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Who pays and who gains from fuel policies in Brazil?

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  • Khanna, Madhu
  • Nuñez, Hector M.
  • Zilberman, David

Abstract

Brazil has pursued a mix of policy interventions in the fuel sector to achieve multiple objectives of economic and social development, promoting biofuels and reducing dependence on oil. We develop an economic framework to provide insight on the fuel policy choices in Brazil and to analyze the trade-offs they have engendered in the fuel and sugar sectors. We also examine their distributional impacts on producers and consumers in the sugar, oil and biofuel sectors and on government revenues. Additionally, we undertake a normative analysis for the purpose of comparing the welfare and environmental impacts of existing policies with those justified by the goal of maximizing social welfare and addressing market failure. The ex-post analysis of the outcomes for different stakeholders in the fuel and sugar sectors provides insights on the likely political-economic factors guiding policy choices. We find that the status quo policies are likely to have been motivated by the objectives of increasing oil exports, raising government revenue and promoting rural development through the sugarcane sector and have had a significant adverse effect on fuel and sugar consumers, aggregate social welfare and greenhouse gas emissions in Brazil.

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  • Khanna, Madhu & Nuñez, Hector M. & Zilberman, David, 2016. "Who pays and who gains from fuel policies in Brazil?," Energy Economics, Elsevier, vol. 54(C), pages 133-143.
    • Handle: RePEc:eee:eneeco:v:54:y:2016:i:c:p:133-143
    DOI: 10.1016/j.eneco.2015.11.001
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    7. Deepayan Debnath & Madhu Khanna & Deepak Rajagopal & David Zilberman, 2019. "The Future of Biofuels in an Electrifying Global Transportation Sector: Imperative, Prospects and Challenges," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 41(4), pages 563-582, December.
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    More about this item

    Keywords

    Biofuel mandate; Fuel taxes; Consumer and producer surplus; partial equilibrium Model; Social welfare; GHG emissions;
    All these keywords.

    JEL classification:

    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • D60 - Microeconomics - - Welfare Economics - - - General
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy

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