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Welfare Impacts of Alternative Biofuel and Energy Policies

Author

Listed:
  • Jingbo Cui
  • Harvey Lapan
  • GianCarlo Moschini
  • Joseph Cooper

Abstract

An open-economy equilibrium model is derived to investigate the effects of energy policy on the U.S. economy, with emphasis on corn-based ethanol. A second best policy of a fuel tax and ethanol subsidy is found to approximate fairly closely the welfare gains associated with the first best policy of an optimal carbon tax and tariffs on traded goods. The largest economic gains to the U.S. economy from these energy policies arise from their impact on U.S. terms of trade, particularly in the oil market. Conditional on the current fuel tax, an optimal ethanol mandate is superior to an optimal ethanol subsidy. Copyright 2011, Oxford University Press.

Suggested Citation

  • Jingbo Cui & Harvey Lapan & GianCarlo Moschini & Joseph Cooper, 2011. "Welfare Impacts of Alternative Biofuel and Energy Policies," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 93(5), pages 1235-1256.
  • Handle: RePEc:oup:ajagec:v:93:y:2011:i:5:p:1235-1256
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    File URL: http://hdl.handle.net/10.1093/ajae/aar053
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    References listed on IDEAS

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    1. Amani Elobeid & Simla Tokgoz, 2008. "Removing Distortions in the U.S. Ethanol Market: What Does It Imply for the United States and Brazil?," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 90(4), pages 918-932.
    2. Lapan, Harvey E. & Moschini, GianCarlo, 2009. "Biofuels Policies and Welfare: Is the Stick of Mandates Better Than the Carrot of Subsidies?," Staff General Research Papers Archive 13076, Iowa State University, Department of Economics.
    3. Searchinger, Timothy & Heimlich, Ralph & Houghton, R. A. & Dong, Fengxia & Elobeid, Amani & Fabiosa, Jacinto F. & Tokgoz, Simla & Hayes, Dermot J. & Yu, Hun-Hsiang, 2008. "Use of U.S. Croplands for Biofuels Increases Greenhouse Gases Through Emissions from Land-Use Change," Staff General Research Papers Archive 12881, Iowa State University, Department of Economics.
    4. Richard S. J. Tol, 2009. "The Economic Effects of Climate Change," Journal of Economic Perspectives, American Economic Association, vol. 23(2), pages 29-51, Spring.
    5. Tol, Richard S. J., 2008. "The Social Cost of Carbon: Trends, Outliers and Catastrophes," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy (IfW), vol. 2, pages 1-22.
    6. repec:oup:renvpo:v:12:y:2018:i:1:p:4-25. is not listed on IDEAS
    7. Hope, C. & Newbery, D., 2006. "Calculating The Social Cost Of Carbon," Cambridge Working Papers in Economics 0749, Faculty of Economics, University of Cambridge.
    8. Richard S J Tol, 2018. "The Economic Impacts of Climate Change," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 12(1), pages 4-25.
    9. Harry de Gorter & David R. Just, 2008. "The Economics of a Blend Mandate for Biofuels," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 91(3), pages 738-750.
    10. Hertel, Thomas W. & Tyner, Wallace E. & Birur, Dileep K., 2008. "Biofuels for all? Understanding the Global Impacts of Multinational Mandates," 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida 6526, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    11. Harry de Gorter & David R. Just, 2007. "The Welfare Economics of a Biofuel Tax Credit and the Interaction Effects with Price Contingent Farm Subsidies," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 91(2), pages 477-488.
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    More about this item

    JEL classification:

    • F1 - International Economics - - Trade
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation

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