| Summary: | This dissertation examines the influence that economic and technological factors
have on the penetration of biodiesel and ethanol into the transportation fuels market.
This dissertation focuses on four aspects. The first involves the influence of fossil fuel
prices, because biofuels are substitutes and have to compete in price. The second
involves biofuel manufacturing technology, principally the feedstock-to-biofuel
conversion rates, and the biofuel manufacturing costs. The third involves prices for
greenhouse gas offsets. The fourth involves the agricultural commodity markets for
feedstocks, and biofuel byproducts. This dissertation uses the Forest and Agricultural
Sector Optimization Model-Greenhouse Gas (FASOM-GHG) to quantitatively examine
these issues and calculates equilibrium prices and quantities, given market interactions,
fossil fuel prices, carbon dioxide equivalent prices, government biofuel subsidies,
technological improvement, and crop yield gains.
The results indicate that for the ranges studied, gasoline prices have a major
impact on aggregate ethanol production but only at low prices. At higher prices, one
runs into a capacity constraint that limits expansion on the capacity of ethanol
production. Aggregate biodiesel production is highly responsive to gasoline prices and
increases over time. (Diesel fuel price is proportional to the gasoline price). Carbon
dioxide equivalent prices expand the biodiesel industry, but have no impact on ethanol
aggregate production when gasoline prices are high again because of refinery capacity
expansion. Improvement of crop yields shows a similar pattern, expanding ethanol production when the gasoline price is low and expanding biodiesel. Technological
improvement, where biorefinery production costs decrease over time, had minimal
impact on aggregate ethanol and biodiesel production. Finally, U.S. government
subsidies have a large expansionary impact on aggregate biodiesel production, but only
expand the ethanol industry at low gasoline prices. All of these factors increase
agricultural welfare with most expanding producer surplus and mixed effects on
consumers.
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