This paper examines economy-wide impacts of expansion of biodiesel production to meet the blending target using a computable general equilibrium model. Assesses impacts of biodiesel expansion on household welfare, other sectors of the economy, carbon emissions, rural development, and employment generation.

The biofuel policy of India stipulates a blending target of 20% for both bioethanol and biodiesel. In the case of biodiesel, this target is to be achieved using wastelands and fallow lands to cultivate nonedible oil seed plants without affecting food security. This paper
examines economy-wide impacts of expansion of biodiesel production to meet the blending target using a computable general equilibrium model. The paper assesses the impacts of biodiesel expansion on household welfare, other sectors of the economy, carbon emissions, rural development, and employment generation. Results indicate that expanding biodiesel production to meet the national target is a welfare-improving strategy. The sector can generate 0.70%–1.0% one-time incremental growth with significant employment and income generation in rural areas. Thus, biodiesel provides an opportunity for better energy security and inclusive growth, without adverse effects on the other sectors of the economy. The biodiesel sector, however, faces many challenges and removal of existing constraints is necessary to realize its potential.