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Removal of U.S. Ethanol Domestic and Trade Distortions: Impact on U.S. and Brazilian Ethanol Markets

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Author Info
Amani Elobeid () (Center for Agricultural and Rural Development (CARD))
Simla Tokgoz () (Center for Agricultural and Rural Development (CARD))

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Abstract

We analyze the impact of trade liberalization and removal of the federal tax credit in the United States on U.S. and Brazilian ethanol markets using a multi-market international ethanol model calibrated on 2005 market data and policies. The removal of trade distortions induces a 23.2 percent increase in the price of world ethanol on average between 2006 and 2015 relative to the baseline. The U.S. domestic ethanol price decreases by 14.1 percent, which results in a 7.5 percent decline in production and a 3.2 percent increase in consumption. The lower domestic price leads to a 2.5 percent rise in the share of fuel ethanol in gasoline consumption. U.S. net ethanol imports increase by 192.8 percent. Brazil responds to the higher world ethanol price by increasing its production by 8.8 percent on average. Total ethanol consumption in Brazil decreases by 3.2 percent and net exports increase by 61.9 percent relative to the baseline. The higher ethanol price leads to a 4.7 percent increase in the share of sugarcane used in ethanol production. The removal of trade distortions and 51¢ per gallon tax credit to refiners blending ethanol induces a 22.5 percent increase in the world ethanol price.

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Publisher Info
Paper provided by Food and Agricultural Policy Research Institute (FAPRI) at Iowa State University in its series Food and Agricultural Policy Research Institute (FAPRI) Publications with number 06-wp427.

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Date of creation: Oct 2006
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Handle: RePEc:ias:fpaper:06-wp427

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Keywords: biofuels ethanol renewable fuels trade liberalization. JEL code: F13 F17 Q17 Q18 Q42

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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.:
  1. Moreira, Jose R. & Goldemberg, Jose, 1999. "The alcohol program," Energy Policy, Elsevier, vol. 27(4), pages 229-245, April. [Downloadable!] (restricted)
  2. Gallagher, Paul W. & Shapouri, Hosein & Price, Jeffrey & Schamel, Guenter & Brubaker, Heather, 2003. "Some Long-Run Effects of Growing Markets and Renewable Fuel Standards on Additives Markets and the U.S. Ethanol Industry," Staff General Research Papers 10648, Iowa State University, Department of Economics.
  3. Gallagher, Paul W. & Shapouri, Hosein & Price, Jeffrey & Schamel, Guenter & Brubaker, Heather, 2003. "Some long-run effects of growing markets and renewable fuel standards on additives markets and the US ethanol industry," Journal of Policy Modeling, Elsevier, vol. 25(6-7), pages 585-608, September. [Downloadable!] (restricted)
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  1. Elobeid, Amani & Tokgoz, Simla & Hayes, Dermot J. & Babcock, Bruce A. & Hart, Chad E., 2006. "Long-Run Impact of Corn-Based Ethanol on the Grain, Oilseed, and Livestock Sectors: A Preliminary Assessment, The," Staff General Research Papers 12692, Iowa State University, Department of Economics. [Downloadable!]
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  2. repec:isu:genres:12735 is not listed on IDEAS
  3. Fabiosa, Jacinto F. & Beghin, John C. & Dong, Fengxia & Elobeid, Amani & Tokgoz, Simla & Yu, Tun-Hsiang (Edward), 2008. "Land Allocation Effects of the Global Ethanol Surge: Predictions from the International FAPRI Model," Staff General Research Papers 12877, Iowa State University, Department of Economics. [Downloadable!]
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