The choice of cooperation mode in the bioenergy supply chain with random biomass feedstock yield

Abstract

A successful cooperation mode between bioenergy producers and farmers can effectively promote the supply of biomass feedstock, which plays an important role in the bioenergy industry. In this study, we examine two prevailing cooperation modes in bioenergy supply chain, namely contract farming (CF) and land as shares (LS). This study assesses how each cooperation mode influences the planting acreage, the feedstock quality and the profits of supply chain participants. Under CF, the farmer and the bioenergy producer sign a contract in which the bioenergy producer purchases all feedstock produced by the farmer. Under LS, the farmer converts their land use rights into company shares, so that the bioenergy producer will share part of sales revenue with the farmer. First, we find that the optimal planting scale of biomass feedstock under LS is larger than that under CF when the bioenergy market size is sufficiently large. If the market size is relatively small, the supply quantity of biomass feedstock under LS depends on the marginal value of feedstock quality. Second, when the bioenergy market is sufficiently large, the farmer and the bioenergy producer under LS can achieve a win-win situation, which improves the reliability of the bioenergy supply chain. Third, we extend our model to the case where the government implements subsidies for biomass feedstock. We find that when the subsidy is high enough, the biomass feedstock quantity under LS will be larger. In addition, government subsidy does not necessarily improve the profit of all supply chain participants and excessive government subsidy may adversely affect the reliability of the bioenergy supply chain.