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Impact of Switching Production to Bioenergy Crops: The Switchgrass Example January 2005

Author

Listed:
  • Scott McDonald

    (Department of Economics, The University of Sheffield)

  • Karen Thierfelder

Abstract

This paper reports the results of a series of simulations that evaluate the general equilibrium effects of substituting crude oil by biomass, specifically switchgrass, in the production of petroleum in the USA. The simulations are inspired by debates over the implications for developing countries if agricultural policies in the USA are changed so that agricultural land is transferred from the production of cereals and other crops to biomass production. The results confirm expectations that such a policy shift would raise cereal and other agricultural prices, due to a general reduction in food production in the USA. However, the reduction in the demand for crude oil in the USA causes terms of trade effects that more than offset any potential benefits for developing countries due to the depreciation of their exchange rates, causing a general decline in economic welfare. Moreover, the declines in welfare are proportionately greater for developing countries due to their small levels of production of the commodities whose prices increase with the change in USA agricultural production.

Suggested Citation

  • Scott McDonald & Karen Thierfelder, 2005. "Impact of Switching Production to Bioenergy Crops: The Switchgrass Example January 2005," Working Papers 2005002, The University of Sheffield, Department of Economics, revised Jan 2005.
    • Handle: RePEc:shf:wpaper:2005002
    as

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    File URL: http://www.shef.ac.uk/content/1/c6/03/91/72/SERP2005002.pdf
    File Function: First version, 2005
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    File URL: http://www.shef.ac.uk/content/1/c6/03/91/72/SERP2005002.pdf
    File Function: Revised version, 2005
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    References listed on IDEAS

    as
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    2. McDonald, Scott & Thierfelder, Karen, 2004. "Deriving A Global Social Accounting Matrix From Gtap Versions 5 And 6 Data," Technical Papers 28716, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    3. Devaragan, Shantayanan & Lewis, Jeffrey D. & Robinson, Sherman, 1990. "Policy lessons from trade-focused, two-sector models," Journal of Policy Modeling, Elsevier, vol. 12(4), pages 625-657.
    4. Kilkenny, Maureen & Robinson, Sherman, 1990. "Computable general equilibrium analysis of agricultural liberalization: Factor mobility and macro closure," Journal of Policy Modeling, Elsevier, vol. 12(3), pages 527-556.
    5. Hertel, Thomas, 1997. "Global Trade Analysis: Modeling and applications," GTAP Books, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University, number 7685, December.
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    8. Devarajan, Shantayanan & Lewis, Jeffrey & Robinson, Sherman, 1990. "Policy Lessons from Two-Sector Models," CUDARE Working Papers 198566, University of California, Berkeley, Department of Agricultural and Resource Economics.
    9. Graham Pyatt, 1991. "SAMs, THE SNA AND NATIONAL ACCOUNTING CAPABILITIES," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 37(2), pages 177-198, June.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Biomass; Energy; Computable General Equilibrium; USA agricultural policy.;
    All these keywords.

    JEL classification:

    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy; Animal Welfare Policy

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