A panel study on the relationship between biofuels production and sustainable development

Biomass is one of the renewable energy sources on which policy makers are greatly dependent on since it is a flexible feedstock capable of conversion into electricity, transport liquid fuels and heat by chemical and biological processes on demand. Though numerous publications have examined the relationship of economic growth with renewable energy and other parameters, biomass energy has never been included in these studies. Then, this study examines the causal relationship within a multivariate panel cointegration/error correction framework which combines the cross-section and time series data while allowing for heterogeneity across different provinces. After employing panel data regression model ranging from 2003 through 2012 to examine the relationships of biofuels production with sustainable development in China, the paper concludes that the development of biofuel energy production integrated with the consideration of the improvement of income per capita, and the attraction of more capital investment, does make a significant contribution to economic growth. However, some negative side effects including the increase of greenhouse emissions and the decrease of marginal land still coexist with the economic development. Of course, the importance of these findings lies on their implications and their adoption on strategic policies.