Income-generating Effects of Biofuel Policies: A Meta-analysis of the CGE Literature

While the production of biofuels has expanded in recent years, findings in the literature on its impact on economic growth and development remain contradictory. This paper presents a meta-analysis of computable general equilibrium (CGE) studies published between 2006 and 2017 on the effect of biofuel production on economic development worldwide. Using 30 CGE studies, we found that biofuel-supportive policies generated significant impacts on GDP and household incomes. CGE studies included in our database reported an average 0.25 percentage point increase in GDP and a 0.49 percentage point increase in household incomes. We also found that results were driven by several key features of the CGE studies included in our database. We investigated features such as biofuel type, geographic area, and characteristics of the CGE models employed. We found that biofuel expansion has heterogeneous effects in developed versus emerging countries. Simulations on longer time periods and in multi-country studies led to results that indicate higher impacts of biofuel expansion on GDP growth and household incomes. Moreover, simulations with an increase in agricultural productivity indicate positive welfare impact gains, unlike simulations with land expansion. Lastly, we found that biodiesel development leads to higher welfare impact gains than that of bioethanol.