International Review of Environmental and Resource Economics > Vol 2 > Issue 3

The Economics of Biofuels

Tommy Lundgren, Department of Forest Economics, Swedish University of Agricultural Sciences, Sweden, Per-Olov Marklund, Centre for Regional Science (CERUM), Umeå University, Sweden, Runar Brännlund, Department of Forest Economics, Swedish University of Agricultural Sciences, Sweden, Bengt Kriström, Department of Forest Economics, Swedish University of Agricultural Sciences, Sweden,
 
Suggested Citation
Tommy Lundgren, Per-Olov Marklund, Runar Brännlund and Bengt Kriström (2008), "The Economics of Biofuels", International Review of Environmental and Resource Economics: Vol. 2: No. 3, pp 237-280. http://dx.doi.org/10.1561/101.00000017

Published: 30 Nov 2008
© 2008 Tommy Lundgren et al.
 
Subjects
Environmental Economics
 
Keywords
H23Q20Q42Q54Q56
BiofuelsEnvironmental policyGreen accountingWelfare economics
 

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In this article:
1 Introduction
2 Background and Stylized Facts
3 The Economics of Biofuels, a Selected Review
4 The Economics of Biofuels; A Theoretical Framework
5 Policy Implications
6 Summary and Concluding Discussion
7 Directions for Future Research
Appendix
References

Abstract

Biofuels are increasingly regarded as energy sources with the potential to solve diverse problems related to serious concerns, including climate change, environmental degradation, energy supply, and energy security. Here we examine biofuels, primarily biofuels used for transportation (e.g., ethanol and biodiesel), through the lens of modern resource economics and address fundamental questions, such as: Why biofuels? We then review some of the relevant literature and present a framework for analysis drawn mainly from the green accounting literature. The literature reviewed indicates that the effects of policies promoting conversion from fossil fuels to biofuels do not necessarily promote welfare. Our theoretical framework provides indications of possible reasons for this. Based on findings obtained using the framework we propose policies that not only penalize emissions of CO2 from all sources, but also stimulate biomass growth. Finally, we identify issues for further research.

DOI:10.1561/101.00000017