Integrated micro-economic modelling and multi-criteria methodology to support public decision-making: the case of liquid bio-fuels in France

Decision making to determine government support policy for agro-energy indu stry can be assisted by mathematical programming and Multiple Criteria proc edures. In this case study, tax credit policy in the French bio-fuel indust ry producing ethanol and esters is determined. Micro-economic models simula te the agricultural sector and the bio-fuel industry through multi-level mi xed integer linear programming. Aggregate supply of energy crops at the nat ional level is estimated using a staircase model of 450 individual farm sub -models specialising in arable cropping. The government acts as a leader, s ince bio-fuel chains depend on subsidies. The model provides rational respo nses of the industry, taking into account of the energy crops' supply, to a ny public policy scheme (unitary tax exemptions for bio-fuels subject to bu dgetary constraints) as well as the performance of each response regarding total greenhouse gases emissions (GHG), budgetary expenditure and agents' s urpluses. Budgetary, environmental and social concerns will affect policy d ecisions, and a multi-criteria optimisation module projects the decision ma ker aims at the closest feasible compromise solutions. When public expendit ure is the first priority, the best compromise solution corresponds to tax exemptions of about 2 FFI-1 [FF: French Franc (le equivalent to 6.559 FF)I for ester and 3 FF 1(-1) for ethanol (current tax exemptions amount at 2.30 FF 1(-1) for ester and 3.30 FF 1(-1) for ethanol). On the other hand, a pr iority on the reduction of GHG emissions requires an increase of ester volu me produced at the expense of ethanol production (2.30 FF 1(-1) for both es ter and ethanol chains proposed by the model). (C) 2001 Elsevier Science Lt d. All rights reserved.