Ethanol and Corn Prices: The Role of US Tax Credits, Mandates, and Imports
The recent global increases in agricultural commodity prices can be attributed to a number of factors, but one of the most important was the large increase in US ethanol production. We argue that without a complex web of ethanol policies, little ethanol would be produced in the United States. This is likely the case for biofuel production in the EU, Canada, and other developed countries as well. It is increasingly evident that developing countries have a comparative advantage in the production of biofuels and their feedstock. Yet policies have been enacted that discriminate against trade. The result is little international trade in biofuels. This chapter puts into perspective the effects of US ethanol policies on commodity prices, as well as their impact on US terms of trade.
KeywordsEthanol Production Gasoline Price Import Tariff Production Subsidy Gasoline Consumption
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