Handbook of Water Economics
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Handbook of Water Economics

Edited by Ariel Dinar and Kurt Schwabe

Water scarcity, whether in the quality or quantity dimension, afflicts most countries. Decisions on water management and allocation over time, space, and among uses and users involve economic considerations. This Handbook assembles research that represents recent thinking and applications in water economics. The book chapters are written by leading scholars in the field who address issues related to its use, management, and value. The topics cover analytical methods, sectoral and intersectoral water issues, and issues associated with different sources of water.
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Chapter 11: Water, land use and environmental aspects of biofuel production

David Zilberman and Scott Kaplan


Until the 1860s, agriculture was providing most of the food and fuel used for transportation. The invention of the internal combustion engine combined with the discovery of oil and other fossil fuels provided new sources of energy that were cheap and energy intensive, meaning that they contained large amounts of energy per unit of weight. However, these resources, especially oil, are non-renewable, and the environmental side effects they generate, in particular with respect to climate change, limit their potential use in the long run. While the supply of fossil energy is constrained by both availability and environmental side effects, the demand for transport energy is likely to expand as population continues to grow and individuals in developing countries experience rising incomes. The energy emissions of the transportation sector can be lowered by reducing demand for energy and fuels as well as by increasing supply of clean energy sources. Improved fuel-use efficiency of the transportation sector is an example of a demand-reducing solution. There has been a great deal of legislation (for example, the US CAFE standards) to incentivize these improvements. Increases in fuel price, either directly through a carbon tax or indirectly through a cap-and-trade mechanism, will reduce fuel demand by reducing driving and encouraging adoption of fuel-efficient vehicles. Supply enhancement may be achieved by increased use of renewable fuels.

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