Optimal design of supply chains for second generation biofuels incorporating European biofuel regulations

Abstract

Expected changes in European biofuel regulations lead to uncertainty in supply chain planning for second generation biofuel industries. Previous studies used optimization to design biofuels' supply chains and a few of them analyzed the impact of selected biofuel policy instruments on sustainability targets. This study presents a mixed integer programming model for the optimal design of second generation biofuel supply chains considering all policy instruments of European biofuel regulations. The model maximizes the net present value of second generation biofuel supply chains considering time-dependent quotas for biofuel market shares and greenhouse gas emission savings. The model includes multiple counting of second generation biofuel towards meeting biofuel market share targets and captures all greenhouse gas emissions of the second generation biofuel supply chain including land use change emissions. We demonstrated the use of the model through the case study of second generation biodiesel in a German region, and evaluated the sensitivity of the optimal solution to model parameters and policy instruments' levels. A set of remarks were made regarding the impact of policy instruments on the performance of second generation biodiesel supply chain under study. Future work entails the application of the analysis to the aggregate level in the European Union.