Hayes, Dermot J. Babcock, Bruce A. Fabiosa, Jacinto F. Tokgoz, Simla Elobeid, Amani Yu, Tun-Hsiang Dong, Fengxia Hart, Chad E. Chavez, Edward Pan, Suwen Carriquiry, Miguel A. Dumortier, Jerome
Additional information is available for the following
registered author(s):
We examine four scenarios for the evolution of the biofuel sector using a partial equilibrium model of the world agricultural sector. The model includes the new Renewable Fuels Standard in the 2007 energy act, the two-way relationship between fossil energy and biofuel markets, and a new trend toward corn oil extraction in ethanol plants. At one extreme, one scenario eliminates all support to the biofuel sector when the energy price is low, while the other extreme assumes no distribution bottleneck in ethanol demand growth when the energy price is high. Of the remaining two scenarios, one considers a pure market force driving ethanol demand growth because of the high energy price while the other is a policy-induced shock with removal of the biofuel tax credit when the energy price is high. We find that the biofuel sector expands with a higher energy price, raising prices of most agricultural commodities through demand-side adjustments for primary feedstocks and supply-side adjustments for substitute crops and livestock. With the removal of all support, including the tax credit, the biofuel sector shrinks, lowering the prices of most agricultural commodities. We also find that, given distribution bottlenecks, cellulosic ethanol crowds marketing channels, resulting in a discounted price of corn-based ethanol. The blenders’ credit and consumption mandates provide a price floor for ethanol and for corn. Finally, the tight linkage between the energy and agricultural sectors resulting from the expanding biofuel sector may raise the possibility of spillover effects of OPEC’s market power on the agricultural sector.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. 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.
Publisher Info
Paper provided by Iowa State University, Department of Economics in its series Staff General Research Papers with number
13052.
Length: Date of creation: 26 Mar 2009 Date of revision: Handle: RePEc:isu:genres:13052
Contact details of provider: Postal: Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070 Phone: +1 515.294.6741 Fax: +1 515.294.0221 Email: Web page: http://www.econ.iastate.edu More information through EDIRC
For technical questions regarding this item, or to correct its listing, contact: (Stephanie Bridges).
References listed on IDEAS 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.: