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 industry can be assisted by mathematical programming and Multiple Criteria procedures. In this case study, tax credit policy in the French bio-fuel industry producing ethanol and esters is determined. Micro-economic models simulate the agricultural sector and the bio-fuel industry through multi-level mixed integer linear programming. Aggregate supply of energy crops at the national level is estimated using a staircase model of 450 individual farm sub-models specialising in arable cropping. The government acts as a leader, since bio-fuel chains depend on subsidies. The model provides rational responses of the industry, taking into account of the energy crops’ supply, to any public policy scheme (unitary tax exemptions for bio-fuels subject to budgetary constraints) as well as the performance of each response regarding total greenhouse gases emissions (GHG), budgetary expenditure and agents’ surpluses. Budgetary, environmental and social concerns will affect policy decisions, and a multi-criteria optimisation module projects the decision maker aims at the closest feasible compromise solutions. When public expenditure is the first priority, the best compromise solution corresponds to tax exemptions of about 2 FFl−1 [FF: French Franc (1 equivalent to 6.559 FF)] for ester and 3 FFl−1 for ethanol (current tax exemptions amount at 2.30 FFl−1 for ester and 3.30 FFl−1 for ethanol). On the other hand, a priority on the reduction of GHG emissions requires an increase of ester volume produced at the expense of ethanol production (2.30 FFl−1 for both ester and ethanol chains proposed by the model).