Jean-Claude Sourie

Micro-economic modelling of biofuel system in France to determine tax exemption policy under uncertainty

Abstract Liquid biofuel support program launched in 1993 in France is implemented through tax exemptions to biofuels produced by agro-industrial chains. Activity levels are fixed by decree and allocated by the government to the different chains. Based on earmarked budget increase voted in the parliament, total quantity of biofuels will be increased by 50% in the horizon 2002–2003. A micro-economic biofuel activity model containing a detailed agricultural sector component, that is represented by 700 farms, is used to estimate costs and surpluses generated by the activity at the national level as well as tax exemption levels. Furthermore, Monte Carlo simulation has been used to search for efficient tax exemptions policies in an uncertain environment, where biofuel profitability is significantly affected by petroleum price and soja cake prices. Results suggest that, for the most efficient units both at the industry level (large size biomass conversion units) and at the agricultural sector level (most productive farms), unitary tax exemptions could be decreased by 10–20% for both biofuels, ethyl ether and methyl ester, with no risk for the viability of any existing chain.

Bio-fuel production system in France: an Economic Analysis☆

1. IntroductionLiquid bio-fuelproductiontake-o,duringthelastdecade, has placed Europe third behind Brasil andUS with 6% of the world volume. Biofuel produc-tionhasreachedasignicantlevelinFrance,wheremorethanhalfoftotalEuropeanproductionofethanolandmethylestersisproduced.Thisdevelopmentisduetoasupportprogram,thathasbeenimplementedsince 1993, including tax exemptions of 0:35 l

Determining Efficient Bio-Fuel Tax Exemption Policy in France for Greenhouse Gas Emission Abatement

This chapter presents a micro-economic modeling framework for decisionmaking on tax exemptions and bio-fuel production levels allocated to the French bio-fuel industry. The agricultural sector is represented by about 700 arable cropping farms upon which energy crops can be cultivated. Processes undertaken where biomass is transformed into bio-fuel include ester and ethanol chains. Agriculture and industry data and technical performance parameters are projected for the year 2002. The government acts as a leader, since bio-fuel chain viability depends on subsidies. Budgetary, environmental and social concerns will affect policy decisions, whereas farmers and the industry are assumed to act rationally. A multi-criteria optimisation module is used to assist in decision-making when conflicting objectives are involved. Cost-effective tax credit levels and bio-industry configurations have been determined. Trade-offs are estimated for different targets of public expenditure and emission abatement. The French bio-fuel program was launched in 1993 with the decree of a tax exemption for bio-fuels, as a result of fuel supply uncertainty and environmental concerns. Set aside land obligations by the revised Common Agricultural Policy of 1992, that aimed at controlling cereal overproduction, created a favourable environment for growing non-food crops and has been the decisive factor that incited farmers to produce energy crops in sufficient quantities to supply bio-fuel industry. As a matter of fact, the part of energy crops cultivated in land set aside increased to reach 30% in 1999 (Figure 15.1).