Ethanol_Policies_and_Objectives - Objectives of Biofuel...

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Objectives of Biofuel Policies The policy objectives are threefold: (1) Energy: to reduce dependence on fossil fuels (oil) a. ‘Energy security’ by reducing oil imports from unstable regimes, reducing oil imports, reducing oil prices to reduce funding for terrorism, diversify energy sources (types and countries), … b. Concerns over ‘peak’ oil, oil price instability and rising oil prices… (2) Environment: to improve the environment by reducing CO 2 e emissions, local air pollutants, traffic congestion and accidents, etc. (3) Agriculture: to improve farm incomes, reduce tax costs of farm subsidy programs and stimulate rural development A Classification of Biofuel Policies Biofuel policies generally promote biofuel production and substitution for petroleum fuels in consumption. These policies can be classified as follows: (1) Consumer excise-tax exemptions at the gasoline pump 1 or blender’s tax credits (45 cents federal and 6 cents per gallon state in the U.S.). (2) Mandatory blending or biofuel consumption requirements (from domestic and import supplies) – 10.5 bil. gallons for 2009 in the U.S. (3) Import tariffs (import quotas) on biofuels (4) Production subsidies for biofuel feedstocks (e.g., corn) and biofuels themselves (grants, loan guarantees, tax incentives, etc.) (5) (6) Policies that shift the: a. demand curve for non-biofuel feedstocks right (e.g., U.S. import quota on sugar increases the demand for corn used as a sweetener product), or b. supply curve for biofuel feedstocks left (e.g., U.S. subsidies for other crops) (7) Sustainability standards 2 All policies enhance biofuel prices and production except category (6) where sugar policies
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This note was uploaded on 02/22/2009 for the course ECON 4300 taught by Professor Degorter during the Spring '09 term at Cornell University (Engineering School).

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Ethanol_Policies_and_Objectives - Objectives of Biofuel...

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