TY - JOUR AU - Chen, Xiaoguang AU - Huang, Haixiao AU - Khanna, Madhu AU - Önal, Hayri TI - Meeting the Mandate for Biofuels: Implications for Land Use, Food and Fuel Prices JF - National Bureau of Economic Research Working Paper Series VL - No. 16697 PY - 2011 Y2 - January 2011 DO - 10.3386/w16697 UR - http://www.nber.org/papers/w16697 L1 - http://www.nber.org/papers/w16697.pdf N1 - Author contact info: Xiaoguang Chen E-Mail: xgchenist@gmail.com Haixiao Huang Institute for Genomic Biology University of Illinois at Urbana Champaign 1206 West Gregory Dr Urbana, IL 61801 E-Mail: hxhuang@illinois.edu Madhu Khanna Department of Agricultural and Consumer Economics University of Illinois at Urbana Champaign 326 Mumford Hall 1301 Gregory Dr Urbana, IL 61801 E-Mail: khanna1@illinois.edu Hayri Onal Department of Agricultural and Consumer Economics University of Illinois at Urbana Champaign 326 Mumford Hall 1301 Gregory Dr Urbana, IL 61801 E-Mail: h-onal@illinois.edu M1 - published as Xiaoguang Chen, Haixiao Huang, Madhu Khanna, Hayri Önal. "Meeting the Mandate for Biofuels: Implications for Land Use, Food, and Fuel Prices," in Joshua S. Graff Zivin and Jeffrey M. Perloff, editors, "The Intended and Unintended Effects of U.S. Agricultural and Biotechnology Policies" University of Chicago Press (2012) M3 - presented at "Agricultural Economics Conference", March 4-5, 2010 AB - Biofuel production is being promoted through various policies such as mandates and tax credits. This paper uses a dynamic, spatial, multi-market equilibrium model, Biofuel and Environmental Policy Analysis Model (BEPAM), to estimate the effects of these policies on cropland allocation, food and fuel prices, and the mix of biofuels from corn and cellulosic feedstocks over the 2007-2022 period. We find that the biofuel mandate will increase corn price by 24%, reduce the price of gasoline by 8% in 2022, and increase social welfare by $122 B (0.7%) relative to Business As Usual scenario. The provision of volumetric tax credits that accompany the mandate significantly changes the mix of biofuels produced in favor of cellulosic biofuels and reduces the share of corn ethanol in the cumulative volume of biofuels produced from 50% to 10%. The tax credits reduce the adverse impact of the mandate alone on crop prices and decrease the price of biofuels. However, they impose a welfare cost of $79 B compared to the mandate alone. These results are found to be sensitive to the rate of growth of crop productivity, the costs of production of bioenergy crops, and the availability of marginal land for producing bioenergy crops. ER -