International Variability in Biofuel Trade: An Assessment of U.S. Policies
Although the United States has typically been in a position to import ethanol, corn-based ethanol exports are surging as the domestic market becomes saturated and world prices rise due to high prices for sugar, the competing global feedstock. The U.S. is now the world’s leading ethanol producer but domestic demand is constrained because of technical limitations in the current vehicle fleet. Higher ethanol blends have been approved for use (15% rather than 10%) but a limited number of vehicles that can use such higher blends. Infrastructure constraints also affect the potential supply of higher ethanol blends. As a result of these factors, U.S. biofuel policies can have significant implications for the world ethanol market. Usage mandates under the Renewable Fuel Standard, blender tax credits, and the blend wall can interact to generate excess supplies of ethanol that are likely to be diverted to the world market. This paper examines how fluctuations in corn yield and gasoline prices affect the excess supply of U.S. corn-based ethanol in the presence of alternative assumptions about the maximum amount of ethanol that can be consumed domestically. Using stochastic simulations we also explore the impact of current policies on the mean and variance of export supply. The results highlight the complex interaction between technological constraints, economic incentives, and government policies in the U.S. biofuels sector, and point to the potentially destabilizing effect of such policies in international markets.
|Date of creation:||2011|
|Contact details of provider:|| Web page: http://www.eaae.org|
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Muhammad, Andrew & Kebede, Ellene, 2009. "The Emergence of an Agro-Energy Sector: Is Agriculture Importing Instability from the Oil Sector?," Choices, Agricultural and Applied Economics Association, vol. 24(1).
- Beghin, John C. & Dong, Fengxia & Elobeid, Amani & Fabiosa, Jacinto F. & Fuller, Frank H. & Hart, Chad E. & Kovarik, Karen P. & Tokgoz, Simla & Yu, Tun-Hsiang & Wailes, Eric J. & Chavez, Edward & Woma, 2007.
"FAPRI 2007 U.S. And World Agricultural Outlook,"
Staff General Research Papers Archive
12805, Iowa State University, Department of Economics.
- Beghin, John C. & Dong, Fengxia & Elobeid, Amani E. & Fabiosa, Jacinto F. & Fuller, Frank H. & Hart, Chad E. & Kovarik, Karen & Tokgoz, Simla & Yu, Tun-Hsiang (Edward) & Wailes, Eric J. & Chavez, Eddi, 2007. "FAPRI 2007 U.S. and World Agricultural Outlook," Staff Reports 7296, Food and Agricultural Policy Research Institute (FAPRI).
- Lihong Lu McPhail & Bruce A. Babcock, 2008. "Ethanol, Mandates, and Drought: Insights from a Stochastic Equilibrium Model of the U.S. Corn Market," Center for Agricultural and Rural Development (CARD) Publications 08-wp464, Center for Agricultural and Rural Development (CARD) at Iowa State University.
- Thompson, Wyatt & Meyer, Seth D. & Kalaitzandonakes, Nicholas G. & Kaufman, James, 2009. "Ethanol Policy Changes to Ease Pressures in Corn Markets: Could They Work?," Choices, Agricultural and Applied Economics Association, vol. 24(1). Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:ags:eaae11:115793. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (AgEcon Search)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.