Impacts of Second Generation Bioethanol Production on the Japanese Economy: Evidence From a Computable General Equilibrium Model

The target of a bioethanol introduction policy is to decrease emissions of greenhouse gases (GHG) by substituting fossil fuels with bioethanol. To make such an environmental policy feasible, economic pros and cons need to be considered, but the impacts on the Japanese economy are still quantitatively unclear. This study aimed to evaluate environmental and economic impacts of bioethanol introduction policies by a dynamic computable general equilibrium (CGE) model, J-DCGE model. We considered three production technologies, i.e. first generation technology using edible parts of agricultural products as bioethanol materials, second generation present technology using non-edible parts of agricultural products, and second generation advanced technology that is expected to be used in future production plants. Simulation results demonstrated the following points. First, replacing a fixed rate of gasoline with bioethanol reduced imports of petroleum products, and consequently raised the selfsufficiency rate for energy. Second, the introduction of bioethanol produced by second generation advanced technology increased total income and raised GDP. However, first generation and second generation present technologies decreased GDP. Hence, acceleration of production technology by research and development is highly desirable. Third, a bioethanol introduction policy cut GHG emissions, but such environmental effects were smaller than the initial reduction in GHG emissions from gasoline consumption. This is because the policy stimulates domestic production. In this sense, policy makers need to consider the ripple effects of environmental policies through economic factors.