Biofuel Policies and Sustainable Global Trade: Building a Framework for an Equitable Energy Transition

• Grant number: 25/02233-0
• Support Opportunities: Regular Research Grants
• Start date: August 01, 2025
• End date: July 31, 2027
• Field of knowledge: Applied Social Sciences - Economics - Agrarian and Natural Resource Economics
• Principal Investigator: Nicole Rennó Castro
• Grantee: Nicole Rennó Castro
• Principal researcher abroad: Diego Soares Cardoso
• Institution abroad: University of Illinois at Urbana-Champaign, United States
• Host Institution: Escola Superior de Agricultura Luiz de Queiroz (ESALQ). Universidade de São Paulo (USP). Piracicaba , SP, Brazil
• Associated researchers: FERNANDO SALGUEIRO PEROBELLI

Abstract

The increasing global demand for biofuels has developed complex market interactions between major producers, particularly the United States and Brazil. While biofuel policies aim to promote renewable energy adoption, their unilateral implementation in integrated markets can propagate significant economic impacts and potentially hinder energy transition in lower-income regions. This study proposes to analyze the economic implications of interconnected bioenergy policies among trade partners, focusing on the cost impacts of biodiesel policies in Brazil and the US and the potential benefits of bilateral policy coordination. We will develop a novel open-source computational model that captures the linkages in biodiesel production and policy effects with rich substitution mechanisms and flexible trade patterns. Using this framework, we will conduct both retrospective analyses to quantify increased compliance costs due to unilateral policy implementation and prospective analyses to examine potential cost savings from policy coordination. The project will deliver five key outcomes: establishment of a new research collaboration network, development of human capital through student engagement, creation of an open-source model for the scientific community, dissemination of findings through scientific conferences and journals, and communication of research insights for stakeholders and the broad public. This work represents the first step in a broader research agenda examining the impacts of biofuel policies on commodity markets, land use, emissions, and economic efficiency, addressing pressing sustainability challenges for Brazil, the US, and the global community. (AU)