Abstract
The interaction among the fuel ethanol industry, the technology system, and the market system has a substantial effect on the growth of the fuel ethanol industry which plays a key role in the formation of a sustainable energy system in China. However, we know little about the relationships among them and it is difficult to explore the nexus using econometric method due to the lack of statistics on China’s fuel ethanol industry. This paper develops a history-friendly coevolutionary model to describe the relationships among the fuel ethanol industry, the technology system, and the market system in China. Based on the coevolutionary model, we further assess the impacts of entry regulations, production subsidies, R&D subsidies, and ethanol mandates on the growth of the fuel ethanol industry in China using a simulation method. The results of historical replication runs show that the model can appropriately reflect the multidirectional causalities between the fuel ethanol industry, the technology system, and the market system. We also found that entry regulation is conducive to weakening the negative economic impacts induced by the growth of the grain-based fuel ethanol industry without affecting the long-term total output of the industry; production subsidies to traditional technology firms are helpful for the expansion of the fuel ethanol industry, but they also impede technology transfer in the industry; only when firms inside the industry are not in the red can R&D subsidies promote technological progress and then further accelerate the growth of the fuel ethanol industry; the ethanol mandate has a significant impact on industrial expansion only when a production subsidy policy is implemented simultaneously. Our findings suggest that more attention could be paid to consider the cumulative effects caused by coevolutionary mechanisms when policymakers assess the effects of exogenous policies on the growth of the fuel ethanol industry. More attention also could be paid to the conditions under which these policies can work effectively.
Highlights
Fuel ethanol helps to reduce harmful emissions from vehicles, contributing to the fight against climate change and the pursuit of clean mobility [1]
Given that the ultimate purpose of our paper is to understand how the fuel ethanol industry has grown, we mainly focused on the following stylized facts about the number of firms and the output of the fuel ethanol industry in China, which are derived from a detailed analysis of the industrial history and from the existing appreciative literature on the fuel ethanol industry in China [58,59]
The interaction among the fuel ethanol industry, the technology system, and the market system has a substantial effect on the growth of the fuel ethanol industry which plays a key role in the formation of a sustainable energy system in China
Summary
Fuel ethanol helps to reduce harmful emissions from vehicles, contributing to the fight against climate change and the pursuit of clean mobility [1]. As a kind of renewable energy made from sustainable biomass materials, fuel ethanol is an ideal substitute for the non-renewable fossil fuels [2]. Fuel ethanol is expected to play a key role in the formation of a sustainable energy system. China is the largest consumer of fossil fuels and attaches great importance of the development of the fuel ethanol industry. In 2018, the fuel ethanol production capacity in China reached 3.22 million. China has become the third-largest fuel ethanol consuming and producing country, following
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