On the economic sustainability of ethanol E85
AbstractSeveral studies have considered the sustainability of corn-based ethanol as produced in the US as a major fuel source from a technical perspective. However, not much attention has been paid to the market-based aspects of corn-based ethanol as a sustainable fuel. We address this question by offering an econometric analysis of the E85 (apparently the most viable of the potential substitutes for gasoline) market using demand and supply analysis. Reduced form price equation estimates indicate that the cross elasticity of E85's price with respect to the price of gasoline does not differ significantly from unity, so that any rise in gasoline prices will be matched (in percentage terms) by a corresponding rise in the price of E85. Thus, given the current market, which includes significant government subsidy, the prospect that E85 will ever be price competitive with gasoline is indeed dim.
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Bibliographic InfoArticle provided by Elsevier in its journal Energy Economics.
Volume (Year): 32 (2010)
Issue (Month): 6 (November)
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Web page: http://www.elsevier.com/locate/eneco
Economic sustainability Ethanol E85 Reduced form estimation Energy policy;
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Center for Agricultural and Rural Development (CARD) Publications
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- Amani Elobeid & Simla Tokgoz, 2006. "Removal of U.S. Ethanol Domestic and Trade Distortions: Impact on U.S. and Brazilian Ethanol Markets," Food and Agricultural Policy Research Institute (FAPRI) Publications 06-wp427, Food and Agricultural Policy Research Institute (FAPRI) at Iowa State University.
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- Tyner, Wallace E. & Quear, Justin, 2006. "Comparison of a Fixed and Variable Corn Ethanol Subsidy," Choices, Agricultural and Applied Economics Association, vol. 21(3).
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