Contributions of U.S. Crop Subsidies to Biofuel and Related Markets

Stephen Devadoss and Jude Bayham

Journal of Agricultural and Applied Economics, 2010, vol. 42, issue 4, 14

Abstract: The U.S. crop subsidies provide incentives for farmers to expand feedstock production, which benefits the biofuel producers by lowering input costs. This study develops a general equilibrium model to analyze the effects of a reduction in the U.S. crop subsidy on biofuel industries and social welfare. The impacts of feedstock policies on the biofuel market are marginal. In contrast, the biofuel mandate has a larger impact and counteracts the effects of the crop subsidy reduction. The mandate increases the demand for feedstock and causes not only grain ethanol, but also cellulosic ethanol production to rise. The mandate exacerbates the distortion, and government spending increases significantly, leading to greater welfare loss.

Keywords: Agribusiness; Agricultural and Food Policy; Agricultural Finance; Community/Rural/Urban Development; Crop Production/Industries; Environmental Economics and Policy; Farm Management; Financial Economics; Land Economics/Use; Research and Development/Tech Change/Emerging Technologies; Resource/Energy Economics and Policy (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:ags:joaaec:100525

DOI: 10.22004/ag.econ.100525

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