Impact of government policies on sustainable petroleum supply chain (SPSC): a case study - part II (the State of Nebraska)

Abstract

The accompanying part I (Ghahremanlou and Kubiak, 2020) developed the Lean Model (LM), a two-stage stochastic programming model which incorporates Renewable Fuel Standard 2 (RFS2), Tax Credits, Tariffs, and Blend Wall (BW), to study the policy impact on the Sustainable Petroleum Supply Chain (SPSC) using cellulosic ethanol. The model enables us to study the impact by running computational experiments more efficiently and consequently by arriving at robust managerial insights much faster. In this paper, we present a case study of the policy impact on the SPSC in the State of Nebraska using the model. The case study uses available real-life data. The study shows that increasing RFS2 does not impact the amount of ethanol blended with gasoline but it might lead to the bankruptcy of the refineries. We recommend that the government consider increasing the BW because of its positive economic, environmental and social impacts. For the same reason, we recommend that the tax credit for blending the US produced ethanol with gasoline be at least 0.189 $\frac{\$}{gal}$ and the tariff for imported ethanol be at least 1.501 $\frac{\$}{gal}$. These also make the State independent of foreign ethanol thereby enhancing its energy security. Finally, the change in policy impacts the SPSC itself, most importantly it influences strategic decisions. However setting up a bio-refinery at York county and a blending site at Douglas county emerge as the most robust location decisions against the policy change in the study.