on the other hand, will be upward-sloping.
Today's situation for most biomass energy crops from
agriculture is that there is no intersection between supply
and demand. To be competitive, there either needs to be a
shift in demand and/or a shift in supply. Another option is
that government subsidies or other policy measures lead to
a shift in supply or demand to arrive at a market solution.
The question then shifts to whether or not environmental
and social benefits of bioenergy can justify bioenergy subsidies
or fossil fuel taxes in the needed range. The typical supply
and demand situation (external costs excluded) is illustrated
in Figure 1.