The social inefficiency of regulating indirect land use change due to biofuels

Efforts to reduce the indirect land use change (ILUC) -related carbon emissions caused by biofuels has led to inclusion of an ILUC factor as a part of the carbon intensity of biofuels in a Low Carbon Fuel Standard. While previous research has provided varying estimates of this ILUC factor, there has been no research examining the economic effects and additional carbon savings from including this factor in implementing a Low Carbon Fuel Standard. Here we show that inclusion of an ILUC factor in a national Low Carbon Fuel Standard led to additional abatement of cumulative emissions over 2007–2027 by 1.3 to 2.6% (0.6–1.1 billion mega-grams carbon-dioxide-equivalent (Mg CO 2 e −1 ) compared to those without an ILUC factor, depending on the ILUC factors utilized. The welfare cost to the US of this additional abatement ranged from $61 to $187 Mg CO 2 e −1 and was substantially greater than the social cost of carbon of $50 Mg CO 2 e −1 . A Low Carbon Fuel Standard seeks to regulate indirect land use change by including its related carbon emissions in the carbon intensity of biofuels. Khanna et al . show the economic cost of abatement achieved by including this factor is much larger than the social cost of carbon.