Abstract for: Assessing the Liberalization of Biofuels
Global biofuel consumption has been growing in recent years as different countries worldwide have been exploring alternatives to gasoline and diesel fuel for transport. This is due to a hike in oil prices and their increasing volatility as well as both a high dependence of the transport sector on oil and also because, arguably, the supply chains of biofuels emit less CO2 than for fossil fuels. Biofuels have been available around the world for a while, with the aid of some government support. Biofuels are being widely considered as part of the solution to affordable fuels for transport. This research makes use of a system dynamics model to analyse the current leading policies aiming at increasing the penetration of biofuels. In this context, and given multiple uncertainties including technology evolution and fuel prices, scenario analysis has been considered for the examination of different, extreme, though plausible, futures. SD under extreme scenarios helped in assessing the possibility of removing incentives (that is, leaving decisions to an open market) and a partial reduction of subsidies. This paper concludes that for the case of Colombia, the potential of biofuels seems promising.