An Integrated Assessment of Energy Crops Production in Taiwan

Abstract

For countries with scarce fossil fuel resources and limited cropland, how would energy crops production increase energy security and affect land use and farmer’s income? To address such questions, we develop an integrated assessment model to evaluate land use changes and economic impacts of energy crop policy in Taiwan. The model consists of several submodels linked together interactively, representing different components of the integrated agricultural-energy-environmental-economic system. Five major findings and policy implications can be drawn from our study: 1) There is lack of economic incentives for farmers to produce energy crops using set-aside croplands without government subsidies. The required subsidies for energy crops production will be 50% to 120% higher than the original subsidies for set-aside croplands. 2) There is very little economic incentive for farmers to switch to energy crop production from existing crop production even with government subsidies. Therefore, the impacts on the supply and demand of existing agricultural crops are very minor. 3) Among four soil grades, more than half of the total energy crop output comes from Grade II soil, which is mostly located in the West Tainan County. This implies that energy crop mills and refining plants should be located in the West Tainan County to minimize the transportation costs. 4) The results from general equilibrium modeling show that the Miscellaneous Crops sector will incur the largest increase in output due to energy crop production. In the case of sunflower production, the ratio of total output increase to total government subsidies is about 1.12, which is the only energy crop with benefit-cost ration greater than 1.0. This implies that sunflower is the most economical feasible choice among three energy crops. 5) In the case of sunflower production, the total employment and average monthly wage rates in the Agricultural Sector will increase by 6.7% and 71.7%, respectively. This indicates that sunflower production will have significant positive economic impacts on the employment and income of farmers in Tainan County.