Supply Portfolio of Bioethanol in the Republic of Korea

Jeong Hwan Bae
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Jeong Hwan Bae: Chonnam National University

Korean Economic Review, 2014, vol. 30, 133-161

Abstract: Despite the co-benefits of bioethanol, such as energy security, environmental improvement, CO2 emission reduction and development of associated industry, bioethanolblended gasoline without subsidy is more expensive than pure gasoline in Korea. The renewable fuel standard (RFS) can contribute to the development of a bioethanol market. However, without controlling the portions of domestic bioethanol, it is highly plausible that a new bioethanol market will be filled with imported bioethanol. If the entire supply of bioethanol is imported, Korea can no longer expect those co-benefits. This study aims at simulating the desirable ratios of domestic versus imported bioethanol as well as domestic versus imported feedstock for producing bioethanol in Korea by combining the marginal social benefit (MSB) with the marginal social cost (MSC) for bioethanol supply. MSB is derived from a choice experiment and the MSC is derived from the differences in the bioethanol production costs and the petroleum price. The simulation results show that considerable portions of bioethanol should be produced domestically under the condition that MSB is equivalent to MSC in bioethanol production. Thus, the upcoming RFS policy should allow for some quota on behalf of domestic bioethanol with domestic feedstock or more credit should be given to the petroleum companies that use domestic bioethanol with domestic feedstock.

Keywords: Bioethanol; Renewable Fuel Standard; Marginal Social Gains; Marginal Social Costs; Supply Portfolio of Bioethanol (search for similar items in EconPapers)
JEL-codes: Q42 Q51 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (1)

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