Do biofuel subsidies reduce greenhouse gas emissions?
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Kompas, Tom
Long, Ngo Van
Grafton, Quentin
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Crawford School of Economics and Government, The Australian National University
Abstract
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.
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Grafton R.Q., Kompas, T. & Long, N.V. (2010). Do biofuel subsidies reduce greenhouse gas emissions? International and Development Economics Working Paper 10-01. Canberra, ACT: Crawford School of Economics and Government, The Australian National University.
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Open Access
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