Are There Carbon Savings from US Biofuel Policies? The Critical Importance of Accounting for Leakage in Land and Fuel Markets

Abstract

We develop a multi-market model that integrates land, fuel, and food markets, and link it with an emissions model to quantify the importance of carbon leakage relative to the intended emissions savings resulting from the Renewable Fuel Standard (RFS) for conventional biofuels. We find that the RFS unambiguously increases emissions, with leakage from land and fuel markets offsetting 70.9% and 62.3% the intended emissions savings, respectively. Even when the Volumetric Ethanol Excise Tax Credit is phased out, the RFS provides at best modest emissions reductions.