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Blend-wall economics: Relaxing US ethanol regulations can lead to increased use of fossil fuels

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  • Zhang, Zibin
  • Qiu, Cheng
  • Wetzstein, Michael

Abstract

The US Environmental Protection Agency is currently considering a waiver allowing an increase in the fuel-ethanol blend limit (the "blend wall") from 10% (E10) up to 15% (E15). Justifications for this waiver are reduced vehicle fuel prices and less consumption of petroleum gasoline leading to energy security. A theoretical examination of this waiver reveals an anomaly where a relaxation of this blend wall elicits a demand response. Under a wide range of elasticities, this demand response can actually increase the consumption of petroleum gasoline and thus lead to greater energy insecurity. The economics supporting this result and associated policy implications are developed and discussed.

Suggested Citation

  • Zhang, Zibin & Qiu, Cheng & Wetzstein, Michael, 2010. "Blend-wall economics: Relaxing US ethanol regulations can lead to increased use of fossil fuels," Energy Policy, Elsevier, vol. 38(7), pages 3426-3430, July.
    • Handle: RePEc:eee:enepol:v:38:y:2010:i:7:p:3426-3430
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    6. Tang, Xing & Zeng, Xianhai & Li, Zheng & Hu, Lei & Sun, Yong & Liu, Shijie & Lei, Tingzhou & Lin, Lu, 2014. "Production of γ-valerolactone from lignocellulosic biomass for sustainable fuels and chemicals supply," Renewable and Sustainable Energy Reviews, Elsevier, vol. 40(C), pages 608-620.
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    9. Debnath, Deepayan & Whistance, Jarrett & Thompson, Wyatt, 2017. "The causes of two-way U.S.–Brazil ethanol trade and the consequences for greenhouse gas emission," Energy, Elsevier, vol. 141(C), pages 2045-2053.
    10. Pacini, Henrique & Assunção, Lucas & van Dam, Jinke & Toneto, Rudinei, 2013. "The price for biofuels sustainability," Energy Policy, Elsevier, vol. 59(C), pages 898-903.
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    13. Trumbo, Jennifer L. & Tonn, Bruce E., 2016. "Biofuels: A sustainable choice for the United States' energy future?," Technological Forecasting and Social Change, Elsevier, vol. 104(C), pages 147-161.

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    Keywords

    Blend wall Energy security Ethanol;

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