Market Penetration of Biodiesel

This research examines in detail the technology and economics of substituting biodiesel for diesel #2. This endeavor examines three areas. First, the benefits of biodiesel are examined, and the technical problems of large-scale implementation. Second, the biodiesel production possibilities are examined for soybean oil, corn oil, tallow, and yellow grease, which are the largest sources of feedstocks for the United States. Examining in detail the production possibilities allows to identity the extent of technological change, production costs, byproducts, and greenhouse gas (GHG) emissions. Finally, a U.S. agricultural model, FASOMGHG was used to predict market penetration of biodiesel, given technological progress, variety of technologies and feedstocks, market interactions, energy prices, and carbon dioxide equivalent prices.FASOMGHG has several interesting results. First, diesel fuel prices have an expansionary impact on the biodiesel industry. The higher the diesel fuel prices, the more biodiesel is produced. However, given the most favorable circumstances, the maximum biodiesel market penetration is 9% in 2030 with a wholesale diesel price of $4 per gallon. Second, the two dominant sources of biodiesel are from corn and soybeans. Sources like tallow and yellow grease are more limited, because they are byproducts of other industries. Third, GHG prices have an expansionary impact on the biodiesel prices, because biodiesel is quite GHG efficient. Finally, U.S. government subsidies on biofuels have an expansionary impact on biodiesel production, and increase market penetration at least an additional 3%