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Do Biofuel Subsidies Reduce Greenhouse Gas Emissions?

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  • R. Quentin Grafton
  • Tom Kompas
  • Ngo Van Long

Abstract

Conventional wisdom suggests that subsidising biofuel production will reduce greenhouse gas (GHG) emissions. This paper shows that in many cases, and for a wide range of parameter values, this is not true. Biofuel subsidies can generate supply-side response by fossil fuel producers that accelerates their rate of extraction, even in the case where fossil fuel extraction costs are stock dependent. Thus, policies designed to reduce GHG emissions may, perversely, hasten climate change.

Suggested Citation

  • R. Quentin Grafton & Tom Kompas & Ngo Van Long, 2010. "Do Biofuel Subsidies Reduce Greenhouse Gas Emissions?," International and Development Economics Working Papers idec10-01, International and Development Economics.
    • Handle: RePEc:idc:wpaper:idec10-01
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    File URL: https://crawford.anu.edu.au/degrees/idec/working_papers/IDEC10-01.pdf
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    References listed on IDEAS

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    1. The Green Paradox
      by David Stern in Stochastic Trend on 2010-12-12 17:17:00

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