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Spatial Equilibrium in the Bio-Fuel Economy: A Multi-Market Analysis of Trade Distortions in the U.S. and Brazilian Ethanol Sector

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  • Bowser, William
  • Khanna, Madhu
  • Onal, Hayri

Abstract

Energy security and environmental concerns about global climate change have lead to recent growth in the use of bio-fuels in the U.S. Brazil currently exports a substantial share of its sugarcane based ethanol to the U.S. to support the growing demand for bio-fuels. However, U.S. policies that exogenously affect the bio-fuel sector confound the understanding of the multi-market impacts of a growing bio-fuel demand. Moreover, the various forms of government intervention in the bio-fuel economy leave researchers with unclear conclusions about the prospects for bio-fuels. The indirect effects on related agricultural markets from increased bio-fuels consumption and the subsequent land use changes driven by expanded feedstock production also require more attention. To improve the understanding of these issues, we examine the market implications in the international ethanol sector by analyzing the equilibrium effects of bio-fuels policies. Additionally, we investigate land use change implications of an expanding Brazilian ethanol sector. In particular, the potential for livestock intensification of Brazilian pasture land grazing systems is considered as a prospective pathway for releasing new land for expanding sugarcane cultivation. We consider the related trade-offs in the Brazilian agricultural sector and their implications for trade with the U.S.

Suggested Citation

  • Bowser, William & Khanna, Madhu & Onal, Hayri, 2010. "Spatial Equilibrium in the Bio-Fuel Economy: A Multi-Market Analysis of Trade Distortions in the U.S. and Brazilian Ethanol Sector," 2010 Annual Meeting, July 25-27, 2010, Denver, Colorado 61636, Agricultural and Applied Economics Association.
    • Handle: RePEc:ags:aaea10:61636
    DOI: 10.22004/ag.econ.61636
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    References listed on IDEAS

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    1. Birur, Dileep & Hertel, Thomas & Tyner, Wally, 2008. "Impact of Biofuel Production on World Agricultural Markets: A Computable General Equilibrium Analysis," GTAP Working Papers 2413, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
    2. de Gorter Harry & Just David R, 2008. "The Economics of the U.S. Ethanol Import Tariff with a Blend Mandate and Tax Credit," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 6(2), pages 1-23, December.
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