A risk management approach to the economic and environmental strategic design of ethanol supply chains

Abstract

A general Mixed Integer Linear Programming modelling framework supporting strategic design and planning decisions for multi-period and multi-echelon ethanol supply chains is developed and implemented. Multiple biomass and technology options involving both first and second generation production are addressed for paving the way towards sustainable and feasible energy infrastructures. The ethanol supply chain is optimised according to a comprehensive mathematical framework where multiple decision criteria are simultaneously considered in an uncertain market scenario. In particular, the economic and environmental performances are both optimised also considering the decision makers' risk mitigation preferences. Carbon cost emissions allowances trading scheme, crop management and technology learning issues are encompassed, too. A demonstrative case study is proposed involving the potential future Italian biomass-based ethanol production. Results show the effectiveness of the modelling framework as a decision making-tool to steer decisions and investments in the long term horizon among different ethanol fuel configurations.