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Although the biofuel market remains at its early stage, it is expected to play an important role in climate policy in the future in the transportation sector. In this paper, we develop a bottom-up equilibrium model to study the supply chain of the biofuel market, explicitly formulating the interactions among farmers, biofuel producers, blenders, and consumers. The model is built on optimization problems faced by each entity and considers decisions associated with farmers' land allocation, biomass transportation, biofuel production, and biofuel blending. As such, the model is capable of and appropriate for policy analysis related to interactions among multiple stakeholders. For example, the model can be used to analyze the impacts of biofuel policies on market outcomes, pass-through of taxes or subsidies, and distribution of consumers' or producers' surplus. The equilibrium model can also serve as an analytical tool to study the price impact of biomass, biofuel, and Renewable Identification Numbers (RINs) for biofuels. We demonstrate the model by applying it to a case study of Iowa. We specifically focus on the effects of market structure, i.e., points-of-implementation on subsidies on market outcomes. The results indicate that some entities can benefit greatly at the expense of others when they possess market power. Government oversight is therefore needed to safeguard the development of the sector. [ABSTRACT FROM AUTHOR]

The paper focuses on the impact of emission 'cap-and-trade' mechanism in a so-called emission-dependent supply chain with the emission permit supplier and the emission-dependent firm. In the cap-and-trade system, emission permit becomes one of key factors of production for emission-dependent firms. Two major sources of emission permits are considered-emission cap/quota imposed by the government, and permits purchased via emission trading. If the quota is insufficient to satisfy the target production, extra permits should be purchased via trading. In this case, the traditional non-profit green organizations may be endowed with the role of emission permit suppliers. Thus, the introduction of market mechanism injects new life into environment protection. In the context of newsvendor, the paper investigates the behavior and decision-making of each member in the emission-dependent supply chain. A game-theoretical analytical model is proposed and the unique Nash equilibrium is derived. In their own self-interest, the emission permit supplier and the emission-dependent firm make their optimal decisions on permits pricing and production quantity respectively. Players' bargaining power in the game is affected by several exogenous factors, such as the governmental environment policy, the market risk, etc. Several valuable managerial insights on bargaining power affected by external factors (such as environmental policies, market risks, etc.) are further concluded. [ABSTRACT FROM AUTHOR]