On the economic sustainability of ethanol E85
Several studies have considered the sustainability of corn-based ethanol as produced in the US as a major fuel source from a technical perspective. However, not much attention has been paid to the market-based aspects of corn-based ethanol as a sustainable fuel. We address this question by offering an econometric analysis of the E85 (apparently the most viable of the potential substitutes for gasoline) market using demand and supply analysis. Reduced form price equation estimates indicate that the cross elasticity of E85's price with respect to the price of gasoline does not differ significantly from unity, so that any rise in gasoline prices will be matched (in percentage terms) by a corresponding rise in the price of E85. Thus, given the current market, which includes significant government subsidy, the prospect that E85 will ever be price competitive with gasoline is indeed dim.
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- George Ford & John Jackson, 1998. "On the interpretation of policy effects from estimates of simultaneous systems of equations," Applied Economics, Taylor & Francis Journals, vol. 30(8), pages 995-999.
- Amani Elobeid & Simla Tokgoz, 2006.
"Removal of U.S. Ethanol Domestic and Trade Distortions: Impact on U.S. and Brazilian Ethanol Markets,"
Center for Agricultural and Rural Development (CARD) Publications
06-wp427, Center for Agricultural and Rural Development (CARD) at Iowa State University.
- Amani Elobeid & Simla Tokgoz, 2006. "Removal of U.S. Ethanol Domestic and Trade Distortions: Impact on U.S. and Brazilian Ethanol Markets," Food and Agricultural Policy Research Institute (FAPRI) Publications 06-wp427, Food and Agricultural Policy Research Institute (FAPRI) at Iowa State University.
- Tyner, Wallace E. & Quear, Justin, 2006. "Comparison of a Fixed and Variable Corn Ethanol Subsidy," Choices, Agricultural and Applied Economics Association, vol. 21(3).
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