The Economics of Alternative Energy Sources and Globalization


by

Andrew Schmitz, Norbert L. Wilson, Charles B. Moss, David Zilberman

DOI: 10.2174/97816080523321110101
eISBN: 978-1-60805-233-2, 2011
ISBN: 978-1-60805-614-9



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Indexed in: Scopus

Considerable effort and money are devoted to developing alternative energy sources, such as wind power, solar power, cellulosic ethano...[view complete introduction]

Table of Contents

FOREWORD

- Pp. i

Parr Rosson

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PREFACE

- Pp. ii- (1)

Andrew Schmitz

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List of Contributors

- Pp. iii-ix (7)

Andrew Schmitz, Norbert L. Wilson, Charles B. Moss and David Zilberman

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Summary

- Pp. x

Andrew Schmitz, Norbert L. Wilson, Charles B. Moss and David Zilberman

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The Global Petroleum Picture

- Pp. 3-12 (10)

Robert Rapier

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Government Policies to Support Biofuel Production: Why and to What Effect?

- Pp. 13-23 (11)

Kurt K. Klein and Danny G. Le Roy

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The Economics of Biofuels, Food, and the Environment

- Pp. 24-34 (11)

David Zilberman, Deepak Rajagopal, Steven Sexton, Gal Hochman and Teresa Serra

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Potential Effect of Ethanol on the U.S. Economy: A General Equilibrium Approach

- Pp. 35-48 (14)

Charles B. Moss and Troy G. Schmitz

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Measuring the Subsidy Component of Biofuel Tax Credits and Exemptions

- Pp. 49-64 (16)

Erika M. Kliauga, Harry de Gorter and David R. Just

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Hidden Ethanol Subsidies in Brazil Revisited

- Pp. 65-75 (11)

Troy G. Schmitz and James L. Seale

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Impacts of Future Energy Price and Biofuel Production Scenarios on International Crop Prices, Production, and Trade

- Pp. 76-90 (15)

Gerald Schwarz, Harald von Witzke and Steffen Noleppa

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Alternative Domestic and Trade Policies for Biofuels and Market Variability in the United States

- Pp. 91-108 (18)

Yuki Yano, David Blandford and Yves Surry

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Food Before Fuel: Issues and Price Effect

- Pp. 109-113 (5)

Zibin Zhang and Michael Wetzstein

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U.S. Biofuel Policy Effects on Agricultural Commodity Exports

- Pp. 114-125 (12)

Wyatt Thompson, Seth Meyer and Pat Westhoff

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Long-Term Effects of Increasing Ethanol Production on Agricultural Markets and Trade, Land Use, and Food Security

- Pp. 126-138 (13)

Henry L. Bryant, Jiamin Lu, James W. Richardson and Joe L. Outlaw

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Critical Economic Factors for Success of a Biomass Conversion Plant for Agricultural Residue, Yard Residue, and Wood Waste in Fl

- Pp. 139-145 (7)

Ivan R. Granja, John J. Vansickle, Lonnie Ingram and Richard Weldon

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Global Biofuel Expansion under Different Energy Price Environments

- Pp. 146-157 (12)

May M. Peters

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The Economic Feasibility of Electricity Generation from Biomass on the South Plains of Texas

- Pp. 158-169 (12)

Xiaolan Liu, Michael Farmer and Sergio Capareda

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Impact of Voluntary Carbon and Bioenergy Markets on Non-Industrial Private Forest Landowners' Profitability

- Pp. 170-182 (13)

Puneet Dwivedi, Janaki Alavalapati, Douglas Carter and Sherry Larkin

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Economic Impacts of Expanded Woody Biomass Utilization for Electric Power Generation in Florida

- Pp. 183-195 (13)

Alan W. Hodges, Thomas J. Stevens and Mohammad Rahmani

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Biofuels and the Transformation of Agriculture: The Case of Climate Change Policy Instruments

- Pp. 196-205 (10)

Daniel De La Torre Ugarte and Chad Hellwinckel

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Subject Index

- Pp. 206-209 (4)

Andrew Schmitz, Norbert Wilson, Charles Moss and David Zilberman

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Author Index

- Pp. 210-220 (11)

Andrew Schmitz, Norbert Wilson, Charles Moss and David Zilberman

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Foreword

Rapidly rising oil prices several years ago spurred a strong interest in the production of alternative fuels. While Brazil has been producing ethanol from sugarcane for quite some time, the phenomenal growth in ethanol production from corn in the United States has been of recent origin. There are both supporters and nonsupporters of biofuel production. Those who do not support biofuels raise the question: How can energy be used to produce corn and then used to produce energy, especially when government subsidies are used to promote ethanol production? There are major constraints on the production of alternative fuels. Factors such as high water requirements, limited distribution infrastructure, the corrosive nature of ethanol which increases its distribution costs, and the ongoing 'food vs. fuel' debate may limit the degree to which more alternative fuel is produced, especially in the short run.

Because of the strong interest in the future of biofuel production, our S-1043 Regional Research Group decided to launch a project on the economics of biofuels. The chapters in this volume are the result of the Economics of Alternative Energy Sources and Globalization: The Road Ahead Conference that was held in November 2009 in Orlando, Florida. This project was sponsored by the S-1043 Regional Research Group: Impacts of Trade and Domestic Policies on the Competitiveness and Performance of Southern Agriculture: Texas A&M University, Louisiana State University, and University of Florida. This is an opportune time to publish this volume, especially in view of the major oil catastrophe in the Gulf of Mexico which may limit expanded production of fossil fuels in favor of bioenergy. Speakers for this conference were drawn from industry, government, and academia to provide a broad perspective on realistic alternatives for policy as well as production of traditional and new alternative fuels.

This volume is a must read for researchers and policymakers directly involved in biofuel production. The authors of the chapters have considerable expertise in the economics of biofuels. As these chapters show, biofuel production is a highly controversial subject, and that there is no one answer as to whether or not it is in the best interest of society to pursue the expansion of alternative fuels.

Professor Parr Rosson
Texas AgriLife Extension Service
Texas A&M University


Preface

According to a national poll released by the Renewable Fuels Now Coalition, 74 percent of Americans believe that using domestically-produced renewable fuels should be increased. In addition, 87 percent maintain that the federal government should actively support the development of a U.S. renewable fuels industry, and 77 percent think that the U.S. Congress should encourage oil refiners to blend more ethanol into their gasoline products. Ranking ethanol for reducing greenhouse gas emission, 75 percent view it as somewhat important and 41 percent view it as extremely important (Schmitz et al., 2010). This volume contains papers that deal with the pros and cons of producing biofuels.

Brazil is a leader in ethanol production, which has been supported by hidden subsidies. The Brazilian government must solve the complex problem of how to deal with the production of both ethanol and sugar from sugarcane production. The demand facing domestically-produced sugar in Brazil is very different from the demand facing ethanol produced from sugar. Because of the state involvement of ethanol production through Petrobras, Brazil has the capability to price discriminate between the sugar versus ethanol market.

Sugar production in Brazil could double by 2020, and ethanol production could triple. Exports of ethanol could increase five-fold. Also, bioelectricity could expand by 12 percent. If these results are achieved, Brazil's record will indeed be impressive. There are investments which could make this forecast a reality. These include Bunge, Inc. investing in sugar mills in Brazil, and the Royal Dutch Shell partnership with the Brazilian ethanol group Cosan. These firms have formed a joint venture in Brazil to produce ethanol, sugar, and power, and to supply, distribute, and sell transportation fuels.

In the United States, regardless of those who are highly critical of producing ethanol from corn, ethanol production may continue to rise. There are many reasons for this, including the 2010 Gulf of Mexico oil spill, extended government subsidies, and higher prices for crude oil and petroleum products. The beginning of 2010 marked record ethanol production, with the U.S. Energy Information Administration (EIA) citing more than 800,000 barrels being produced daily in January alone. The EIA also reported U.S. ethanol demand to be around 780,000 barrels per day (also record breaking amounts), and imports of ethanol in January 2010 estimated around 1.4 million gallons. In addition, the United States is considering increasing the ethanol-fuel blend ratio from 10 to 15 percent. Significant campaigns have been launched supporting ethanol production. On April 12, 2010, the ethanol lobby group Growth Energy and POET, the nation's largest ethanol producer, each launched a national campaign supporting ethanol production. One ad even says that "no beaches have been closed due to ethanol spills" while another declares that "no wars have ever been fought over ethanol". In addition, the United States is calling for the increased use of advanced biofuels in all U.S. naval vehicles, planes, and ships.

Ethanol production is also heavily dependent on government subsidies. The United States has extended federal tax credits and tariffs through 2015. The Renewable Fuels Association contends that if the ethanol lenders' credit were removed, thousands of jobs would be lost. Domestic ethanol production would decrease roughly by four billion gallons, which is the equivalent of closing two out of every five ethanol plants. It would also potentially decrease corn prices by roughly eight percent, or 30 cents per bushel. The American Farm Bureau Federation has argued that long-term extensions of ethanol tax credits are needed to boost renewable technologies and to support development of the market infrastructure necessary to make biofuels technology more competitive.

Professor Andrew Schmitz
Food and Resource Economics Department
University of Florida

List of Contributors

Editor(s):
Andrew Schmitz
University of Florida
USA


Dr. Norbert L. Wilson
Auburn University
USA


Charles B. Moss
University of Florida
USA


David Zilberman
University of California-Berkeley
USA




Contributor(s):
Janaki Alavalapati
School of Forest Resources and Conservation
University of Florida
Post Office Box 110410
Gainesville
FL, 32611-0410
USA


David Blandford
Department of Agricultural Economics and Rural Sociology
Pennsylvania State University
112D Armsby Building
University Park
PA, 16803
USA


Henry Bryant
Agricultural & Food Policy Center, Department of Agricultural Economics
Texas A&M University
2124 TAMU
College Station
TX, 77843-2124
USA


Sergio Capareda
Department of Biological & Agricultural Engineering
Texas A&M University
2402 TAMU
College Station
TX, 77843
USA


Douglas R. Carter
School of Forest Resources and Conservation
University of Florida
Post Office Box 110410
Gainesville
FL, 32611-0410
USA


Harry de Gorter
Department of Applied Economics and Management
Cornell University
447 Warren Hall
Ithaca
NY, 14853



Daniel G. De La Torre Ugarte
Department of Agricultural and Resource Economics
University of Tennessee
310 Morgan Hall
Knoxville
TN, 37996-4519
USA


Puneet Dwivedi
School of Forestry & Environmental Studies
Yale University, 125 Kroon Hall
195 Prospect Street
New Haven
CT, 06511
USA


Michael Farmer
Department of Agricultural & Applied Economics
Texas Tech University
Post Office Box 42132
Lubbock
TX, 79409
USA


Ivan Granja
Food and Resource Economics Department
University of Florida
Post Office Box 110240
Gainesville
FL, 32611
USA


Chad M. Hellwinckel
Department of Agricultural and Resource Economics
University of Tennessee
310 Morgan Hall
Knoxville
TN, 37996-4519
USA


Gal Hochman
Department of Agricultural and Resource Economics
University of California–Berkeley
207 Giannini Hall
Berkeley
CA, 94720-3310
USA


Alan Hodges
Food and Resource Economics Department
University of Florida
Post Office Box 110240
Gainesville
FL, 32611-0240
USA


Lonnie Ingram
Department of Microbiology and Cell Science
University of Florida
Post Office Box 110700
Gainesville
FL, 32611-0700
USA


David R. Just
Department of Applied Economics and Management
Cornell University
254 Warren Hall
Cornell University Ithaca
NY, 14853
USA


Erika Kliauga
Department of Applied Economics and Management
Cornell University
447 Warren Hall
Ithaca
NY, 14853
USA


Kurt K. Klein
Department of Economics
University of Lethbridge
4401 University Drive
Lethbridge, Alberta, T1K 3M4
Canada


Sherry Larkin
Food and Resource Economics Department
University of Florida
Post Office Box 110240
Gainesville
FL, 32611-0240
USA


Danny G. Le Roy
Department of Economics
University of Lethbridge
4401 University Drive
Lethbridge, Alberta, T1K 3M4
Canada


Xiaolan Liu
Illinois Institute for Rural Affairs
Western Illinois University
528 Stipes Hall, 1 University Circle
Macomb
IL, 61455
USA


Jiamin Lu
Department of Agricultural Economics
Texas A&M University
2124 TAMU
College Station
TX, 77843-2124
USA


Seth Meyer
Agricultural and Applied Economics Department
University of Missouri–Columbia
101 Park de Ville Drive, Suite E
Columbia
MO, 65203
USA


Charles Moss
Food and Resource Economics Department
University of Florida
Post Office Box 110240
Gainesville
FL, 32611-0240
USA


Steffen Noleppa
Agripol–Network for Policy Advice GbR Agripol
Schivelbeiner Str. 21, D – 10439
Berlin
Germany


Joe L. Outlaw
Department of Agricultural Economics
Texas A&M University
2124 TAMU
College Station
TX, 77843-2124
USA


May Peters
United States Department of Agriculture
Economic Research Service (USDA/ERS)
1800 M Street NW, Room S5209
Washington, D.C, 20036-5831
USA


Deepak Rajagopal
Institute of the Environment
University of California–Los Angeles
Post Office Box 951496
Los Angeles, 90095-1496
CA


Mohammad Rahmani
Food and Resource Economics Department
University of Florida
Post Office Box 110240
Gainesville
FL, 32611-0240
USA


Robert Rapier
Chief Technology Officer
Merica International
67-1435 Mamalahoa Highway
Kamuela
HI, 96743



James W. Richardson
Department of Agricultural Economics
Texas A&M University
2124 TAMU
College Station
TX, 77843-2124
USA


Andrew Schmitz
Food and Resource Economics Department
University of Florida
Post Office Box 110240
Gainesville
FL, 32611-0240
USA


Troy G. Schmitz
Morrison School of Agribusiness & Resource Management
Arizona State University
7171 E. Sonoran Arroyo Mall
Mesa
AZ, 85212
USA


Gerald Schwarz
Federal Research Institute for Rural Areas, Forestry, and Fisheries
Institute of Farm Economics, Johann Heinrich von Thünen-Institut
Bundesallee 50, D-38116
Braunschweig
Germany


James Seale
Food and Resource Economics Department
University of Florida
Post Office Box 110240
Gainesville
FL, 32611-0240
USA


Teresa Serra
Parc Mediterrani de la Tecnologia, Edifici ESAB CREDA
C/Esteve Terrades, 8, E-08860 Castelldefels
Barcelona
Spain


Steve Sexton
Department of Agricultural and Resource Economics
University of California–Berkeley
207 Giannini Hall
Berkeley
CA, 94720-3310
USA


Thomas Stevens
Food and Resource Economics Department
University of Florida
Post Office Box 110240
Gainesville
FL, 32611-0240
USA


Yves Surry
Department of Economics
Swedish University of Agricultural Sciences
Post Office Box 7013, 750 07
Uppsala
Sweden


Wyatt Thompson
Agricultural and Applied Economics Department
University of Missouri–Columbia
101 Park de Ville Drive, Suite E
Columbia
MO, 65203
USA


John Vansickle
Food and Resource Economics Department
University of Florida
Post Office Box 110240
Gainesville
FL, 32611-0240
USA


Harald von Witzke
Department of Agricultural Economics
Humboldt University of Berlin
Hannoversche Str. 27, D-10099
Berlin
Germany


Richard Weldon
Food and Resource Economics Department
University of Florida
Post Office Box 110240
Gainesville
FL, 32611-0240
USA


Pat Westhoff
Agricultural & Applied Economics Department/Food and Agricultural Policy Research Institute
University of Missouri–Columbia
101 Park de Ville Drive, Suite E
Columbia
MO, 65203
USA


Michael Wetzstein
Department of Agricultural and Applied Economics
University of Georgia
315 Conner Hall (AAE)
Athens
GA, 30602
USA


Norbert Wilson
Department of Agricultural Economics and Rural Sociology
Auburn University
100 Comer Hall
Auburn
AL, 36849
USA


Yuki Yano
Department of Economics
Swedish University of Agricultural Sciences
Post Office Box 7013, 750 07
Uppsala
Sweden


Zibin Zhang
College of Economics
Zhejiang University
Hangzhou
P.R., 310027
China


David Zilberman
Department of Agricultural and Resource Economics
University of California–Berkeley
207 Giannini Hall
Berkeley
CA, 94720-3310
USA




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