International Variability in Biofuel Trade: An Assessment of U.S. Policies
AbstractAlthough the United States has typically been in a position to import ethanol, corn-based ethanol exports are surging as the domestic market becomes saturated and world prices rise due to high prices for sugar, the competing global feedstock. The U.S. is now the world’s leading ethanol producer but domestic demand is constrained because of technical limitations in the current vehicle fleet. Higher ethanol blends have been approved for use (15% rather than 10%) but a limited number of vehicles that can use such higher blends. Infrastructure constraints also affect the potential supply of higher ethanol blends. As a result of these factors, U.S. biofuel policies can have significant implications for the world ethanol market. Usage mandates under the Renewable Fuel Standard, blender tax credits, and the blend wall can interact to generate excess supplies of ethanol that are likely to be diverted to the world market. This paper examines how fluctuations in corn yield and gasoline prices affect the excess supply of U.S. corn-based ethanol in the presence of alternative assumptions about the maximum amount of ethanol that can be consumed domestically. Using stochastic simulations we also explore the impact of current policies on the mean and variance of export supply. The results highlight the complex interaction between technological constraints, economic incentives, and government policies in the U.S. biofuels sector, and point to the potentially destabilizing effect of such policies in international markets.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by European Association of Agricultural Economists in its series 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland with number 115793.
Date of creation: 2011
Date of revision:
Ethanol Exports; Biofuel Policies; Variability; International Relations/Trade; Resource /Energy Economics and Policy;
This paper has been announced in the following NEP Reports:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Muhammad, Andrew & Kebede, Ellene, 2009. "The Emergence of an Agro-Energy Sector: Is Agriculture Importing Instability from the Oil Sector?," Choices, Agricultural and Applied Economics Association, vol. 24(1).
- Beghin, John C. & Dong, Fengxia & Elobeid, Amani E. & Fabiosa, Jacinto F. & Fuller, Frank H. & Hart, Chad E. & Kovarik, Karen & Tokgoz, Simla & Yu, Tun-Hsiang (Edward) & Wailes, Eric J. & Chavez, Eddi, 2007.
"FAPRI 2007 U.S. and World Agricultural Outlook,"
7296, Food and Agricultural Policy Research Institute (FAPRI).
- Beghin, John C. & Dong, Fengxia & Elobeid, Amani & Fabiosa, Jacinto F. & Fuller, Frank H. & Hart, Chad E. & Kovarik, Karen P. & Tokgoz, Simla & Yu, Tun-Hsiang & Wailes, Eric J. & Chavez, Edward & Woma, 2007. "FAPRI 2007 U.S. And World Agricultural Outlook," Staff General Research Papers 12805, Iowa State University, Department of Economics.
- Lihong Lu McPhail & Bruce A. Babcock, 2008. "Ethanol, Mandates, and Drought: Insights from a Stochastic Equilibrium Model of the U.S. Corn Market," Center for Agricultural and Rural Development (CARD) Publications 08-wp464, Center for Agricultural and Rural Development (CARD) at Iowa State University.
- Thompson, Wyatt & Meyer, Seth D. & Kalaitzandonakes, Nicholas G. & Kaufman, James, 2009. "Ethanol Policy Changes to Ease Pressures in Corn Markets: Could They Work?," Choices, Agricultural and Applied Economics Association, vol. 24(1).
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (AgEcon Search).
If references are entirely missing, you can add them using this form.