The role of flexible biofuel policies in meeting biofuel mandates

The study uses a GTAP-BIO computable general equilibrium model to analyze the relationship between biofuel mandates and feedstock price volatility. It finds that while yield declines significantly increase prices for sugar crops, grains, and oilseeds, the impact on biofuel prices themselves is small. The authors argue that flexible policies, specifically production waivers during low-yield years, can significantly reduce feedstock price spikes, though the effectiveness of such waivers decreases if their implementation is delayed by one year.

• Between 2012 and 2020, biofuel output in the USA, EU, and Brazil was projected to grow by 54%, with global production increasing from 78 billion liters in 2012 to 145 billion liters by 2020.
• Baseline projections for 2012-2020 indicate a general decline in feedstock prices: coarse grains by 8% to 14%, oil seeds by 15% to 20%, and sugar crops by 7% to 21%, with the USA experiencing the largest declines.
• Fluctuations in yields have a significant impact on feedstock prices, with the most pronounced effect seen in sugar crops, followed by grains and oilseeds; however, the resulting impact on the prices of the biofuels themselves is very small.
• Reducing biofuel mandates by 35% during periods of low yields helps mitigate price increases, but the effect is asymmetric: it reduces price rises more effectively than it amplifies price falls.
• Implementing a global 90% production waiver during years of exceptionally low yields can significantly reduce price rises for feedstocks, particularly for oilseeds.
• Delaying the implementation of a production waiver by one year (from year T to T+1) prevents the policy from moderating large price increases in the year of the shock, though it may still reduce prices in the subsequent year.
• A higher elasticity of substitution between fossil fuels and biofuels leads to greater biofuel demand when feedstock yields rise and prices fall, which in turn makes the price of biofuels fall less than in the base case.

APA

Markandya, A., Dhavala, K., & Palma, A. (2016). The role of flexible biofuel policies in meeting biofuel mandates. Basque Centre for Climate Change. https://www.bc3research.org/h6T8Uy8Nm4gFs0O/201606170339221844600589.pdf

Chicago

Markandya, Anil, Kishore Dhavala, and Alessandro Palma. The role of flexible biofuel policies in meeting biofuel mandates. Basque Centre for Climate Change, 2016. https://www.bc3research.org/h6T8Uy8Nm4gFs0O/201606170339221844600589.pdf.

Wikipedia

{{cite report |last1=Markandya |first1=Anil |last2=Dhavala |first2=Kishore |last3=Palma |first3=Alessandro |title=The role of flexible biofuel policies in meeting biofuel mandates |publisher=Basque Centre for Climate Change |date=April 2016 |url=https://www.bc3research.org/h6T8Uy8Nm4gFs0O/201606170339221844600589.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{markandya2016role, author = {Markandya, Anil and Dhavala, Kishore and Palma, Alessandro}, title = {{The role of flexible biofuel policies in meeting biofuel mandates}}, institution = {Basque Centre for Climate Change}, year = {2016}, month = apr, url = {https://www.bc3research.org/h6T8Uy8Nm4gFs0O/201606170339221844600589.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }