OPEC and the Environmental Impact of Biofuels

Hochman, Gal, Deepak Rajagopal, and David Zilberman

from ARE Update Vol. 15, No. 2, Nov/Dec, 2011

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Abstract

Much attention has been given to the introduction of biofuels assuming competitive oil markets. This paper argues that OPEC behaves as a cartel of nations and that this suggests different outcomes than those derived under the competitive or the standard cartel models. In particular, the paper shows that the competitive model overestimates the price effect of the introduction of biofuels but underestimates the quantity effect and, thus, the impact of the introduction of biofuels on the environment.

Keywords

Gas, fuel, biofuel prices, subsidies, taxes, cartel of nations

Citation

Hochman, Gal, Deepak Rajagopal, and David Zilberman. "OPEC and the Environmental Impact of Biofuels." ARE Update 15(2)(2011):9-11. University of California Giannini Foundation of Agricultural Economics.
http://giannini.ucop.edu/publications/are-update/issues/2011/15/2/opec-and-environmental-im/