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The Economics of a Blender's Tax Credit versus a Tax Exemption: The Case of U.S. "Splash and Dash" Biodiesel Exports to the European Union

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  • Harry de Gorter
  • Dusan Drabik
  • David R. Just

Abstract

A conceptual framework is advanced that determines world biodiesel prices, the policy parameters in the country establishing the price, and the binding mandate or tax exemption. The effect of a tax credit differs with international trade compared to traditional closed economy analysis. The U.S. "splash & dash" program, with its $1/gallon tax credit, had minimal impacts on European Union (EU) biodiesel producer profits. Reduced world oil prices and EU tax exemptions, as well as increased rapeseed oil prices, are shown to have reduced the profitability of EU biodiesel production. EU imports from the United States can be beneficial for EU taxpayers, fuel consumers, and U.S. biodiesel producers.

Suggested Citation

  • Harry de Gorter & Dusan Drabik & David R. Just, 2011. "The Economics of a Blender's Tax Credit versus a Tax Exemption: The Case of U.S. "Splash and Dash" Biodiesel Exports to the European Union," Applied Economic Perspectives and Policy, Agricultural and Applied Economics Association, vol. 33(4), pages 510-527.
  • Handle: RePEc:oup:apecpp:v:33:y:2011:i:4:p:510-527.
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    File URL: http://hdl.handle.net/10.1093/aepp/ppr024
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    Cited by:

    1. Drabik, Dusan & de Gorter, Harry & Timilsina, Govinda R., 2016. "Producing biodiesel from soybeans in Zambia: An economic analysis," Food Policy, Elsevier, vol. 59(C), pages 103-109.
    2. Drabik, Dusan & de Gorter, Harry & Timilsina, Govinda R., 2014. "The effect of biodiesel policies on world biodiesel and oilseed prices," Energy Economics, Elsevier, vol. 44(C), pages 80-88.
    3. Rajcaniova, Miroslava & Drabik, Dusan & Ciaian, Pavel, 2011. "International Interlinkages of Biofuel Prices: The Role of Biofuel Policies," 2011 Annual Meeting, July 24-26, 2011, Pittsburgh, Pennsylvania 103222, Agricultural and Applied Economics Association.
    4. de Gorter, Harry & Drabik, Dusan & Timilsina, Govinda R., 2013. "Should Zambia produce biodiesel from soybeans ? some insights from an empirical analysis," Policy Research Working Paper Series 6498, The World Bank.
    5. Pinstrup-Andersen, Per (ed.), 2016. "Food Price Policy in an Era of Market Instability: A Political Economy Analysis," OUP Catalogue, Oxford University Press, number 9780198788836.
    6. Moschini, GianCarlo & Cui, Jingbo & Lapan, Harvey E., 0. "Economics of Biofuels: An Overview of Policies, Impacts and Prospects," Bio-based and Applied Economics Journal, Italian Association of Agricultural and Applied Economics (AIEAA), issue 3.
    7. Rajcaniova, Miroslava & Drabik, Dusan & Ciaian, Pavel, 2013. "How policies affect international biofuel price linkages," Energy Policy, Elsevier, vol. 59(C), pages 857-865.
    8. Kaup, Felix & Selbmann, Kirsten, 2013. "The seesaw of Germany's biofuel policy – Tracing the evolvement to its current state," Energy Policy, Elsevier, vol. 62(C), pages 513-521.
    9. de Gorter, Harry & Drabik, Dusan & Timilsina, Govinda R., 2013. "The effect of biodiesel policies on world oilseed markets and developing countries," Policy Research Working Paper Series 6453, The World Bank.

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