Investment in Cellulosic Biofuel Refineries: Do Waivable Biofuel Mandates Matter?

13 Pages Posted: 8 Apr 2020

See all articles by Ruiqing Miao

Ruiqing Miao

Auburn University

David Hennessy

Iowa State University

Bruce A. Babcock

Iowa State University - Department of Economics

Date Written: April 2012

Abstract

We develop a conceptual model to study the impact of mandate policies on stimulating investment in cellulosic biofuel refineries. In a two‐period framework, we compare the first‐period investment level (FIL) under three scenarios: laissez‐faire, non‐waivable mandate (NWM) policy, and waivable mandate (WM) policy. Results show that when plant‐level marginal costs are increasing then both NWM policy and WM policy may stimulate FIL. The WM policy has a smaller impact than does the NWM policy. When the plant‐level marginal costs are constants, however, WM policy does not increase FIL but does increase the expected profit of more efficient investors.

Keywords: cellulosic biofuels, investment, Renewable Identification Numbers, waivable mandate

Suggested Citation

Miao, Ruiqing and Hennessy, David and Babcock, Bruce A., Investment in Cellulosic Biofuel Refineries: Do Waivable Biofuel Mandates Matter? (April 2012). American Journal of Agricultural Economics, Vol. 94, Issue 3, pp. 750-762, 2012, Available at SSRN: https://ssrn.com/abstract=3571696 or http://dx.doi.org/10.1093/ajae/aar142

Ruiqing Miao (Contact Author)

Auburn University ( email )

Auburn, AL 36849
United States

David Hennessy

Iowa State University

Bruce A. Babcock

Iowa State University - Department of Economics ( email )

Heady Hall
578 Heady Hall
Ames, IA 50011-2063
United States

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