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Abstract
The production of biofuels in many countries is largely driven by the government
strategy and incentives that are in place. In South Africa the first round of the
development of such a draft strategy took place in 2005 while the official stance on
biofuels was finalized in December of 2007. During the policy development process
various governmental departments had strategic goals and targets that they all were
required to achieve. The achievement of these strategic targets and goals is also
risky and the various departments that have some form of involvement in the biofuels
industry need to decide on how much risk they are willing to take. This article
sketches the game that the various governmental departments played as well as the
risks that they were faced with when writing the Industrial Biofuels Strategy. In
establishing a Nash Equilibrium and when comparing this to the current state of
affairs in the industry an investigation is launched as to what has caused the
governmental department to divert so strongly from this position. A variable Z is
defined and included in the model in order to explain the current state of affairs. The
Z variable is also analyzed further in order to bring some form of structure to the
debate on the government’s stance on the issue.