Increases in Fuel Efficiency or Ethanol: Which Has More Efficiently Reduced Fossil Fuel Consumption?
11 Pages Posted: 12 Jun 2017
Date Written: June 7, 2017
One of the goals of the U.S. ethanol mandate is to reduce fossil fuel use in the transportation sector. But some critics of the mandate argue that a more efficient way of reducing fuel consumption would be to focus on improvements in fuel efficiency of motor vehicles. We consider the time span between 2005 and 2015 and ask how much the mandated increases in ethanol use reduced fossil fuel consumption relative to increases in light-duty vehicle fuel efficiency, and how cost-effective each trend was for consumers. We show that, over this time period, changes in vehicle fuel efficiency reduced fossil fuel energy consumption by 0.90%, while increases in ethanol consumption decreased it by 1.21%. Accordingly, fuel savings caused by increases in fuel efficiency saved drivers $40.9B, while the ethanol mandate penalized drivers with $91.5B in additional fuelling costs.
Keywords: Ethanol Mandate, Fossil-Fuel Energy, Biofuels
JEL Classification: Q42, Q48, R40
Suggested Citation: Suggested Citation