1. Liberalization of Trade in Biofuels: Implications for GHG Emissions and Social Welfare Xiaoguang Chen Madhu Khanna Hayri Önal University of Illinois at Urbana-Champaign

2. Motivations for Biofuels Energy Security Reducing dependence on foreign oil Rising oil prices Greenhouse Gas Mitigation Larger potential for reduction in GHG emissions relative to gasoline Rural Economy Development

3. Energy Independence and Security Act, 2007 Mandates: 36 B gallons to be produced annually by 2022 –Of this, 21 B gallons to come from advanced biofuels that reduce greenhouse gas emissions by at least 50%

4. Some Options for Second-Generation Biofuels Crop and Forest Residues: Corn stover, wheat straw Dedicated energy crops: Perennial grasses Miscanthus, Switchgrass Switchgrass Miscanthus

5. Food Conservation and Energy Act of 2008 Reduced tax credit for corn ethanol to $0.45/gallon Provides subsidy of $1.01/gallon for cellulosic ethanol Assistance for cellulosic biorefineries, R&D Biomass Crop Assistance Program: $45/ton for collection, harvesting, storage and transportation of cellulosic feedstocks for 2 years 75% cost share for establishment costs

6. Biofuel Trade Policy A 2.5% ad valorem tariff and a per unit tariff of $0.54 per gallon against Brazilian sugarcane ethanol Duty-free ethanol from Caribbean Countries with quantity quota Duty-free ethanol restricted to no more than 7% of U.S. ethanol consumption

7. Research Questions Implications of expanding biofuel production under biofuel policies For land use, crop production, food and fuel prices and GHG emissions Costs to the economy, for consumer and producers in agricultural and fuel markets Economically viable mix of feedstocks and resulting spatial pattern of land use Simulated yields of Miscanthus and Switchgrass Availability of land for food and fuel crops

8. Miles Panel a: Vehicle Miles $ Gasoline Panel b: Domestic Gasoline $ Gasoline Panel d: Domestic Ethanol PwMPwM Pw0Pw0 $ Panel e: Ethanol Trade $ Panel c: Gasoline Trade $ Sugarcane ethanol Corn ethanol P0P0 PMPM No Intervention Mandate Rest of World Gasoline Supply to the US US Demand for Gasoline Import US Gasoline Supply US Gasoline Demand US VMT Demand US Ethanol Supply US Ethanol Demand Rest of World Ethanol Supply to the US US Demand for Ethanol Import Impact of A Mandate

9. Miles Panel a: Vehicle Miles $ Gasoline Panel b: Domestic Gasoline $ Gasoline Panel d: Domestic Ethanol PwMPwM Pw0Pw0 $ Panel e: Ethanol Trade $ Panel c: Gasoline Trade Ethanol Sugarcane ethanol Corn ethanol P0P0 PMPM Rest of World Gasoline Supply to the US US Demand for Gasoline Import US Gasoline Supply US Gasoline Demand US VMT Demand US Ethanol Supply US Ethanol Demand Rest of World Ethanol Supply to the US US Demand for Ethanol Import No Intervention Mandate Subsidy and Mandate P w MS Impact of A Mandate and A Subsidy

10. Miles Panel a: Vehicle Miles $ Gasoline Panel b: Domestic Gasoline $ Gasoline Panel d: Domestic Ethanol $ Panel e: Ethanol Trade $ Panel c: Gasoline Trade Ethanol Sugarcane ethanol Corn ethanol P MS Rest of World Gasoline Supply to the US US Demand for Gasoline Import US Gasoline Supply US Gasoline Demand US VMT Demand US Ethanol Supply US Ethanol Demand Rest of World Ethanol Supply to the US US Demand for Ethanol Import Subsidy and Mandate P w MS t P w MST Pw*Pw* Subsidy, Mandate and Tariff Impact of A Mandate with Subsidies and Tariff

11. Dynamic Land Use Model and Data Biofuel and Environmental Policy Analysis Model (BEPAM) Multi-market; Dynamic; Spatial; Partial Equilibrium Multi-markets in agricultural sector: several crops, sugar, livestock, DDGs Fuel sector with corn ethanol, cellulosic ethanol, imported gasoline and ethanol Food and fuel prices, demand for cropland determined within model 16 year planning period (2007-2022); 10-year rolling horizon; annual time scale Data Simulated yields of bioenergy crops: miscanthus and switchgrass CRD-level data on productivity, returns to various activities CRD-level life-cycle analysis Cropland expansion based on crop price expectation from the conversion of marginal land (idle cropland and cropland pasture) Yield changes for major crops

12. Yield of Miscanthus and Switchgrass Miscanthus Corn Yields

14. Life Cycle GHG Emissions of Biofuels

15. Key Results

16. Fuel Consumption and the Mixes of Biofuels

17. Food and Fuel Prices

18. Cropland Allocation

19. SwitchgrassMiscanthus Corn StoverWheat Straw Spatial Distribution of Cellulosic Feedstocks under Mandate Alone in 2022

20. Corn StoverWheat Straw SwitchgrassMiscanthus Spatial Distribution of Cellulosic Feedstocks under Mandate and Subsidies in 2022

21. GHG Emissions and Social Welfare

22. Conclusions  A diverse mix of cellulosic feedstocks likely to be used to meet the RFS  Heavy reliance on miscanthus  The RFS provides the assurance needed for industry to invest in cellulosic biofuels  But biofuel mandates and tax credits may not necessarily be good climate policy  Imposing tariffs decreases ethanol imports and increase GHG emissions and social welfare  Small effects on agricultural and fuel sectors