Policy Analysis of Global Wood Chips Trade Using Spatial Price Equilibrium Model

Transcription

1 Policy Analysis of Global Wood Chips Trade Using Spatial Price Equilibrium Model Wei Jiang Ph.D. Student Sauleh Siddiqui Assistant Professor Mathematical Optimization for Decisions Lab Department of Civil Engineering Johns Hopkins System Institute Stephanie Searle The International Council on Clean Transportation Oct. 30, Background Cellulosic biofuel wood pulp mulch 2

2 Policy : RFS U.S. Renewable Fuel Standard (RFS) is a federal program that mandates increasing volumes of biofuel in gasoline and diesel for road transportation Largest increase from cellulosic biofuel made from non-food sources Cellulosic biofuel rollout is behind schedule but still increasing EPA is working to approve more cellulosic pathways 3 Policy : Woodchips Biofuel EPA is considering a new pathway for cellulosic biofuel made from woodchips. If approved, woodchips biofuel could receive RFS support EPA needs to know how increased use of woodchips for biofuel would affect the global market The European Union (EU) imports are expected to increase If woodchips demand increases in both the EU and US, where will the additional supply come from? 4

3 Policy : Global Woodchip Supply Cause deforestation and high greenhouse gas (GHG) emissions in high carbon stock regions? This would decrease the carbon savings benefit of a woodchip biofuel pathway under the RFS Lots of forest high carbon stocks Less forest more wood production might be ok 5 Global Trade of Wood Chips 6

4 Major Exporters and Major Importers Major Exporters: United States, Latin America(Chile, Brazil), Oceania(Australia), Europe(Germany) Southeast Asia(Vietnam, Malaysia) Major Importers: Japan, China, Europe Note: Data Source: FORESTAT Database from UN FAO All the following scenario analysis are calibrated to 2011 data Unit: Quantity( cubic meters); Price ( thousands US dollars) 7 Research Questions What if U.S. limited its exports of wood chips? What if EU increased its imports of wood chips significantly? How would these scenarios affect the global trade flow and prices of wood chips? 8

5 Spatial Price Equilibrium Model SPE Model is well suited for modelling trade of wood chips: 1. Transportation cost is significant in trade of wood chips 2. SPE Model can be solved as an optimization problem, giving trade flow and prices as solutions 3. Model parameters can be calibrated using historical data 9 Spatial Price Equilibrium Model Trade only occurs when: demand price = supply price + transportation cost trade flow from region i to region j supply price at region i demand price at region j transportation cost from region i to region j demand at region j 10 supply at region i

6 Equivalent Optimization Problem Equilibrium problem Optimization Problem Maximize net social payoff s.t. flow conservation 11

7 Our Adaptation of SPE Model Assume no substitution effect (only woodchips) Assume fixed demand (constant ) 13 Assume linear supply curve For calibration purpose, assume quadratic transportation cost function

8 (2) Calibrating transportation cost Positive Mathematical Programming (Howitt 1995) Stage 1: (1)

9 Add Supply Function Construct linear supply function using elasticity and referenced supply and price Inverse supply function: 17 ( Computed using historical data here)

10 Scenario Analysis First scenario: USA decreases its supply of wood chips by ~ 2 million Increased supply mainly goes to: Latin America Southeas t Asia East Asia Middle East East Asia 19 Scenario Analysis Second scenario: EU increases its demand of wood chips by ~34 million Increased supply mainly goes to: Latin America Southeas t Asia European Union East Asia 20

11 Scenario Analysis Third scenario: EU increases its demand Increased supply mainly goes to: of wood Latin European chips by America Union East Asia Southeas European t Union & USA Asia decreases 21 Its supply by

12 Questions? Thank you! 23 Backup Slides for the Mathematical Model 24