Bioenergy and Employment - A Regional Economic Impact Evaluation

Abstract

There is a problem in estimating renewable energy’s impact on regional economies of developing countries, owing both to the lack of disaggregated data on these renewable energy sources at the subnational level and a method to address its share in the energy matrix (in a context where oil and gas are yet hegemonic). We apply a method to solve both problems and to the case of Santa Fe province, Argentina, an important producer of biofuels (biodiesel from soybean and ethanol from maize). To disaggregate the biofuel sector, we combine aggregated sector information with subsector surveys. Once the share of biofuels is established in the economy and their potential to create jobs, it is possible to generate statistics on the input-output relationships. With the latter, we estimate a hybrid input-output model and calculate the effects of shocks (defined as policies as well as the effect of exogenous elements impacting the performance of the sector) on production and employment stemming from the full utilization of existing idle capacity, as well as from new investments in the sector. The results, allow us to policy evaluations, for instance, the consequences of acceleration of the energy matrix transition to renewables through regulations, to study the effect of changes in relative prices of energy, determine the effect on potential employment creation of subsidies to promote the activity, etc. The sector we analyze empirically had an important idle capacity plus delayed investment projects because of external shocks. In the event of overcoming transient problems to export biofuels (and to attain full capacity utilization of current infrastructure), from expanding supply with new investments, the employment effect is proportionally much larger since transient jobs would be created in the construction phase.