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Energy Security and Economics of Indian Biofuel Strategy in a Global Context

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This paper examines India"s options for managing energy price risk in three ways: biofuel development, energy efficiency promotion, and food productivity improvements. The overall results suggest that biodiesel shows promise as a transport fuel substitute that can be produced in ways that fully utilize marginal agricultural resources and hence promote rural livelihoods. First-generation bioethanol, by contrast, appears to have a limited ability to offset the impacts of oil price hikes. Combining the biodiesel expansion policy with energy efficiency improvements and food productivity increases proved to be a more effective strategy to enhance both energy and food security, help mitigate climate change, and cushion the economy against oil price shocks. Biodiesel expansion, when combined with energy efficiency improvements and food productivity increases, could provide India much better opportunities for enhanced energy security, food security, and climate change mitigation. Biodiesel expansion for 20% blending by 2017 can offset the significant negative impacts on the Indian economy of price increases. However, bioethanol does not have the ability to counteract the impacts of oil price increases.