An economic model of Brazil's ethanol-sugar markets and impacts of fuel policies
The lack of growth in the Brazilian sugarcane-ethanol complex since the 2008 financial crisis has been blamed on policies: lower mandate, holding gasoline prices below world levels, high fuel taxes, and inadequate fuel tax exemptions for ethanol. This paper develops an empirical model of the Brazilian fuel-ethanol-sugar complex to analyze the impacts of these policies. Unlike biofuel mandates and tax exemptions elsewhere, Brazil's fuel-ethanol-sugar markets and fuel policies are unique such that each policy, in theory, has an ambiguous impact on the market price of ethanol and hence on sugarcane and sugar prices. The results indicate two policies that seemingly help the ethanol industry do otherwise in reality: low gasoline taxes and high anhydrous tax exemptions lower ethanol prices. But higher mandates, hydrous ethanol tax exemptions, and gasoline prices had the expected impact of increasing ethanol and sugar prices. Eliminating Brazilian ethanol tax exemptions and mandates reduces ethanol prices by 21 percent. Observed changes in prices are explained by outward shifts in fuel transportation and sugar export demand curves, and bad weather reducing sugarcane supply.
|Date of creation:||01 Jun 2013|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: (202) 477-1234
Web page: http://www.worldbank.org/Email:
More information through EDIRC
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.:
- Serra, Teresa & Zilberman, David, 2009.
"Price volatility in ethanol markets,"
2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin
49188, Agricultural and Applied Economics Association.
- Serra, Teresa & Zilberman, David, 2009. "Price volatility in ethanol markets," 2009 Conference, August 16-22, 2009, Beijing, China 49940, International Association of Agricultural Economists.
- 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.
- Elobeid, Amani E. & Tokgoz, Simla, 2007. "Removing Distortions in the U.S. Ethanol Market: What Does It Imply for the United States and Brazil?," 2007 Annual Meeting, July 29-August 1, 2007, Portland, Oregon TN 9808, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
- Tatiane Menezes & Carlos Azzoni & Fernando Silveira, 2008. "Demand elasticities for food products in Brazil: a two-stage budgeting system," Applied Economics, Taylor & Francis Journals, vol. 40(19), pages 2557-2572.
- Drabik, Dusan, 2011. "The Theory of Biofuel Policy and Food Grain Prices," Working Papers 126615, Cornell University, Department of Applied Economics and Management.
- Havranek, Tomas & Irsova, Zuzana & Janda, Karel, 2011.
"Demand for gasoline is more price-inelastic than commonly thought,"
CUDARE Working Paper Series
1118, University of California at Berkeley, Department of Agricultural and Resource Economics and Policy.
- Havranek, Tomas & Irsova, Zuzana & Janda, Karel, 2012. "Demand for gasoline is more price-inelastic than commonly thought," Energy Economics, Elsevier, vol. 34(1), pages 201-207.
- Tomáš Havránek & Zuzana Iršová & Karel Janda, 2011. "Demand for Gasoline Is More Price-Inelastic than Commonly Thought," Working Papers IES 2011/10, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Mar 2011.
- Havranek, Tomas & Irsova, Zuzana & Janda, Karel, 2011. "Demand for gasoline is more price-inelastic than commonly thought," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt0m94j50t, Department of Agricultural & Resource Economics, UC Berkeley.
- Crago, Christine Lasco & Khanna, Madhu & Barton, Jason & Giuliani, Eduardo & Amaral, Weber, 2010.
"Competitiveness of Brazilian Sugarcane Ethanol Compared to US Corn Ethanol,"
2010 Annual Meeting, July 25-27, 2010, Denver, Colorado
60895, Agricultural and Applied Economics Association.
- Crago, Christine L. & Khanna, Madhu & Barton, Jason & Giuliani, Eduardo & Amaral, Weber, 2010. "Competitiveness of Brazilian sugarcane ethanol compared to US corn ethanol," Energy Policy, Elsevier, vol. 38(11), pages 7404-7415, November.
- Serra, Teresa, 2011. "Volatility Spillovers between Food and Energy Markets, A Semiparametric Approach," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland 115997, European Association of Agricultural Economists.
- Rajcaniova, Miroslava & Drabik, Dusan & Ciaian, Pavel, 2013. "How policies affect international biofuel price linkages," Energy Policy, Elsevier, vol. 59(C), pages 857-865.
- Serra, Teresa, 2011. "Volatility spillovers between food and energy markets: A semiparametric approach," Energy Economics, Elsevier, vol. 33(6), pages 1155-1164.
- Lapan, Harvey & Moschini, GianCarlo, 2012.
"Second-best biofuel policies and the welfare effects of quantity mandates and subsidies,"
Journal of Environmental Economics and Management,
Elsevier, vol. 63(2), pages 224-241.
- Lapan, Harvey E. & Moschini, GianCarlo, 2012. "Second-Best Biofuel Policies and the Welfare Effects of Quantity Mandates and Subsidies," Staff General Research Papers 34891, Iowa State University, Department of Economics.
- de Freitas, Luciano Charlita & Kaneko, Shinji, 2011. "Ethanol demand in Brazil: Regional approach," Energy Policy, Elsevier, vol. 39(5), pages 2289-2298, May.
- Madhu Khanna & Hayri �nal & Christine L. Crago & Kiyoshi Mino, 2013. "Can India Meet Biofuel Policy Targets? Implications for Food and Fuel Prices," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 95(2), pages 296-302.
- Kelvin Balcombe & George Rapsomanikis, 2008. "Bayesian Estimation and Selection of Nonlinear Vector Error Correction Models: The Case of the Sugar-Ethanol-Oil Nexus in Brazil," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 90(3), pages 658-668.
When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:6524. 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: (Roula I. Yazigi)
If references are entirely missing, you can add them using this form.