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US–Brazil Trade in Biofuels: Determinants, Constraints, and Implications for Trade Policy

In: Handbook of Bioenergy Economics and Policy

Author

Listed:
  • Christine Lasco

    (University of Illinois)

  • Madhu Khanna

    (University of Illinois)

Abstract

This chapter compares the cost and greenhouse gas (GHG) mitigation benefits of corn ethanol in the United States relative to sugarcane ethanol produced in Brazil and develops a stylized model to analyze its implications for the impact of US biofuel policies on social welfare and GHG emissions. The policies considered here include the $0.51 per gallon blender’s subsidy for ethanol and the import tariff of $0.54 per gallon on sugarcane ethanol. Our analysis shows that the combined subsidy and tariff policy decreases welfare by about $3 B depending on assumptions about the extent of market power the United States has in the world ethanol market. These policies also provide negligible (in some cases negative) benefits in the form of GHG reduction. The results indicate that the United States would gain from removing domestic and trade distortions in the ethanol market. Increasing ethanol demand in the world market will entail expansion of Brazil’s ethanol industry. We briefly discuss concerns about the environmental impacts of this expansion.

Suggested Citation

  • Christine Lasco & Madhu Khanna, 2010. "US–Brazil Trade in Biofuels: Determinants, Constraints, and Implications for Trade Policy," Natural Resource Management and Policy, in: Madhu Khanna & Jürgen Scheffran & David Zilberman (ed.), Handbook of Bioenergy Economics and Policy, chapter 0, pages 251-266, Springer.
    • Handle: RePEc:spr:nrmchp:978-1-4419-0369-3_15
    DOI: 10.1007/978-1-4419-0369-3_15
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    Citations

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    Cited by:

    1. Marcelo Sant'Anna, 2024. "How Green Is Sugarcane Ethanol?," The Review of Economics and Statistics, MIT Press, vol. 106(1), pages 202-216, January.
    2. Khanna, Madhu & Hector, Nunez & David, Zilberman, 2014. "The Political-Economy of Biofuel and Cheap Oil Policies in Brazil," 2014 Annual Meeting, July 27-29, 2014, Minneapolis, Minnesota 169471, Agricultural and Applied Economics Association.
    3. de Gorter, Harry & Drabik, Dusan & Kliauga, Erika M. & Timilsina, Govinda R., 2013. "An economic model of Brazil's ethanol-sugar markets and impacts of fuel policies," Policy Research Working Paper Series 6524, The World Bank.
    4. Ujjayant Chakravorty & Marie-HéLène Hubert, 2013. "Global Impacts of the Biofuel Mandate under a Carbon Tax," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 95(2), pages 282-288.
    5. Chao Bi & Jingjing Zeng & Wanli Zhang & Yonglin Wen, 2020. "Modelling the Coevolution of the Fuel Ethanol Industry, Technology System, and Market System in China: A History-Friendly Model," Energies, MDPI, vol. 13(5), pages 1-26, February.

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