The impact of the rebound effect of first
generation biofuel use in the EU on
greenhouse gas emissions
17th ICABR Conference, 19 June 2013
Edward Smeets, Jamil Moorad, Andrzej Tabeau, Siemen
van Berkum, Geert Woltjer, Hans van Meijl
Biofuel use in the EU 27
 Increasing biofuel use in the EU to 5% in 2010
 Driven by blend mandate 10%
Source: Eurobserv’er, 2012
Feedstock composition of biofuel use
in the EU 27 & indirect effects
 Current biofuels made from
food crops
 Concerns about indirect
effects:
● Food prices
● Indirect Land Use Change
(ILUC)
 Reduction of blend mandate
to 5%
 Increased stimulation of
biofuels from residues and
waste
Source: Eurobserv’er, 2012
The rebound effect of biofuel use


Change in biofuel use ≠ change in fossil fuel use

Also known as market leakage, indirect fuel use change,
indirect output use change

Well studied issue in relation to energy efficiency, but only
recently the rebound effects of biofuel use have received
attention
Crucial for both environmental impacts AND economic
impacts of biofuel use; potential trade-off!
Objectives:
1)
To evaluate the dynamics of the rebound effect of biofuel
use based on a literature review and CGE modelling
2)
To evaluate the impact of the rebound effect of GHG
emissions
Conceptual representation of the
rebound effect of biofuel use
Source: Drabik and De Gorter, 2011
Simplified conceptual representation of
the rebound effect of biofuel use

Distinction between
rebound effect in
biofuel consuming
region (HOME) and
ROW

A 20% rebound effect
means that 1 J increase
of biofuel changes fossil
fuel use by 0.8 J

A -20% rebound effect
means that 1 J increase
of biofuel changes fossil
fuel use by 1.2 J
Literature review & MAGNET CGE analysis
 Nine studies: 5 US, 2 world and 2 EU
 Range of -21% to +119% global rebound effect
US
world
EU
ROW
HOME
• WORLD
Literature review
 Negative rebound effects in the biofuel consuming region:
biofuel consumption increase < fossil fuel consumption decrease
 Positive rebound effect in the ROW: oil consumption increase
 Net positive rebound effect globally
 Key factors:
● Biofuel policy: mandate leads to lower rebound effects than
biofuel subsidies
● Oil supply and the role of the Organization of the Petroleum
Exporting Countries (OPEC):
- Price maker
- Target revenue
- Green paradox
Evaluation of key factors
Impact on
rebound effect
↑
↑
↑↑
Elasticity of biofuel supply (increase)
Elasticity of oil demand (increase; i.e. more negative)
Elasticity of oil supply (increase)
Elasticity of oil supply (compared to competitive oil market approach)
OPEC Price Maker
OPEC Target Revenue Theory
Green Paradox theory
Elasticity of substitution between biofuel and fossil fuel (increase)
↑↑
↑↑↑
↑↑↑
↑
Biofuel policy (in case of uncompetitive biofuel industry or very low biofuel use)
Biofuel mandate
Biofuel credits
Biofuel mandate and tax credits
Carbon tax (compared to no tax)
↑↑
↑↑↑
↑↑
↓↓
Source of financing of biofuel tax credits (compared to not considering)
Income tax
Agricultural subsidies
Petrol tax
Biofuel trade (compared to no considering of these effects)
Oil production costs and oil price (increase)
Biofuel production costs and price (increase)
↓
↓↓
↓↓↓
↑↑ or ↓↓
↓↓
↓↓
Impact of rebound effect on GHG
emissions of biofuel use (globally)
-1% RE
Lower
range
literature
review
+88% RE
Upper
range
literature
review
+30% RE
MIRAGE
CGE
model
+22% RE
MAGNET
CGE
model
Conclusions
 Large range in estimates due to differences in approach,
method, scenario assumptions, time fame, geographic
scope and other parameters used in economic modelling.
 Oil supply and role of OPEC is a key uncertain factor
 Tax credits and other financial incentives for biofuel
production and use results in higher rebound effects
 Most studies indicate that rebound effect in the EU is
negative and thus contributes to meeting EU GHG and
energy security targets
 ROW rebound effects are positive → negative impact on
GHG emissions
 Rebound effects are crucial for the efficiency and
effectiveness of biofuel policies and for economic effects
Thank you for
your attention!
International Policy Division
LEI – part of Wageningen UR
Edward Smeets
edward.smeets@wur.nl
070 335 82 43