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The Benefits and Costs of Ethanol: An Evaluation of the Government's Analysis

35 Pages Posted: 8 Nov 2007 Last revised: 14 Oct 2013

Robert W. Hahn

University of Oxford, Smith School; Georgetown University

Caroline Cecot

George Mason University - Antonin Scalia Law School, Faculty

Date Written: August 1, 2008

Abstract

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.

Keywords: benefit-cost analysis, regulation, energy policy, environmental economics, ethanol

JEL Classification: D61, D78, L50, Q48, Q5

Suggested Citation

Hahn, Robert W. and Cecot, Caroline, The Benefits and Costs of Ethanol: An Evaluation of the Government's Analysis (August 1, 2008). AEI-Brookings Joint Center Working Paper No. 07-17; Journal of Regulatory Economics, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1027692

Robert W. Hahn (Contact Author)

University of Oxford, Smith School ( email )

Oxford
United Kingdom

Georgetown University

Georgetown Center for Business and Public Policy
Washington, DC 20057
United States

Caroline Cecot

George Mason University - Antonin Scalia Law School, Faculty ( email )

3301 Fairfax Drive
Arlington, VA 22201
United States

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