An economic analysis of transportation fuel policies in Brazil

Héctor M. Núñez () and Hayri Onal ()
Additional contact information
Héctor M. Núñez: Division of Economics, CIDE

No DTE 570, Working Papers from CIDE, División de Economía

Abstract: Brazil uses taxes, subsidies, and blending mandates as policy instruments to manage its transportation fuel markets. Despite all the market stabilization efforts, the fuels sector has been very dynamic in recent years. In response to ethanol supply fluctuations, the ethanol blending rate is adjusted at times and complemented with fuel tax rates changes. In this paper, we analyze the impacts of such policy adjustments and market disturbances in the world ethanol and sugar markets on Brazilian producers’ supply responses, consumers’ driving demand and fuel choice, ethanol trade with the rest of the world, greenhouse gas (GHG) emissions, and social welfare. As the analytical tool, we use a large-scale spatially explicit price endogenous mathematical programming model which simulates the resource utilization in agriculture and finds the simultaneous equilibrium in food and fuel markets. The model results show that reducing the ethanol blending rate would reduce the driving demand by conventional vehicles while lowering the tax rate on gasoline would encourage flex fuel vehicle users to switch from pure ethanol to gasohol resulting in larger GHG emissions due to the consumption of a more carbon intensive fuel blend.

Keywords: Brazil fuel policy; mathematical programming; land use; greenhouse gas emissions (search for similar items in EconPapers)
JEL-codes: Q42 Q55 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2014-03
New Economics Papers: this item is included in nep-ene, nep-env and nep-tre
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.economiamexicana.cide.edu/RePEc/emc/pdf/DTE/DTE570.pdf (application/pdf)

Related works:
Working Paper: An Economic Analysis of Transportation Fuel Policies in Brazil (2013)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:emc:wpaper:dte570

Access Statistics for this paper

More papers in Working Papers from CIDE, División de Economía Contact information at EDIRC.
Bibliographic data for series maintained by Mateo Hoyos ().