Biofuel prices: Drivers and underlying assumptions · 2019-11-11 · Crude oil prices affect...
Transcript of Biofuel prices: Drivers and underlying assumptions · 2019-11-11 · Crude oil prices affect...
Biofuel prices: Drivers and underlying assumptions
Céline GinerOECD Trade and Agriculture
Roundtable on the Cost of Biofuels March 28 2012
Biofuel prices: drivers and underlying assumptions
Background:Modelling framework
OECD Trade and Agriculture Directorate
2
• AGLINK-COSIMO model:– Global coverage– Temperate zone agricultural commodities:
• Crops• Crop products• Meat commodities• Dairy• Biofuels
• Medium-term projections published annually in the OECD-FAO Agricultural Outlook: www.agri-outlook.org
AGLINK-COSIMO and the Outlook
Role for the OECD and the FAO
in assessing the impacts of policies on:
– agricultural and biofuel markets
– achievement of policy objectives(GHG mitigation including land use changes)
Why modelling biofuels in AGLINK-COSIMO?
Increased links between energy and agricultural sectors
Development of biofuels has been driven by policies
Basic Characteristics of the Modelling ApproachIssue: Ethanol Biodiesel
1st-generation biofuels
Additional demand for cereals, sugar cropsBy-production of animal feed
Additional demand for vegetable oils
2nd-generation
biofuels
Exogenous path same
Use in motor vehicles
Low-level blends and FFVs demand is induced by theethanol / gasoline price ratio
Overall share in diesel fuels induced by thebiodiesel/diesel priceratio
Biofuelsupportpolicies
- Mandates- Trade barriers (tariffs)- Tax concessions- Direct subsidies
same
A major challenge: production costs
World ethanol and biodiesel markets:an overview
OECD Trade and Agriculture Directorate
7
Growing importance of biofuels
Links between biofuels and agricultural markets
0%
5%
10%
15%
20%
25%
30%
35%
Sugar cane Coarse grains Sugar beet wheat Vegetable oils
Shareoffeedstockusedtoproducebiofuelsinglobalproduction
2005 2011 2021
World biofuel prices
Key drivers and underlying assumptions
1/ Crude oil prices2/ Policies3/ Availability of second generation biofuels
OECD Trade and Agriculture Directorate
11
1/ Crude oil prices
Crude oil prices affect biofuel and agricultural markets :
1/ Fossil fuels are directly linked to crude oil prices
effect on the demand for biofuels
2/ Energy: important share in agricultural production costs and is required in the conversion of feedstock to biofuels
effect on the supply of biofuels
OECD Trade and Agriculture Directorate
12
1/ Crude oil prices
OECD Trade and Agriculture Directorate
13
2/ Biofuel policies
Production and use is driven by:- Renewable Fuel standard (RFS2) Final Rule in the US- Renewable Energy Directive in the EU:
OECD Trade and Agriculture Directorate
14
European Union ethanol market
European Union biodiesel market
3/ Availability of second generation biofuels
Development of second generation biofuels depends:- on the advancement of R&D in coming years- on current investments - on the continuation of biofuel policies / mandates
OECD Trade and Agriculture Directorate
17
Key uncertainties
• Evolution of policies in major OECD countries
• Development of new technologies
• Export potential of developing countries especially Brazil
• Sustainability criteria
For more information
• Visit our website: www.oecd.org/agriculture
• Contact us: [email protected]
• Follow us on Twitter: @OECDagriculture
Trade and Agriculture Directorate
19
• Direct support to producers: It generates a wedge between wholesale and incentive price directly enters supply response
• Import tariff:It generates a wedge between world and domestic prices directly enters price transmission
• Tax credit:It generates a wedge between wholesale and retail prices directly enters price link
• Blending obligation:It creates a lower bound to blending shares enters the blending share equations
• Biofuel targets:Not a measure that drives private decisions ignored
Representation of support policies
• Production of ethanol and biodiesel– Production capacity building, capacity use
• Depending on biofuel prices and production costs (crop prices) and related support measures
• Dynamics of supply response– Crop use / by-product output in fixed but dynamic
proportions- 2nd generation biofuel production is exogenous
Principles of the biofuel modules (1/2)
• Fuel use of ethanol– 3 different levels (additive, low-level blend, ffv)– Shares depend on ethanol-gasoline price ratio and
related support measures, blending obligations– Neat fuel (or E85) share also depending on the FFV
share in vehicle fleet• Fuel use of biodiesel
– Simpler representation depending on biodiesel-diesel price ratio and related support measures, blending obligations
Principles of the biofuel modules (2/2)
US ethanol
US ethanol
Brazil ethanol
Ethanol production and use in 2021
Biodiesel production and use in 2021