Effects of Biofuel Crop Expansion on Green Gross Domestic Product

Abstract

Following Thailand’s Alternative Energy Development Plan, lands for sugarcane and oil palm are being expanded to support biofuel production, thus decreasing the availability of land for other crops. Not only does this lead to the change in Gross Domestic Product (GDP) but also environmental consequences. This study assessed the effects of land expansion caused by biofuel promotion on Green GDP, which is the conventional GDP after adjusting for environmental damage. A static computable general equilibrium (CGE) model combined with life cycle impact assessment was used to estimate the effects of land expansion on economic transactions and conventional GDP. Results showed that compared with the business-as-usual scenario, expanding land for biofuel crops increased the Green GDP. However, rice cultivation and milling were adversely affected by the substitution of biofuel crops. Furthermore, expanding biofuel crops slightly reduced the production capacity of some industrial sectors. The Green GDP for biofuel crop expansion policies was greatest when abandoned rice fields were utilized for agriculture and lowest when forests were transformed. Using CGE to investigate the effects of policy on Green GDP yielded results that were comprehensive for decision making. The method presented in this study can be utilized for future Green GDP research focusing on other biofuel productions.