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Ethanol demand under the flex-fuel technology regime in Brazil

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  • de Freitas, Luciano Charlita
  • Kaneko, Shinji

Abstract

This paper analyzes the characteristics of ethanol demand in the context of fuel mix diversification in Brazil. Currently, ethanol is the most important gasoline additive and alternative fuel consumed in Brazil and is responsible there for profound changes in the dynamics of fuel consumption. The diffusion of flex-fuel vehicles in Brazil symbolizes a new stage of ethanol expansion and is a central component of the increasing demand for fuel. Accordingly, we evaluate ethanol demand in Brazil following the introduction of flex-fuel vehicles using a cointegration approach and autoregressive distributed lag bounds tests over the period 2003–2010. The evidences confirm that during the last decade, ethanol has strengthened its position as both an independent fuel and a substitute for gasoline. There is also evidence that growth in the Brazilian automobile fleet based on flex-fuel technology is a major driving factor of long-run ethanol demand. Further, the dynamics of gasohol (mandatory blend of gasoline and ethanol) and ethanol prices operate in a symmetric manner over ethanol demand, thereby evidencing the increasing substitutability between these alternative fuels.

Suggested Citation

  • de Freitas, Luciano Charlita & Kaneko, Shinji, 2011. "Ethanol demand under the flex-fuel technology regime in Brazil," Energy Economics, Elsevier, vol. 33(6), pages 1146-1154.
  • Handle: RePEc:eee:eneeco:v:33:y:2011:i:6:p:1146-1154
    DOI: 10.1016/j.eneco.2011.03.011
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    Cited by:

    1. Curci, Ylenia & Mongeau Ospina, Christian A., 2016. "Investigating biofuels through network analysis," Energy Policy, Elsevier, vol. 97(C), pages 60-72.
    2. Brexó, Ramon Peres & Sant’Ana, Anderson S., 2017. "Impact and significance of microbial contamination during fermentation for bioethanol production," Renewable and Sustainable Energy Reviews, Elsevier, vol. 73(C), pages 423-434.
    3. Nunez, Hector & Onal, Hayri, 2013. "An Economic Analysis of Transportation Fuel Policies in Brazil," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 149973, Agricultural and Applied Economics Association.
    4. Leonardo Chaves Borges Cardoso & Maurício Vaz Lobo Bittencourt & Alexandre Alves Porsse, 2014. "Demanda Por Combustíveis Leves No Brasil: Uma Abordagem Utilizando Painéis Espaciais Dinâmicos," Anais do XLI Encontro Nacional de Economia [Proceedings of the 41th Brazilian Economics Meeting] 194, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics].
    5. Santos, Gervásio F., 2013. "Fuel demand in Brazil in a dynamic panel data approach," Energy Economics, Elsevier, vol. 36(C), pages 229-240.
    6. Mauricio Vaz Lobo Bittencourt & Leonardo Chaves Borges Cardoso & Elena Grace Irwin, 2016. "Biofuels Policies And Fuel Demand Elasticities In Brazil: An Iv Approach," Anais do XLIII Encontro Nacional de Economia [Proceedings of the 43rd Brazilian Economics Meeting] 181, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics].
    7. Laurini, Márcio Poletti, 2017. "The spatio-temporal dynamics of ethanol/gasoline price ratio in Brazil," Renewable and Sustainable Energy Reviews, Elsevier, vol. 70(C), pages 1-12.
    8. repec:eee:eneeco:v:63:y:2017:i:c:p:322-331 is not listed on IDEAS
    9. Jose Cantos & Robert Dixon, 2014. "Impacts of bioethanol on gasoline prices in the Philippines: an econometric analysis," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 19(1), pages 1-13, January.
    10. Odziemkowska, Małgorzata & Matuszewska, Anna & Czarnocka, Joanna, 2016. "Diesel oil with bioethanol as a fuel for compression-ignition engines," Applied Energy, Elsevier, vol. 184(C), pages 1264-1272.
    11. Hector M. Nuñez and Jesús Otero, 2017. "Integration in Gasoline and Ethanol Markets in Brazil over Time and Space under the Flex-fuel Technology," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2).
    12. de Barros, Marisa Maia & Szklo, Alexandre, 2015. "Petroleum refining flexibility and cost to address the risk of ethanol supply disruptions: The case of Brazil," Renewable Energy, Elsevier, vol. 77(C), pages 20-31.
    13. El Montasser, Ghassen & Gupta, Rangan & Martins, Andre Luis & Wanke, Peter, 2015. "Are there multiple bubbles in the ethanol–gasoline price ratio of Brazil?," Renewable and Sustainable Energy Reviews, Elsevier, vol. 52(C), pages 19-23.
    14. Kumar, Satish & Cho, Jae Hyun & Park, Jaedeuk & Moon, Il, 2013. "Advances in diesel–alcohol blends and their effects on the performance and emissions of diesel engines," Renewable and Sustainable Energy Reviews, Elsevier, vol. 22(C), pages 46-72.
    15. Chanthawong, Anuman & Dhakal, Shobhakar & Jongwanich, Juthathip, 2016. "Supply and demand of biofuels in the fuel market of Thailand: Two stage least square and three least square approaches," Energy, Elsevier, vol. 114(C), pages 431-443.

    More about this item

    Keywords

    Ethanol demand; Elasticity; Cointegration; Brazil;

    JEL classification:

    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • P48 - Economic Systems - - Other Economic Systems - - - Political Economy; Legal Institutions; Property Rights; Natural Resources; Energy; Environment; Regional Studies
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

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