Biofuel Subsidies and International Trade
Document Type
Article
Publication Title
Economics & Politics
Abstract
This paper explores optimal biofuel subsidies in a general equilibrium trade model. The focus is on the production of biofuels such as corn-based ethanol, which diverts corn from use as food. In the small-country case, when the tax on crude is not available as a policy option, a second-best biofuel subsidy may or may not be positive. In the large-country case, the twin objectives of pollution reduction and terms-of-trade improvement justify a combination of crude tax and biofuel subsidy for the food exporter. Finally, we show that when both nations engage in biofuel policies, the terms-of-trade effects encourage the Nash equilibrium subsidy to be positive (negative) for the food exporting (importing) nation.
DOI
https://doi.org/10.1111/ecpo.12009
Publication Date
2-2013
Recommended Citation
Bandyopadhyay, Subhayu; Bhaumik, Sumon; and Wall, Howard J., "Biofuel Subsidies and International Trade" (2013). Faculty Scholarship. 198.
https://digitalcommons.lindenwood.edu/faculty-research-papers/198