Impacts of selected US ethanol policy options
University of Missouri, FAPRI
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In response to a request from several members of Congress, the Food and Agricultural Policy Research Institute at the University of Missouri (FAPRI-MU) has examined alternatives to current US ethanol policies. Some of the alternative scenarios modify or eliminate tax credits to ethanol blenders, import tariffs and use mandates. Others make payments to ethanol plants, allow 15% ethanol blends and divert distillers grains from domestic feed markets. The FAPRI-MU 2009 stochastic baseline was used to explore these policy options under a range of market contexts. The results consequently depend on assumptions about macroeconomic conditions and policy implementation that were based on information available in January 2009. The following conclusions can be drawn from the analysis of the diverse scenarios: Allowing the ethanol tax credit or ethanol tariff to expire tends to reduce domestic ethanol production and corn prices. Reducing biofuel use mandates also tends to reduce ethanol production and corn prices. Current policies often provide redundant support. Policy options that reduce biofuel support when corn prices are high can slightly moderate high grain prices. Allowing 15% ethanol blends increases ethanol use and average corn prices, but the effects are modest. Market circumstances matter.
Added on 3 June 2009
United States & Canada
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