This paper describes the model, in which investors compare the profitability of different biofuel feedstock and fuel operations using a risk-adjusted discount rate – taking market, currency, country and sector risks into account. Prices for biofuels and feedstocks are determined in part through exogenous international prices and in part through a dynamic, equilibrium-seeking price adjustment mechanism. The model is intended to be used within a participatory scenario exercise, and can be run interactively.

This paper has been produced as part of the project ‘Bioenergy, sustainability and trade-offs: Can we avoid deforestation while promoting bioenergy?’ which aims to contribute to sustainable bioenergy development that benefits local people in developing countries, minimises negative impacts on local environments and rural livelihoods, and contributes to global climate change mitigation. The project is managed by CIFOR and implemented in collaboration with the Council on Scientific and Industrial Research (South Africa), Joanneum Research (Austria), the Universidad Nacional Autónoma de México and the Stockholm Environment Institute.

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