Biofuels and Economic Development: A Computable General Equilibrium Analysis for Tanzania

Arndt, Channing
Pauw, Karl
Thurlow, James
Energy Economics

Biofuels could offer new economic opportunities for low-income countries. We use a recursive dynamic computable general equilibrium model of Tanzania to evaluate different biofuels production options and estimate their impacts on growth and poverty. Our results indicate that maximizing the poverty-reducing effects of biofuels production in countries like Tanzania will require engaging and improving the productivity of smallholder farmers. Evidence shows that cassava-based ethanol production is more profitable than other feedstock options. Cassava also generates more “pro-poor” growth than sugarcane-based systems. However, if smallholder yields can be improved rather than expanding cultivated land, then both sugarcane and cassava out-grower schemes generate similar pro-poor outcomes. We conclude that, in so far as the public investments needed to establish a biofuels industry are consistent with other development needs, then producing biofuels will enhance economic development in countries like Tanzania.

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Source / Citation
Arndt, C., Pauw, K., and Thurlow, J., 2012. "Biofuels and Economic Development: A Computable General Equilibrium Analysis for Tanzania" Energy Economics. Article in Press. First published online on August 10, 2012