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2010 | OriginalPaper | Buchkapitel

21. Biofuels, Policy Options, and Their Implications: Analyses Using Partial and General Equilibrium Approaches

verfasst von : Farzad Taheripour, Wallace E. Tyner

Erschienen in: Handbook of Bioenergy Economics and Policy

Verlag: Springer New York

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Abstract

In this chapter, we highlight some important aspects of biofuels development and policies from partial and general equilibrium perspectives. We first examine US biofuel policy backgrounds to determine factors which caused the boom in the ethanol industry in recent years. Then, we use a partial equilibrium model to investigate the economic consequences of further expansion in the ethanol industry for the key economic variables of the US agricultural and energy markets. This analysis is done for a range of alternative policy options and crude oil prices. Finally, we extend our analyses to examine consequences of further biofuel production at a global scale.

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Vorheriges Kapitel The Welfare Economics of Biofuel Tax Credits and Mandates

Nächstes Kapitel Welfare and Equity Implications of Commercial Biofuel

Several articles have addressed the impacts of higher energy prices on the agricultural costs of production (examples are Dvoskin and Heady 1976; Christensen et al. 1981). These papers do not address the link between these markets on the demand side. Even with energy being an influence on cost of production, there has been very low correlation historically between energy and agricultural commodity prices.

These prices are corn price paid and ethanol price received by the ethanol producer.

We have modified the Tiffany–Eidman spreadsheet developed at the University of Minnesota (Tiffany and Eidman, 2003) to generate the break-even ethanol and corn prices.

We also assumed that the price of DDGS is a function of corn and soybean prices. We used historical data to establish the link between these variables. To define a break-even line between corn and crude oil prices, one needs to establish a link between ethanol and crude oil prices. There is no need to establish such a link for the break-even line between corn and ethanol prices.

Actual observations are annual average prices of corn and ethanol in each year. The 2008 observation represents the average of the first 6 months. The monthly market corn (yellow number 2) prices are obtained from the United States Department of Agriculture website available at: http://www.ers.usda.gov/data/. The monthly rack ethanol prices are obtained from the Nebraska Government website available at: http://www.neo.ne.gov/statshtml/66.html.

The ethanol industry share of the blending subsidy is a controversial issue. For a detailed discussion see Taheripour and Tyner (2008).

This model assumes that gasoline and ethanol are perfect substitutes and that the price received by ethanol producers is equal to its energy equivalent gasoline price plus the ethanol subsidy, if there is any.

The blending wall refers to the physical limit on ethanol use with a 10% blend known as E10. We consume about 140 billion gallons of gasoline annually, so 10% would be 14 billion gallons. Due to lack of blending facilities, inability to blend ethanol in southern warm weather states in summer due to its high evaporative emissions, and other infrastructure issues, the effective limit is more like 12–12.5 billion gallons (Tyner et al. 2008). In addition, most vehicles are not flex-fuel and hence they cannot use gasoline blended with ethanol at a rate higher than 10%.

This analysis does not consider short-run adjustments in market prices and ignores short-term speculative demand for commodities.

In the extended GTAP model, ethanol and DDGS are jointly produced by the ethanol industry, and biodiesel and oilseed meals are jointly produced by biodiesel industry. So ethanol and DDGS are joint products and biodiesel and oilseed are also joint products. So defining DDGS and oilseed meals as the by-products does not undermine their importance.

According to these mandate policies, the US corn ethanol production will be equal to 15 billion gallons in 2015. The European Union Biofuels Directive requires that 10% of liquid fuel should be biofuel in the EU region by 2020 (European Commission (2007)). To compare and contrast the EU biofuel directive with the US mandate, it is assumed that the EU will obtain 6.25% of its transportation fuels from biofuels in 2015.

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Titel: Biofuels, Policy Options, and Their Implications: Analyses Using Partial and General Equilibrium Approaches
verfasst von: Farzad Taheripour
Wallace E. Tyner
Verlag: Springer New York
Buch: Handbook of Bioenergy Economics and Policy
Print ISBN: 978-1-4419-0368-6

Electronic ISBN: 978-1-4419-0369-3

Copyright-Jahr: 2010
DOI: https://doi.org/10.1007/978-1-4419-0369-3_21

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