Land use and economic effects of alternative biofuel policies in Brazil and the United States

Abstract

AbstractBeing the two largest ethanol producers in the world, biofuel policies in Brazil and the United States affect both their domestic markets and the global food and biofuel economy. In this article we develop a price endogenous mathematical programming model to simulate and analyze the impacts of biofuel mandates and trade distortions on land use, agricultural commodity and transportation fuel markets, and global environment. We find that an 80% increase in total biofuel production from its 103 billion liter baseline level to the mandated 183 billion liter level in 2022 can be achieved with less than 2% increase in total cropland use in both countries. In the United States, this would occur with cellulosic biofuels meeting nearly half of the biofuels consumed and produced largely on cropland pasture and corn ethanol meeting the rest of the mandate and resulting in a 2% increase in corn price. In Brazil, the expansion in sugarcane production would be achieved by reducing land under pasture and a marginal increase in intensification of livestock production. In the aggregate, biofuel policies increase economic surplus in both countries by 1% and redistribute the benefits from agricultural consumers to agricultural producers and the fuel sector. Finally, we also find that full implementation of the mandates in North America, China, and the European Union would reduce the global life‐cycle global greenhouse gas emissions by about 5%.