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In this paper we investigate the potential production and implications of a global biofuels industry. We develop alternative approaches to consistently introduce land as an economic factor input and in physical terms into a computable general equilibrium framework. The approach allows us to parameterize biomass production consistent with agro-engineering information on yields and a "second generation" cellulosic biomass conversion technology. We explicitly model land conversion from natural areas to agricultural use in two different ways: in one approach we introduced a land supply elasticity based on observed land supply responses and in the other approach we considered only the direct cost of conversion. We estimate biofuels production at the end of the century could reach 221 to 267 EJ in a reference scenario and 319 to 368 EJ under a global effort to mitigate greenhouse gas emissions. The version with the land supply elasticity allowed much less conversion of land from natural areas, forcing intensification of production, especially on pasture and grazing land, whereas the pure conversion cost model led to significant deforestation. These different approaches emphasize the importance of somehow reflecting the non-market value of land more fully in the conversion decision. The observed land conversion response we estimate may be a short turn response that does not fully reflect the effect of long run pressure to convert land if rent differentials are sustained over 100 years.
