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Contributions of U.S. Crop Subsidies to Biofuel and Related Markets

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  • Devadoss, Stephen
  • Bayham, Jude

Abstract

The U.S. crop subsidies provide incentives for farmers to expand feedstock production, which benefits the biofuel producers by lowering input costs. This study develops a general equilibrium model to analyze the effects of a reduction in the U.S. crop subsidy on biofuel industries and social welfare. The impacts of feedstock policies on the biofuel market are marginal. In contrast, the biofuel mandate has a larger impact and counteracts the effects of the crop subsidy reduction. The mandate increases the demand for feedstock and causes not only grain ethanol, but also cellulosic ethanol production to rise. The mandate exacerbates the distortion, and government spending increases significantly, leading to greater welfare loss.

Suggested Citation

  • Devadoss, Stephen & Bayham, Jude, 2010. "Contributions of U.S. Crop Subsidies to Biofuel and Related Markets," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 42(4), pages 743-756, November.
    • Handle: RePEc:cup:jagaec:v:42:y:2010:i:04:p:743-756_00
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    Cited by:

    1. Stephen Devadoss & Jude Bayham, 2013. "US Ethanol Trade Policy: Pollution Reduction or Domestic Protection," Review of International Economics, Wiley Blackwell, vol. 21(3), pages 568-584, August.

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