Biorenewable fuels at the intersection of product and process flexibility: A novel modeling approach and application

In recent years, governments, industry and academia have all invested increasing amounts of time, effort and resources into the production of biorenewable fuels. This interest owes, among other reasons, to our planet's growing demand for energy, depletion of fossil fuel resources and the negative effect of drilling for and burning fossil fuels on the health of our eco-systems and atmospheric chemistry. However, research suggests that biorenewable fuels have the potential to cause environmental and social calamities of their own—especially when produced in the same ways and at the expense of conventional food production. This paper proposes novel supply chains and land use plans for advanced biorenewable fuels which are measured for cost and environmental impact. A two-stage Stackelberg leader-follower mathematical optimization model is proposed. The model uses a series of integrated and sequenced linear programs to optimize the benefits of leveraging biodiversity for the production of advanced biorenewable fuels. Numerical experiments with our model show statistically significant cost, land use and environmental improvements on the order of 10% to 25%. Because the model captures two types of flexibilities (product and process) interfacing across firms, implications are drawn for production systems in other industries where distinct flexibilities meet and environmental impacts are critical.