Global Implications of U.S. Biofuels Policies in an Integrated Partial and General Equilibrium Framework

With the increasing research interests in biofuels, global implications of biofuels production have been generally examined either in a partial equilibrium (PE) or general equilibrium (GE) frameworks. Though both of these approaches have unique strengths, they also suffer from many limitations due to complexity of addressing all the relevant aspects of biofuels. In this paper we have exploited the strengths of both PE and GE approaches for analyzing the economic and environmental implications of the U.S. policies on corn-ethanol and biodiesel production. In this study, we utilize the Forest and Agricultural Sector Optimization Model (FASOMGHG: Adams et al. 1996, 2005; Beach et al. 2009), a non-linear programming, PE model for the United States. We also use the GTAP-BIO model (Birur et al. 2008), a multi-region, multi-sector CGE model for global-scale assessment of biofuels policies. Following Britz and Hertel (2009), we link the GTAP-BIO model through a static, quadratic restricted revenue function obtained from perturbing crop prices from the FASOMGHG model. With this linkage we implement the U.S. Corn ethanol and biodiesel scenarios in the GTAP-BIO model and obtain the FASOMGHG-consistent, global land use changes. The resulting crop price changes from the GE model are fed back into the FASOMGHG model to obtain the disaggregated impacts in the U.S.