Welfare impacts of alternative biofuel and energy policies
Jingbo Cui (),
GianCarlo Moschini () and
Joseph Cooper ()
No 61138, 2010 Annual Meeting, July 25-27, 2010, Denver, Colorado from Agricultural and Applied Economics Association
We employ an open economy general equilibrium model to investigate the effects of government energy policy, with emphasis on corn-based ethanol, on the U.S. economy. The model specification incorporates world and domestic markets, assumes pollution costs from fuel consumption, and allows endogenous determination of equilibrium quantities and prices for oil, corn and ethanol. The model is calibrated to represent a recent benchmark data set for 2009 and is used to simulate the positive and normative effects of alternative policies. We find that a second best policy of a fuel tax and ethanol subsidy approximates fairly closely the welfare gains associated with the first best policy (optimal carbon tax and tariffs on traded goods).The largest economic gains to the U.S. economy from these energy policies arise from the impact of policies on the U.S.’s terms of trade, particularly in the oil market. We also find that, conditional on the current fuel tax, an optimal ethanol mandate is superior to an optimal ethanol subsidy. In the benchmark case the optimal mandate slightly exceeds 15 billion gallons of ethanol.
Keywords: Biofuel; Calibration; Welfare; Second Best Policies; Agricultural and Food Policy; Resource /Energy Economics and Policy (search for similar items in EconPapers)
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Journal Article: Welfare Impacts of Alternative Biofuel and Energy Policies (2011)
Working Paper: Welfare Impacts of Alternative Biofuel and Energy Policies (2010)
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Persistent link: http://EconPapers.repec.org/RePEc:ags:aaea10:61138
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