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Do biofuel subsidies reduce greenhouse gas emissions?

Kompas, Tom; Long, Ngo Van; Grafton, Quentin


Conventional wisdom suggests that subsidising biofuel production will reduce greenhouse gas (GHG) emissions. This paper shows that in many cases, and for a wide range of parameter values, this is not true. Biofuel subsidies can generate supply-side response by fossil fuel producers that accelerates their rate of extraction, even in the case where fossil fuel extraction costs are stock dependent. Thus, policies designed to reduce GHG emissions may, perversely, hasten climate change.

CollectionsANU Crawford School of Public Policy
Date published: 2010
Type: Working/Technical Paper
Access Rights: Open Access


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