Supplementing biofuel mandates with a carbon mitigation policy can lead to water quality co-benefits

Abstract

Biofuel mandates can impact the environment in multiple ways that may be positive or negative, including affecting life-cycle greenhouse gas (GHG) emissions by displacing fossil fuels, affecting soil carbon stocks due to accompanying land use change, and water quality due to changes in fertilizer requirements and the mix of crops used as feedstocks. To achieve desired environmental outcomes in the presence of a biofuel mandate, additional policy instruments must be adopted to supplement the mandate. We develop an integrated and spatially explicit ecosystem-economic modeling framework to analyze the cost-effectiveness of alternative policies to achieve desired targets for GHG emissions reduction from the agricultural and fuel sectors in the USA and nitrate leaching reduction in the Gulf of Mexico below the levels that would be achieved by a corn ethanol and/or a cellulosic ethanol mandate in the USA. We find that while a corn ethanol mandate lowers GHG emissions, it increases nitrate leaching due to the expansion of corn production; a cellulosic ethanol mandate lowers both GHG emissions and nitrate leaching relative to a corn ethanol mandate, but the additional carbon and nitrate prices are needed to achieve anticipated GHG reduction and nitrate reduction targets. We also find that accompanying a biofuel mandate with a GHG reduction target alone leads to substantial nitrate reduction co-benefits, but a nitrate reduction target alone is less effective in reducing GHG emissions. Combining a GHG standard with a nitrate standard can achieve GHG and nitrate reduction targets at lower carbon and nitrate prices as compared to implementing each of these policies independently. Our findings show that disregarding policy co-benefits can overestimate the GHG and nitrate prices needed to achieve policy targets and higher policy costs.