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Impact of U.S. Biofuel Policy in the Presence of Drastic Climate Conditions

Author

Listed:
  • Héctor M. Núñez

    (Division of Economics, CIDE)

  • Andrés Trujillo-Barrera

    (Division of Economics, CIDE)

Abstract

We analyze the impact of total and partial waivers of the U.S. Renewable Fuel Standard (RFS) under uncertain changes in climate conditions that affects crop yields distributions. The main model results show that reducing RFS would make world agricultural consumers better off, and increase U.S. corn share in the world market, while slightly decrease agricultural commodity prices, but the higher the RFS reduction the higher the uncertainty on the price changes. On the other hand, price changes would make ethanol and agricultural producers face losses as well as increase gasoline consumption and, therefore, bringing larger environmental damages. Overall RFS reduction generates negative changes in total economic surplus, specifically, RFS reductions up to 40 percent generate significant changes in the socioeconomic variables, however any reductions beyond 40 percent do not appear to bring further changes, although welfare results appear more uncertain under an increased reduction.

Suggested Citation

  • Héctor M. Núñez & Andrés Trujillo-Barrera, 2015. "Impact of U.S. Biofuel Policy in the Presence of Drastic Climate Conditions," Working Papers DTE 585, CIDE, División de Economía.
    • Handle: RePEc:emc:wpaper:dte585
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    References listed on IDEAS

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    More about this item

    Keywords

    Biofuel Policy; Climate Uncertainty; Crop Commodity Markets;
    All these keywords.

    JEL classification:

    • Q10 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - General
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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