IDEAS home Printed from https://ideas.repec.org/p/ags/aaea14/169471.html
   My bibliography  Save this paper

The Political-Economy of Biofuel and Cheap Oil Policies in Brazil

Author

Listed:
  • Khanna, Madhu
  • Hector, Nunez
  • David, Zilberman

Abstract

Brazil has pursued a mix of policy interventions in the fuel sector to achieve multiple objectives of economic and social development, promoting biofuels and reducing dependence on oil. We develop a welfare economic framework to analyze the rationale the fuel policy choices in Brazil and to analyze the trade-offs they have engendered in the fuel and sugar sectors. We also examine their distributional impacts on producers and consumers in the sugar, oil and biofuel sectors and on government revenues. Additionally, we undertake a normative analysis for the purpose of comparing the welfare and environmental impacts of existing policies with those justified by the goal of maximizing social welfare and addressing market failure. The ex-post analysis of the outcomes for different stakeholders in the fuel and sugar sectors provides insights on the likely political-economic factors guiding policy choices. We find that the status quo policies are likely to have been motivated by the objectives of exporting oil, raising government revenue and promoting rural development through the sugarcane sector and have had a significant adverse effect on fuel and sugar consumers and aggregate social welfare in Brazil.

Suggested Citation

  • 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.
    • Handle: RePEc:ags:aaea14:169471
    DOI: 10.22004/ag.econ.169471
    as

    Download full text from publisher

    File URL: https://ageconsearch.umn.edu/record/169471/files/Brazil%20Welfare%203%2026%202014%20AAEA.pdf
    Download Restriction: no
    File URL: https://libkey.io/10.22004/ag.econ.169471?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Amani Elobeid & Simla Tokgoz, 2008. "Removing Distortions in the U.S. Ethanol Market: What Does It Imply for the United States and Brazil?," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 90(4), pages 918-932.
    2. Stephen P. Holland & Jonathan E. Hughes & Christopher R. Knittel, 2009. "Greenhouse Gas Reductions under Low Carbon Fuel Standards?," American Economic Journal: Economic Policy, American Economic Association, vol. 1(1), pages 106-146, February.
    3. de Gorter Harry & Just David R, 2008. "The Economics of the U.S. Ethanol Import Tariff with a Blend Mandate and Tax Credit," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 6(2), pages 1-23, December.
    4. Lapan, Harvey & Moschini, GianCarlo, 2012. "Second-best biofuel policies and the welfare effects of quantity mandates and subsidies," Journal of Environmental Economics and Management, Elsevier, vol. 63(2), pages 224-241.
    5. Gately, D. & Streifel, S.S., 1997. "The demand for Oil Products in Developing Countries," World Bank - Discussion Papers 359, World Bank.
    6. Krichene, Noureddine, 2002. "World crude oil and natural gas: a demand and supply model," Energy Economics, Elsevier, vol. 24(6), pages 557-576, November.
    7. Devadoss, Stephen & Kropf, Jurgen, 1995. "Trade Creation And Diversion Effects Of The North American Free Trade Agreement Of U.S. Sugar Imports From Mexico," A.E. Research Series 305137, University of Idaho, Department of Agricultural Economics and Rural Sociology.
    8. Santos, Gervásio F., 2013. "Fuel demand in Brazil in a dynamic panel data approach," Energy Economics, Elsevier, vol. 36(C), pages 229-240.
    9. Jingbo Cui & Harvey Lapan & GianCarlo Moschini & Joseph Cooper, 2011. "Welfare Impacts of Alternative Biofuel and Energy Policies," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 93(5), pages 1235-1256.
    10. Drabik, Dusan & de Gorter, Harry & Just, David R., 2010. "The Implications of Alternative Biofuel Policies on Carbon Leakage," 2011 Annual Meeting, July 24-26, 2011, Pittsburgh, Pennsylvania 102689, Agricultural and Applied Economics Association.
    11. repec:idb:brikps:80518 is not listed on IDEAS
    12. 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.
    13. 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.
    14. Devadoss, Stephen & Kropf, Jurgen & Wahl, Thomas I., 1995. "Trade Creation And Diversion Effects Of The North American Free Trade Agreement Of U.S. Sugar Imports From Mexico," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 20(2), pages 1-16, December.
    15. Walter Vergara & Ana R. Rios & Luis Miguel Galindo Paliza & Pablo Gutman & Paul Isbell & Paul Hugo Suding & Joseluis Samaniego, 2013. "The Climate and Development Challenge for Latin America and the Caribbean: Options for Climate-Resilient, Low-Carbon Development," IDB Publications (Books), Inter-American Development Bank, number 80518, February.
    16. Tatiane Menezes & Carlos Azzoni & Fernando Silveira, 2008. "Demand elasticities for food products in Brazil: a two-stage budgeting system," Applied Economics, Taylor & Francis Journals, vol. 40(19), pages 2557-2572.
    17. Xiaoguang Chen & Madhu Khanna, 2013. "Food vs. Fuel: The Effect of Biofuel Policies," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 95(2), pages 289-295.
    18. Hector M. Nuñez & Hayri Önal & Madhu Khanna, 2013. "Land use and economic effects of alternative biofuel policies in Brazil and the United States," Agricultural Economics, International Association of Agricultural Economists, vol. 44(4-5), pages 487-499, July.
    19. Dahl, Carol A., 2012. "Measuring global gasoline and diesel price and income elasticities," Energy Policy, Elsevier, vol. 41(C), pages 2-13.
    20. Christiane Baumeister & Gert Peersman, 2013. "The Role Of Time‐Varying Price Elasticities In Accounting For Volatility Changes In The Crude Oil Market," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 28(7), pages 1087-1109, November.
    21. Hira, Anil & de Oliveira, Luiz Guilherme, 2009. "No substitute for oil? How Brazil developed its ethanol industry," Energy Policy, Elsevier, vol. 37(6), pages 2450-2456, June.
    22. repec:idb:brikps:456 is not listed on IDEAS
    23. Márcia Azanha Ferraz Dias de Moraes & David Zilberman, 2014. "Production of Ethanol from Sugarcane in Brazil," Natural Resource Management and Policy, Springer, edition 127, number 978-3-319-03140-8, March.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Khanna, Madhu & Nuñez, Hector M. & Zilberman, David, 2016. "Who pays and who gains from fuel policies in Brazil?," Energy Economics, Elsevier, vol. 54(C), pages 133-143.
    2. 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.
    3. Chen, Xiaoguang & Huang, Haixiao & Khanna, Madhu & Önal, Hayri, 2014. "Alternative transportation fuel standards: Welfare effects and climate benefits," Journal of Environmental Economics and Management, Elsevier, vol. 67(3), pages 241-257.
    4. Scott, K. Rebecca, 2015. "Demand and price uncertainty: Rational habits in international gasoline demand," Energy, Elsevier, vol. 79(C), pages 40-49.
    5. John Baffes & Alain Kabundi & Peter Nagle, 2022. "The role of income and substitution in commodity demand [Modelling OECD industrial energy demand: asymmetric price responses and energy-saving technical change]," Oxford Economic Papers, Oxford University Press, vol. 74(2), pages 498-522.
    6. Drabik, Dusan & de Gorter, Harry & Timilsina, Govinda R., 2014. "The effect of biodiesel policies on world biodiesel and oilseed prices," Energy Economics, Elsevier, vol. 44(C), pages 80-88.
    7. Moschini, GianCarlo & Lapan, Harvey & Kim, Hyunseok, 2016. "The Renewable Fuel Standard: Market and Welfare Effects of Alternative Policy Scenarios," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 235721, Agricultural and Applied Economics Association.
    8. Condon, Nicole & Klemick, Heather & Wolverton, Ann, 2015. "Impacts of ethanol policy on corn prices: A review and meta-analysis of recent evidence," Food Policy, Elsevier, vol. 51(C), pages 63-73.
    9. Basak Bayramoglu & Jean-François Jacques, 2016. "The economic and environmental effects of a biofuel mandate policy: the case of France [Les effets économiques et environnementaux d’une politique d’incorporation obligatoire de biocarburants : le ," Post-Print hal-02877013, HAL.
    10. Moncada, J.A. & Verstegen, J.A. & Posada, J.A. & Junginger, M. & Lukszo, Z. & Faaij, A. & Weijnen, M., 2018. "Exploring policy options to spur the expansion of ethanol production and consumption in Brazil: An agent-based modeling approach," Energy Policy, Elsevier, vol. 123(C), pages 619-641.
    11. Gabriel E. Lade & C.-Y. Cynthia Lin Lawell, 2021. "The Design of Renewable Fuel Mandates and Cost Containment Mechanisms," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 79(2), pages 213-247, June.
    12. Böhringer, Christoph & Garcia-Muros, Xaquin & Gonzalez-Eguino, Mikel & Rey, Luis, 2017. "US climate policy: A critical assessment of intensity standards," Energy Economics, Elsevier, vol. 68(S1), pages 125-135.
    13. John C. Beghin & Barbara El Osta & Jay R. Cherlow & Samarendu Mohanty, 2003. "The Cost Of The U.S. Sugar Program Revisited," Contemporary Economic Policy, Western Economic Association International, vol. 21(1), pages 106-116, January.
    14. Nunez, Hector & Onal, Hayri, 2013. "An Economic Analysis of Transportation Fuel Policies in Brazil," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 149973, Agricultural and Applied Economics Association.
    15. Gabriel E Lade & C -Y Cynthia Lin Lawell & Aaron Smith, 2018. "Policy Shocks and Market-Based Regulations: Evidence from the Renewable Fuel Standard," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 100(3), pages 707-731.
    16. Das, Prantika & Gundimeda, Haripriya, 2021. "Economic Evaluation of Achieving Biofuel Mandate through Advanced Biofuels in Developing Country: Case of India," 2021 Conference, August 17-31, 2021, Virtual 315355, International Association of Agricultural Economists.
    17. Scheitrum, Daniel, 2017. "Renewable Natural Gas as a Solution to Climate Goals: Response to California's Low Carbon Fuel Standard," MPRA Paper 77193, University Library of Munich, Germany.
    18. Coletti, Donald & Lalonde, René & Masson, Paul & Muir, Dirk & Snudden, Stephen, 2021. "Commodities and monetary policy: Implications for inflation and price level targeting," Journal of Policy Modeling, Elsevier, vol. 43(5), pages 982-999.
    19. Christina Korting & Harry de Gorter & David R Just, 2019. "Who Will Pay for Increasing Biofuel Mandates? Incidence of the Renewable Fuel Standard Given a Binding Blend Wall," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 101(2), pages 492-506.
    20. Mugera, Harriet & Gilbert, Christopher, 2015. "Structural Change in the Relationship Between Energy and Food Prices," 2015 Conference, August 9-14, 2015, Milan, Italy 212505, International Association of Agricultural Economists.

    More about this item

    Keywords

    Political Economy;

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ags:aaea14:169471. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: AgEcon Search (email available below). General contact details of provider: https://edirc.repec.org/data/aaeaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.