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Contributions of U.S. Crop Subsidies to Biofuel and Related Markets

Published online by Cambridge University Press:  26 January 2015

Stephen Devadoss  and
Jude Bayham
Stephen Devadoss
Affiliation:
Department of Agricultural Economics, University of Idaho, Moscow, ID
Jude Bayham
Affiliation:
Department of Agricultural Economics, University of Idaho, Moscow, ID
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Abstract

The U.S. crop subsidies provide incentives for farmers to expand feedstock production, which benefits the biofuel producers by lowering input costs. This study develops a general equilibrium model to analyze the effects of a reduction in the U.S. crop subsidy on biofuel industries and social welfare. The impacts of feedstock policies on the biofuel market are marginal. In contrast, the biofuel mandate has a larger impact and counteracts the effects of the crop subsidy reduction. The mandate increases the demand for feedstock and causes not only grain ethanol, but also cellulosic ethanol production to rise. The mandate exacerbates the distortion, and government spending increases significantly, leading to greater welfare loss.

Keywords

biofuelenvironmental impactsfarm supportswelfare analysisQ18Q27
Type
Research Article
Information
Journal of Agricultural and Applied Economics , Volume 42 , Issue 4 , November 2010 , pp. 743 - 756
Copyright
Copyright © Southern Agricultural Economics Association 2010

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