The Economics of a Blend Mandate for Biofuels

Posted: 9 Jun 2009

See all articles by Harry de Gorter

Harry de Gorter

Cornell University - School of Applied Economics and Management

David R. Just

Cornell University - Dyson School of Applied Economics and Management

Date Written: 2009-01

Abstract

2A biofuel blend mandate may increase or decrease consumer fuel prices with endogenous oil prices, depending on relative supply elasticities. Biofuel tax credits always reduce fuel prices. Tax credits result in lower fuel prices than under a mandate for the same level of biofuel production. If tax credits are implemented alongside mandates, then tax credits subsidize fuel consumption instead of biofuels. This contradicts energy policy goals by increasing oil dependency, CO emissions, and traffic congestion, while providing little benefit to either corn or ethanol producers. These social costs will be substantial with tax credits costing taxpayers $28.7 billion annually by 2022. 2

Suggested Citation

de Gorter, Harry and Just, David R., The Economics of a Blend Mandate for Biofuels (2009-01). American Journal of Agricultural Economics, Vol. 91, Issue 3, pp. 738-750, August 2009. Available at SSRN: https://ssrn.com/abstract=1416342 or http://dx.doi.org/10.1111/j.1467-8276.2009.01275.x

Harry De Gorter (Contact Author)

Cornell University - School of Applied Economics and Management ( email )

248 Warren Hall
Ithaca, NY 14853
United States
607-255-8076 (Phone)

David R. Just

Cornell University - Dyson School of Applied Economics and Management ( email )

Ithaca, NY
United States
607-255-2086 (Phone)
607-255-9984 (Fax)

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