Efficiency of a Biofuel Subsidy Policy in the Presence of Environmental Externalities
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The object of this paper is to analyze, in a general equilibrium
setting with four markets, the efficiency of a biofuel subsidy policy.
The analysis takes into account environmental externalities associated
both with the production and the consumption of biofuels, as well as
associated with the production of agricultural raw material. Our preliminary numerical results, applied to the biodiesel subsidy policy in
France, first show that this policy increases the utility of the representative consumer compared to the laissez-faire solution. The same
policy action leads, however, to an increased level of agricultural and
GHG emissions, in comparison with the laissez-faire solution.