Impact of Government Subsidies on a Cellulosic Biofuel Sector with Diverse Risk Preferences Toward Feedstock Uncertainty

Sharma, Bijay P; Yu, T Edward; English, Burton C; Boyer, Christopher N; Larson, James A; United States. Federal Aviation Administration. Center of Excellence for Alternative Jet Fuels and Environment; University of Tennessee, Knoxville. Department of Agricultural and Resource Economics

doi:10.1016/j.enpol.2020.111737

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Impact of Government Subsidies on a Cellulosic Biofuel Sector with Diverse Risk Preferences Toward Feedstock Uncertainty

2020-11-01
By Sharma, Bijay P ; Yu, T Edward ; English, Burton C ; ...

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Creators:

Sharma, Bijay P ; Yu, T Edward ; English, Burton C ; Boyer, Christopher N ; Larson, James A

Sharma, Bijay P ; Yu, T Edward ; English, Burton C ; Boyer, Christopher N ; Larson, James A Less -
Corporate Creators:

United States. Federal Aviation Administration. Center of Excellence for Alternative Jet Fuels and Environment ; University of Tennessee, Knoxville. Department of Agricultural and Resource Economics

United States. Federal Aviation Administration. Center of Excellence for Alternative Jet Fuels and Environment ; University of Tennessee, Knoxville. Department of Agricultural and Resource Economics Less -
Corporate Contributors:

United States. Department of Transportation. Federal Aviation Administration. Office of Environment and Energy
Subject/TRT Terms:

[+]

ASCENT Biomass Biomass Crop Assistance Program Biomass Fuels Climate Change Federal Assistance Programs Greenhouse Gases Investments Risk-averse Risk Management Stochastic Model Stochastic Processes Uncertainty
Publication/ Report Number:

j.enpol.2020.111737
DOI:

https://doi.org/10.1016/j.enpol.2020.111737
Resource Type:

Journal Article
Geographical Coverage:

United States
Corporate Publisher:

Elsevier
Abstract:

Investment risk and uncertainty about the availability of biomass feedstock hinders the development of a mature cellulosic biofuel sector. The Biomass Crop Assistance Program (BCAP) is a federal program designed to subsidize farmers to establish, produce and deliver biomass feedstock to biorefineries. This study evaluated the impacts of BCAP on the optimal biofuel supply chain decisions considering feedstock yield uncertainty and associated investment risk given diverse risk preferences of the biofuel sector. The expected cost for a risk-neutral biofuel sector was minimized using a two-stage stochastic mixed integer linear program, whereas the Conditional Value-at-Risk of the supply chain was optimized for a risk-averse sector. Ex-ante analysis of a switchgrass-based biofuel sector in west Tennessee indicates BCAP payments could lower expected cost and investment risk for both risk-averse and risk-neutral biofuel sectors. However, the cost saving and risk reduction resulting from BCAP incentives for the risk-averse biofuel sector were higher than the risk-neutral biofuel sector. In addition, BCAP payments may drive more cropland to be converted for switchgrass, which potentially mitigates water-induced soil erosion and reduces greenhouse gas emissions associated with net carbon sequestration, but may also create unintended consequence of competition for land between food and fuel use.
Content Notes:

This article is available under the Creative Commons CC-BY-NC-ND license and permits non-commercial use of the work as published, without adaptation or alteration provided the work is fully attributed.
Format:

PDF
Funding:

13-C-AJFE-UTENN-Amd 5
Collection(s):

Transportation and Climate Change Collection Federal Aviation Administration
Main Document Checksum:

[+]

urn:sha256:b6fd32e13896b1751d05a3f0b6c34b1126f60c38f7c6a429357290c5fc3d412a
Download URL:

https://rosap.ntl.bts.gov/view/dot/54913/dot_54913_DS1.pdf
File Type:

01-j.enpol.2020.111737_flat.pdf

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