Allocating Shadow Prices in a Multi-objective Chance Constrained Problem of Biodiesel Blending

Abstract

Biodiesel can be produced from different vegetable oils and the choice of the blend (mix of oils) to be used for biodiesel production has an important impact on its cost and environmental performance. This chapter presents a model that determines the optimal blend that minimizes production costs and GHG emissions and assesses the influence of technical constraints on the decision objectives. For this purpose, an algorithm for the allocation of shadow prices to the constituent parts of the composite objective function was implemented. The technical constraints in the model control biodiesel properties based on the feedstock’s chemical composition, taking into account inherent compositional uncertainty. The information obtained from the shadow prices allowed the identification of which technical constraint limits GHG reduction and cost effectiveness. Thus, the model can be used for evaluating the effects of technical progress or policy mandatory measures relatively to the cost and GHG emissions of the biodiesel production process.