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Impact of energy prices and cellulosic biomass supply on agriculture, energy, and the environment: An integrated modeling approach
Citation:
Dodder, R., O. Kaplan, A. Elobeid, S. Tokgoz, S. Secchi, AND L. Kurkalova. Impact of energy prices and cellulosic biomass supply on agriculture, energy, and the environment: An integrated modeling approach. Energy Economics. Elsevier B.V., Amsterdam, Netherlands, 51:77-87, (2015).
Impact/Purpose:
This study investigates the dynamics in agricultural and biofuel markets under alternative price scenarios for both crude oil and natural gas.
Description:
The accelerated growth in biofuels markets has both created and reinforced linkages between agricultural and energy markets. This study investigates the dynamics in agricultural and biofuel markets under alternative price scenarios for both crude oil and natural gas. Two energy price scenarios are simulated using an integrated modeling framework previously developed to characterize and quantify the dynamic linkages between the energy system and agricultural markets. The integrated modeling framework incorporates both direct and indirect interactions. Comparison of the scenarios shows that biofuel markets are affected more by crude oil price changes than by changes in natural gas prices. However, natural gas prices shift the biofuel production mix. Higher natural gas prices coupled with high crude oil prices provide the largest impetus to the cellulosic ethanol market, primarily by indirect mechanisms. The results of energy price scenarios implemented in an integrated versus non-integrated modeling framework were also compared. The integrated modeling framework tempers the impacts of high energy prices on biofuel volumes and crop prices. Running the models independently overestimates the responses to shocks because there is no allowance for adaptive behavior by economic agents. These results point to the importance of understanding the direct and indirect feedbacks between these sectors.
