The Benefits and Costs of Ethanol: An Evaluation of the Government's Analysis
Robert W. Hahn
University of Oxford, Smith School; Georgetown University
Vanderbilt University - Law School
August 1, 2008
AEI-Brookings Joint Center Working Paper No. 07-17
Journal of Regulatory Economics, Forthcoming
Ethanol production in the United States has been steadily growing and is expected to continue growing. Many politicians see increased ethanol use as a way to promote environmental goals, such as reducing greenhouse gas emissions, and energy security goals. This paper provides a benefit-cost analysis of increasing ethanol use based on an analysis by the Environmental Protection Agency. We find that the cost of increasing ethanol production to almost ten billion gallons a year is likely to exceed the benefits by about three billion dollars annually. We also suggest that earlier attempts aimed at promoting ethanol would have likely failed a benefit-cost test, and that Congress should consider repealing ethanol incentive programs, such as the ethanol tariff and tax credit.
Number of Pages in PDF File: 35
Keywords: benefit-cost analysis, regulation, energy policy, environmental economics, ethanol
JEL Classification: D61, D78, L50, Q48, Q5
Date posted: November 8, 2007 ; Last revised: October 14, 2013
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