Renewable Fuel Standard: Implications for Land Use Changes in Malaysia and Indonesia

plantations in Malaysia and Indonesia (M&I). The main focus of this literature was the environmental damage done when peat land is converted to palm plantation. The existing literature also has examined land use implications of biofuel production and policy in considerable detail. However, no major attempt has been made to highlight interactions between US biofuel policy and land use changes in M&I. This paper offers the first comprehensive analysis on the extent to which production of biofuels in US affects markets for vegetable oils, in particular for palm oil, and examines their land use implications. To achieve the goal of this paper, we modified and used the most recent version of the GTAP-BIO model that has been frequently used in analyzing the environmental, energy, biofuel, agricultural, and trade issues and policies. Unlike the earlier version of this model, the new model takes into account land intensification in the livestock industry due to expansion in supplies of oilseed meals. An expansion in the US soy biodiesel by 0.5 billion gallons increases the US imports of palm oil by 0.4% and that generates an expansion in palm plantation in M&I by 0.48% with only 6500 hectares expansion in cropland due to deforestation when all vegetable oils are included in the model, and the rate of substitution among vegetable oils in US is about 0.5. In this case, the induced land use change (ILUC) emissions for soy biodiesel produced in US is about 17.5 g CO2e MJ-1. With a substitution elasticity of 2 among vegetable oils, the same expansion in biodiesel increases US imports of palm oil by 2.2% but that does not lead to more production of palm oil in M&I, as there is greater global trade of and substitution between other vegetable oils. Even some countries extend palm plantation on lands with lower carbon content compared to M&I. With a substitution elasticity of 2, ILUC emissions for soy biodiesel drops to 16.6 g CO2e MJ-1.