Mandatory Demand as a Policy Instrument: The Case of the Renewable Fuel Standard (RFS) Biofuel Program

31 Pages Posted: 14 Jun 2012 Last revised: 21 Aug 2012

Jay P. Kesan

University of Illinois College of Law

Timothy A. Slating

University of Illinois Energy Biosciences Institute

Hsiao-Shan Yang

University of Illinois at Urbana-Champaign

Date Written: June 13, 2012

Abstract

The U.S. Congress established the Renewable Fuel Standard (RFS) program, which mandates a certain volume of biofuel consumption from 2006-2022, in an effort to enhance U.S. energy security, reduce transportation-related GHG emissions, and stimulate rural economic development. In this Paper, we assess the RFS from the viewpoint of industrial policy and provide the first empirical study addressing whether the RFS is an effective policy instrument to incentivize the development of the nascent biofuels industry. Our analysis focuses on data associated with the first-generation bioethanol industry and suggests that the RFS contributes to increasing economies of scale and improving the competition level among existing firms. More specifically, our empirical analysis suggests that: (1) the RFS has a positive significant effect on the capacity of first-generation bioethanol plants; and (2) the RFS positively affects the survival rate of first-generation bioethanol plants.

Suggested Citation

Kesan, Jay P. and Slating, Timothy A. and Yang, Hsiao-Shan, Mandatory Demand as a Policy Instrument: The Case of the Renewable Fuel Standard (RFS) Biofuel Program (June 13, 2012). Illinois Program in Law, Behavior and Social Science Paper No. LBSS12-16; Illinois Public Law Research Paper No. 11-24. Available at SSRN: https://ssrn.com/abstract=2083698 or http://dx.doi.org/10.2139/ssrn.2083698

Jay P. Kesan (Contact Author)

University of Illinois College of Law ( email )

504 E. Pennsylvania Avenue
Champaign, IL 61820
United States
217-333-7887 (Phone)
217-244-1478 (Fax)

HOME PAGE: http://www.jaykesan.com

Timothy A. Slating

University of Illinois Energy Biosciences Institute ( email )

2122 Institute for Genomic Biology
1206 W. Gregory Dr.
Urbana, IL 61801
United States

Hsiao-Shan Yang

University of Illinois at Urbana-Champaign ( email )

601 E John St
Champaign, IL 61820
United States

Paper statistics

Downloads
120
Rank
192,799
Abstract Views
918