Exploring path dependence, policy interactions, and actor behavior in the German biodiesel supply chain

J.A Moncada,M Junginger,Z Lukszo,A Faaij,M Weijnen

doi:10.1016/j.apenergy.2017.03.047

Abstract

Biofuel production is not cost competitive and thus requires governmental intervention. The effect of the institutional framework on the development of the biofuel sector is not yet well understood. This paper aims to analyze how biofuel production and production capacity could have evolved in Germany in the period 1992–2014. The effects of an agricultural policy intervention (liberalization of the agricultural market) and a bioenergy policy intervention (a tax on biodiesel after an initial exemption) are explored. Elements of the Modeling Agent systems based on Institutional Analysis (MAIA) framework, complex adaptive systems (CAS) theory, and Neo Institutional Economics (NIE) theory were used to conceptualize and formalize the system in an agent-based model. It was found that an early liberalization of the agricultural market led to an under-production of biodiesel; a late liberalization led to the collapse of biodiesel production. An early introduction of the biodiesel tax led to stagnation in biodiesel production and production capacity; a late introduction led to an increase in sunk costs provided that the biofuel quota is binding. Also, a lack of agents’ adaptation mechanism to forecast prices led to a decrease in patterns of biodiesel production when an external shock was introduced in the system. In sum, we argue that system behavior is influenced by individual behavior which is shaped by institutions.

Highlights

Concern has grown in the last decades over the issue of climate change
The study was conducted to answer the following research question: What patterns in biodiesel production and production capacity are generated as a result of applying different policy interventions in Germany in the period 1992–2014? To answer that question, an agent-based model was developed
The model was used to explore the impact of the timing of the enactment of specific agricultural and bioenergy policies on patterns in biodiesel production and production capacity

Summary

Introduction

Concern has grown in the last decades over the issue of climate change Strategies to tackle this problem include the production of energy from solar, wind, biomass, and other renewable sources. Despite the benefits of biofuels, biofuel production is not costcompetitive and requires governmental intervention Policy instruments such as blending mandates, tax credits or tax exemptions, subsidies, and import tariffs are used to stimulate biofuel production and consumption in the world [4]. The literature has focused on reducing the price gap between biofuels and fossil fuels by optimizing the whole supply chain [5,6,7,8], by improving the logistics [9,10], and developing more efficient technologies [11,12,13]. There is clear evidence that biofuel supply chains cannot be created and developed in absence of governmental support2 [4,15], and yet the scientific literature has focused primarily on technological developments [12,13,16,17] and their optimization [18,19,20]

Objectives

Discussion

Conclusion