A stochastic evaluation of economic and environmental effects of Taiwan's biofuel development under climate change

Abstract

Biofuel production is of particular interest to Taiwan in the face of energy insecurity and climate change. Since climate-induced impacts such as changes in regional temperature and precipitation will influence crop yields, this study accommodates the estimated yield changes and subsequently develops a two-stage stochastic programming with recourse model to investigate the economic and environmental effects of biofuel production. The results indicate that the utilization of sweet potato, along with its by-products, can result in the maximum amount of ethanol production. At higher levels of gasoline and greenhouse gas (GHG) prices, 441.2 million liters of ethanol can be produced, of which 70 million liters come from utilization of by-products. In general, economic factors such as gasoline and GHG prices have larger impacts on biofuel production than yield changes. However, although biofuel production is relative stable in the face of crop yield change, a shift in cultivars and land-use pattern is likely to occur. We show that the net emission reduction is relatively low compared to Taiwan's total emission and the aggregate value of emission reduction merits more investigation. These concerns, as well as resource reallocation and policy reformulation are also discussed in detail.