The rise and fall of bioenergy

• Published in: Journal of environmental economics and management Vol. 101; p. 102314
• Main Author: Hoel, Michael
• Format: Journal Article
• Language: English
• Published: Elsevier Inc 01-05-2020
• Subjects: Bioenergy; Carbon tax; Climate policy; Renewable energy; Second best; Subsidies; Q54; Renewable energy; Q48; Q58; Subsidies; Bioenergy; Climate policy; Second best; Q42; Carbon tax
• ISSN: 0095-0696; 1096-0449
• DOI: 10.1016/j.jeem.2020.102314

If bioenergy has a less negative impact on the climate than fossil energy, it may be optimal to have a significant increase in the use of bioenergy over time. Due to the difference in the way the climate is affected by the two types of energy, the future time path of the use of bioenergy may be non-monotonic: It may be optimal to first have an increase in its use, and later a reduction. Optimal taxes/subsidies are derived both for the first-best case and for the case of a constraint on the size of the fossil tax.
•Bioenergy has a negative climate impact.•The dynamics of the climate impact differ between fossil energy and bioenergy.•It may be optimal for the use of bioenergy first to rise and later decline.•Bioenergy should be taxed in a first-best optimum.•Subsidizing bioenergy might be optimal with a constraint on the tax on fossil energy.