Biofuels And Leakages In The Fuel Market
AbstractLeakage in the fuel market differs, depending on whether ethanol production is determined by a tax credit or consumption mandate. Two components of market leakage are distinguished: domestic and international. Leakage with both a tax credit and a consumption mandate depends on market elasticities and consumption/production shares, with the former having a bigger impact. Leakage is also more sensitive to changes in market supply and demand elasticities in the country not introducing biofuels. Although positive with a tax credit, market leakage can be negative with a consumption mandate, meaning that one gallon of ethanol can replace more than a gallon of gasoline. We also show that being a small country biofuels producer does not necessarily mean that leakage for this country is 100 percent. Our numerical estimates show that one gallon of ethanol replaces approximately 0.2-0.3 gallons of gasoline in the U.S.
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Bibliographic InfoPaper provided by International Agricultural Trade Research Consortium in its series Proceedings Issues, 2010: Climate Change in World Agriculture: Mitigation, Adaptation, Trade and Food Security, June 2010, Stuttgart- Hohenheim, Germany with number 91265.
Date of creation: 2010
Date of revision:
Agricultural and Food Policy; Crop Production/Industries; Environmental Economics and Policy; International Relations/Trade; Resource /Energy Economics and Policy;
This paper has been announced in the following NEP Reports:
- NEP-AGR-2010-08-06 (Agricultural Economics)
- NEP-ALL-2010-08-06 (All new papers)
- NEP-ENE-2010-08-06 (Energy Economics)
- NEP-ENV-2010-08-06 (Environmental Economics)
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