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Should Zambia produce biodiesel from soybeans ? some insights from an empirical analysis
 
Author:de Gorter, Harry; Drabik, Dusan; Timilsina, Govinda R.; Collection Title:Policy Research working paper ; no. WPS 6498
Country:Zambia; Date Stored:2013/06/24
Document Date:2013/06/01Document Type:Policy Research Working Paper
Language:EnglishMajor Sector:Agriculture, fishing, and forestry
Rel. Proj ID:1W-Economics Of Biofuels -- -- P118472;Region:Africa
Report Number:WPS6498Sub Sectors:Renewable energy; Crops
SubTopics:Energy Production and Transportation; Markets and Market Access; Emerging Markets; Economic Theory & Research; Renewable EnergyTF No/Name:TF094965-KCP II - Economics of Biofuels
Volume No:1 of 1  

Summary: Facing a huge fiscal burden due to imports of entire petroleum despite the availability of a surplus of agricultural land to produce biofuels, Zambia, a country in Sub-Saharan Africa, has recently introduced a biofuel mandate. But, a number of questions, particularly those related to the economics of biofuels, have not been fully investigated yet. Using an empirical model this study analyzes the economics of meeting the biodiesel mandate through soybean feedstock. The study finds that meeting the biodiesel mandate with biodiesel from soybeans would reduce social welfare because the country's soybean imports would cost more than the expected reduction in petroleum imports. However, if Zambia increases its domestic soybean supply along with its capacity to convert soybean to biodiesel, as well as oil yield, soybean based biodiesel is likely to be welfare-beneficial, even if biodiesel prices are above diesel prices. The study also finds that under current market prices and transportation costs and constraints, the same amount of biodiesel can be produced most cost-effectively with a tax exemption. A blend mandate would be less cost effective, while a biodiesel production subsidy represents the least efficient policy option.

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