On the trade-offs of regulating multiple unpriced externalities with a single instrument: Evidence from biofuel policies

Joel R. Landry, Antonio M. Bento

Research output: Contribution to journalArticle

Abstract

We develop an analytical and numerical model that integrates land, fuel, and food markets to evaluate the welfare implications of the U.S. Renewable Fuel Standard (RFS). Each dollar reduction in the external costs of oil dependency comes at the expense of additional environmental external costs of $0.53. Conditional on the categories of external benefits we consider, the RFS fails a benefit–cost test when excluding the change in the trade balance, with net costs totaling $1.4 billion in 2015. Further, policymakers would have to value the external costs of oil dependency at $1.05 per gallon of gasoline in order for the RFS to pass a benefit–cost test, which is nearly five times larger than central estimates of the oil premium.

Original languageEnglish (US)
Article number104557
JournalEnergy Economics
Volume85
DOIs
StatePublished - Jan 2020

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Biofuels
Costs and Cost Analysis
Oils
Costs
Gasoline
Numerical models
Analytical models
Food
Trade-offs
Externalities
External costs
Oil

All Science Journal Classification (ASJC) codes

  • Structural Biology
  • Biochemistry
  • Molecular Biology
  • Economics and Econometrics
  • Energy(all)

Cite this

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On the trade-offs of regulating multiple unpriced externalities with a single instrument : Evidence from biofuel policies. / Landry, Joel R.; Bento, Antonio M.

In: Energy Economics, Vol. 85, 104557, 01.2020.

Research output: Contribution to journalArticle

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