A System Approach to Sustainable Supply Chains of Bio-fuels

Who’s Involved?

Research Introduction

Alternative energy development pressure has spurred primarily from the concerns of sustainability, environmental degradation and energy independence.  Investment decisions on alternative energy has never been so promising before, thanks to the global efforts to reduce carbon emission and rising scarcity of fossil fuels.

In 2007, United States alone consumed about 20 million barrels of petroleum per day of which about 12 million barrels were imported. This reliance on import insinuates the vulnerability of Americans’ life and economy in case of any oil embargo like that of 1973. In order to make the country energy independent through the production of clean and renewable fuels the Energy Independence and Security Act of 2007 (EISA) was enacted by the Senate and House of Representatives in 2007. EISA 2007 mandates the production of 36 billion gallons of qualifying credits (in general one gallon is equal to one credit, in some cases some bio-fuels may qualify for more than one credit per gallon) from bio-fuels by 2022 from 4.7 billion gallons in 2007. It is to note that 21 billion gallons should be derived from non-cornstarch products. Other policies like Renewable Portfolio Standards enacted in 28 states and the District of Columbia requiring a specified share of electricity sold in the state come from renewable sources has further reinforced the development of bio-fuels.

Though deemed long lasting and renewable, energy production from bio-mass in itself is not sustainable. Bio-products adeptness to produce large amount of fuels needs further scrutiny. Forest is a complex system that functions and maintains human well-being by providing social, economical and environmental opportunities. Unsustainable exploitation of biomass could result in non-linear and very uncertain behavior of the forest system triggering more ills than goods.

The National Bio-fuels Action Plan 2008 of the Biomass Research and Development Board has categorized bio-fuels supply chain into five sectors – feedstock production, feedstock logistics, conversion technologies, distribution and end use. The action plan also requires that the supply chain be sustainable and ensure health, safety and environment of people working in the sector.

Several key questions related to the sustainable development of forest bio-products supply chains in the action plan needs further research. For example as we move from second generation to third generation of feedstock production how likely will it set in motion a scenario for deforestation, how likely is that it will replace the existing cropland to produce feedstock for bio-fuels production etc. Similarly, in terms of feedstock logistic what are the available level of infrastructure and what are needed for this transition?


We have used the System Dynamic concept to model feedstock supply chain when new management models are put in place to generate larger amount of feedstock for bio-fuels production. Dynamic modeling has been widely used for understanding the changes in behavior of a system when new pressures are exerted. If we assume forest as a complex circular system with social, economic and environmental issues then any action in one sector will produce different consequences in rate and magnitude in other sectors, which in turn will affect the primary sector again.

We have applied synergy thinking to model action and reaction, inertia and risk, linear and nonlinear changes associated with change in forest management practice. Though the simulation results are highly susceptible to data quality, assumptions and model structure among others, nevertheless such a modeling provides an understanding of a system behavior, which could help in formulating favorable policies for the development of the sector. We expect that these models would help decision makers to understand important uncertainties and accordingly design policies for the sustainable development of bio-products industry.