Projected Annual Costs and Profits of Biofuel Profit Models (in dollars)
| Method | LCFS revenue | Total revenue | Total cost | Total profit |
|---|---|---|---|---|
| Heuristic | 6,837,474 | 37,957,674 | 30,528,134 | 7,429,540 |
| Lexicographic | 9,878,474 | 40,998,474 | 30,528,134 | 10,470,340 |
| Proposed | 11,157,472 | 42,277,472 | 30,933,469 | 11,344,003 |
Biofuels typically emit less carbon than do fossil fuels. In California, biofuel manufacturers have two revenue sources: biofuel sales and LCFS (low carbon fuel standard) credits purchased from them by companies producing fuel that falls short of California’s emission standards. Given the interplay between these revenue streams, Meltem Denizel et al. examined three models for how a biofuel firm might maximize profit: the industry-standard heuristic model, a lexicographic model, and a model proposed by the researchers. They concluded that although their model maximized profit, it might not be ideal for firms that want to minimize cash outflows.