Effect of biofuel on agricultural supply and land use

Abstract

While biofuels were introduced, in part, to reduce greenhouse gas emissions through replacing fossil fuels, comparing their impact to conventional sources has been difficult. This is largely due to the challenges of quantifying indirect land use change due to biofuels, which has proved controversial. This paper introduces a stylized, dynamic framework to analyze the evolution of land use expansion as well as deforestation over time. Our analysis suggests that land use change is a dynamic process and that relationships between variables are not regular over time and space. Technological change and effective environmental policy, of both agriculture and forests, can curtail deforestation. Outcomes of the model are illustrated with empirical data from the U.S. and Brazil. In the United States, deforestation does not lead directly to cropland expansion, as there is a transition period during which land is used as pasture or left idle. In Brazil, with four times more land in pasture or underutilized land than in cropland, there is significant potential for cropland expansion from this underutilized land.