Ruhr Economic Papers

Ruhr Economic Papers #38

Promoting Biofuels: Implications for Developing Countries

by Jörg Peters and Sascha Thielmann

RWI, 01/2008, 20 S./p., 8 Euro, ISBN 978-3-86788-036-7



Interest in biofuels is growing worldwide as concerns about the security of energy supply and climate change are moving into the focus of policy makers. With the exception of bioethanol from Brazil, however, production costs of biofuels are typically much higher than those of fossil fuels.As a result,promotion measures such as tax exemptions or blending quotas are indispensable for ascertaining substantial biofuel demand.With particular focus on developing countries, this paper discusses the economic justification of biofuel promotion instruments and investigates their implications. Based on data from India and Tanzania, we find that substantial biofuel usage induces significant financial costs. Furthermore, acreage availability is a binding natural limitation that could also lead to conflicts with food production.Yet, if carefully implemented under the appropriate conditions, biofuel programs might present opportunities for certain developing countries.

JEL-Classification: O38, Q42, Q56

Keywords: Renewable energy; environmental policy; government policy; economic development

Published as:

Peters, J. and S. Thielmann (2008), Promoting Biofuels: Implications for Developing Countries. Energy Policy 36 (4): 1538-1544.