 Comparison of fixed versus variable biofuels incentivesWallace Tyner, Farzad Taheripour and David Perkis Energy Policy, 2010, vol. 38, issue 10, 5530-5540 Abstract: We evaluated several variants of a variable biofuel subsidy and compared them with the fixed subsidy and Renewable Fuel Standard using two different modeling approaches. First we used a partial equilibrium model encompassing crude oil, gasoline, ethanol, corn, and ethanol by-products. Second, we used a stochastic simulation model of a prototypical ethanol plant. From the partial equilibrium analysis, it appears the variable subsidy provides a safety net for ethanol producers when oil prices are low; yet, it does not put undue pressure on corn prices when oil prices are high. At high oil prices, the level of ethanol production is driven by market forces. From the plant level stochastic analysis, essentially the same conclusions are reached. As with the fixed subsidy, the variable subsidy can increase the net present value (NPV) sufficiently to encourage investment, but with lower risk for the producer, lower probability of a loss from the investment, and often lower expected cost to government. Finally, in the US, the ethanol industry is up against a blending limit called the blend wall. If the blending wall remains in place and no way around it is found, it does not matter much what other policy options are used. Keywords: Ethanol; policy; Biofuel; incentives (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:enepol:v:38:y:2010:i:10:p:5530-5540 Access Statistics for this article Energy Policy is currently edited by N. France More articles in Energy Policy from Elsevier |
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