarios. All these policy combinations lead to higher net economic benefits for the transportation and agricultural sectors relative to the no policy baseline because they improve the terms of trade for US.

Original languageEnglish (US)
Pages (from-to)5-15
Number of pages11
JournalEnergy Policy
Volume56
DOIs
StatePublished - May 1 2013

Keywords

  • Cellulosic biofuels
  • Food versus fuel
  • Low carbon fuel standard

ASJC Scopus subject areas

  • Energy(all)
  • Management, Monitoring, Policy and Law

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