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Policy Alternatives for the Future Biofuels Industry

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  • Tyner Wallace E.

    (Purdue University)

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    Abstract

    US and state governments have subsidized ethanol since 1978, and the rationale for these subsidies has varied over time from supporting farm prices and income, to environmental quality, and more recently to energy security and reduction of greenhouse gas emissions. The recent boom in ethanol investment and production can be considered as an unintended consequence of an ethanol subsidy keyed to $20 crude oil and fixed at 51 cents per gallon combined with oil surging to $70/bbl. Thus, in the 2005-07 period, ethanol was extremely profitable inducing substantial new investment. For the future, different political action groups and political figures propose renewable fuels targets or standards ranging from 35 to 100 billion gallons per year. To achieve anything like these levels, it is likely that the current policy set will need to be reconsidered. In addition to the current policy, this paper considers using a subsidy tied to the energy security gains and greenhouse gas emission reductions provided by renewable fuels, subsidies targeted specifically at cellulose ethanol, and different versions of a renewable fuel standard such as the one passed by the US Senate. It is clear that we must develop a better understanding of the consequences of these alternative policy pathways.

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    Bibliographic Info

    Article provided by De Gruyter in its journal Journal of Agricultural & Food Industrial Organization.

    Volume (Year): 5 (2007)
    Issue (Month): 2 (December)
    Pages: 1-13

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    Handle: RePEc:bpj:bjafio:v:5:y:2007:i:2:n:2

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    Cited by:
    1. Bhattacharya, Suparna & Azzam, Azzeddine M. & Mark, Darrell R., 2009. "Ethanol and Meat in the U.S.: A Multi-Market Analysis," 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin 49371, Agricultural and Applied Economics Association.
    2. Bayramoglu, Basak, 2008. "Efficiency of a Biofuel Subsidy Policy in the Presence of Environmental Externalities," 2008 International Congress, August 26-29, 2008, Ghent, Belgium 44399, European Association of Agricultural Economists.
    3. Jun, Eunju & Kim, Wonjoon & Jeong, Yong Hoon & Chang, Soon-Heung, 2009. "Measuring the social value of nuclear energy using contingent valuation methodology," MPRA Paper 49668, University Library of Munich, Germany.
    4. Shaw, Daigee & Hung, Ming-Feng & Lin, Yi-Hao, 2010. "Using net energy output as the base to develop renewable energy," Energy Policy, Elsevier, vol. 38(11), pages 7504-7507, November.
    5. Christian Langpap & JunJie Wu, 2011. "Potential Environmental Impacts of Increased Reliance on Corn-Based Bioenergy," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 49(2), pages 147-171, June.
    6. Sparks, G.D. & Ortmann, Gerald F. & Lagrange, L., 2010. "An Economic Evaluation of Soybean-Based Biodiesel Production on Commercial Farms in the Soybean-Producing Regions of KwaZulu-Natal: Some Preliminary Results," 2010 AAAE Third Conference/AEASA 48th Conference, September 19-23, 2010, Cape Town, South Africa 95980, African Association of Agricultural Economists (AAAE);Agricultural Economics Association of South Africa (AEASA).
    7. Tyner, Wallace E. & Taheripour, Farzad & Perkis, David, 2010. "Comparison of fixed versus variable biofuels incentives," Energy Policy, Elsevier, vol. 38(10), pages 5530-5540, October.
    8. Meyer, Ferdinand H. & Strauss, P.G. & Funke, Thomas, 2008. "Modelling the impacts of macro-economic variables on the South African biofuels industry," Agrekon, Agricultural Economics Association of South Africa (AEASA), vol. 47(3), September.
    9. Brown, Stephen P.A. & Huntington, Hillard G., 2008. "Energy security and climate change protection: Complementarity or tradeoff?," Energy Policy, Elsevier, vol. 36(9), pages 3510-3513, September.
    10. Jaeger, William K. & Egelkraut, Thorsten M., 2011. "Biofuel economics in a setting of multiple objectives and unintended consequences," Renewable and Sustainable Energy Reviews, Elsevier, vol. 15(9), pages 4320-4333.

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