WEST LAFAYETTE, Indiana – Capturing the interactions between biofuels and agribusiness and their links to other economic activities has been key to a unique study.
“This is the first comprehensive review of market drivers and policies for expanding biofuel production in the US to separately examine the economic impact of each of these drivers,” he said Farzad Taheripour, the Purdue University agricultural economist who led the study. “We found that RFS played a crucial role in reducing uncertainty in commodity markets, and its most significant impact was in helping farmers use their resources more efficiently. As more corn and soybeans were produced, farmers were able to bring unused fallow land back into production over time, and US annual farm incomes increased by $8.3 billion between 2004 and 2011, with an additional additional annual income of $2.3 billion between 2011 and 2016.”
Over the past 15 years, US biofuel production and consumption has increased due to various factors, including market forces and biofuel policies, he said. the Renewable fuel standard, or RFS, requires that transportation fuel sold in the United States must contain a minimum amount of renewable fuels. Examples of renewable fuels are the biofuels ethanol, most commonly made from corn in the US; and biodiesel, mostly made from soybeans. The directive was introduced in 2005 and expanded and expanded by the Energy Independence and Security Act of 2007.
The economic study examined both short- and long-term price impacts of policies and other market forces on biofuel industry expansion and was able to identify the impact of each individual market driver. A paper Details of the team’s work can be found in the journal Frontiers in Energy Research.
“A hybrid of models is required to accurately assess the situation — one model can’t capture everything,” said Taheripour, research professor of agricultural economics and a member of Purdue’s Center for Global Trade Analysis, or GTAP. “The introduction of a new policy shakes up the market, but only in the short term. In the long run, people adjust, things stabilize, and the real impact is visible. For example, we are now witnessing a shock in crude oil. People are reacting to the war in Ukraine and the uncertainty, but we don’t yet know how that will affect the market for years or decades to come.”
The team developed economic analyzes using partial and general equilibrium models, which are the best modeling frameworks for short-term and long-term analysis, respectively, he said. Through this work, the team was able to distinguish the economic impact of the RFS from other drivers that contributed to biofuel production growth, and to assess the short- and long-term price impacts of the RFS, as well as policy contributions to agricultural improvements Income and use of agricultural resources.
A key model used by the team was Purdue’s general GTAP-BIO computational equilibrium model for land use analysis related to environmental, agricultural, energy, trade and biofuel policies and measures. The model divides oil crops, vegetable oils, and meals into several categories. In addition to the standard goods and services, the model includes the production and consumption of biofuels – corn ethanol, sugar cane ethanol and biodiesel – and their by-products from dried distilling grains, commonly referred to as DDGS, and meals.
“The model accounts for the use of commodity stocks for food and fuel, and the competition or trade-offs between these and other market uses,” Taheripour said. “It also tracks land use and addresses the intensification of crop production due to technological advances, multicropping and the conversion of unused arable land to crop production. This is the first biofuel study to be able to single out all of these factors and combine that information with short-term models to capture more accurate and shorter-term impacts.”
Taheripour worked with Harry Baumes, a member of the National Center for Food and Agriculture Policy in Washington, DC, and Wallace E. Tyner, the late James and Lois Ackerman professor of agricultural economics at Purdue.
“When we analyze policy implications, we need to look comprehensive and have a broad perspective,” Taheripour said. “The goal of my research is to guide policymakers to make the best, most informed decisions that are safe and benefit all of us.”
Writer: Elizabeth K Gardner; 765-441-2024; [email protected]
source: Farzad Taheripour; 765-494-4612; [email protected]
Agricultural communication: 765-494-8415;
Maureen Manier, Division Manager, [email protected]