Resource information
Facing a huge fiscal burden due to
imports of entire petroleum despite the availability of a
surplus of agricultural land to produce biofuels, Zambia, a
country in Sub-Saharan Africa, has recently introduced a
biofuel mandate. But, a number of questions, particularly
those related to the economics of biofuels, have not been
fully investigated yet. Using an empirical model this study
analyzes the economics of meeting the biodiesel mandate
through soybean feedstock. The study finds that meeting the
biodiesel mandate with biodiesel from soybeans would reduce
social welfare because the country's soybean imports
would cost more than the expected reduction in petroleum
imports. However, if Zambia increases its domestic soybean
supply along with its capacity to convert soybean to
biodiesel, as well as oil yield, soybean based biodiesel is
likely to be welfare-beneficial, even if biodiesel prices
are above diesel prices. The study also finds that under
current market prices and transportation costs and
constraints, the same amount of biodiesel can be produced
most cost-effectively with a tax exemption. A blend mandate
would be less cost effective, while a biodiesel production
subsidy represents the least efficient policy option.
