Impact Of The Policy Of Energy Taxation On The Cost Of Biodiesel In China

Increasing awareness of the environmental damage caused by the current fossil fuel-based energy system and rising fossil fuel prices explain,the growing interest in renewable energy sources.Given such,biomass-based energy is a promising alternative to fossil fuels because of the versatility of its use,its potential for greatly decreasing greenhouse gas emissions and a reduced dependence on foreign fossil fuels.However,in combination with a global growing demand for food,this could lead to a food-fuel competition for bio-productive land.The concern,however,is that an increase in biomass plantations will reduce the land available for agricultural production.The aim is this study is to investigate the effect of taxing conventional diesel production in combination with subsidizing biomass on the production and price of biomass and agricultural commodities and on land reallocation and on the production and price of conventional diesel and biodiesel.We develop a partial equilibrium model to illustrate the main economic relations between agricultural and fuel sectors,with special attention to biomass production and the biodiesel sector.As a case study for China,we choose six sectors,comprised of cereals,wheat,rape,soybean,conventional diesel and biodiesel,and four elements,including of land,labor,capital and crude oil.Through comparatively static analysis,results shows that an only diesel tax of 50% decrease the consumption of diesel nearly 27%,and the consumption of biodiesel increase 7.3 times.With reduction of the production and consumption of rice & wheat, the price of which have a little rise 0.1%.Combining a diesel tax of 50%with a 20% subsidy on biomass production in scenario 2,the increase of production of biodiesel is larger than scenario 1,to 31.The consumption of diesel is cut down 36%.With the greater demand for biodiesel,the production of rape and soybean respectively has 18.7% and 15.4%increase.At the same time,the crops in the model,rice and wheat,the price of which increase respectively 0.3%and 0.4%.As the land competition between the crops and the biomasses,the price of land rise 2%and the acreage for the crops reduce 5%.With the sensitivity analysis for parameter,it shows that the substitution elasticity for consumption has prominence influence to the welfare and the share of biodiesel.