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Should the ethanol blenders credit be eliminated? / David Besanko, Melissa Ulan.

By: Contributor(s): Material type: TextSeries: Publisher: London : SAGE Publications Ltd, 2017Description: 1 online resource : illustrationsContent type:
  • text
Media type:
  • computer
Carrier type:
  • online resource
ISBN:
  • 9781473995239 (ebook) :
Subject(s): DDC classification:
  • 333.95390973
Online resources: In December 2010, one U.S. legislative action was largely overlooked in the popular press: the one-year extension of the 45-cent-per-gallon Volumetric Ethanol Excise Tax Credit (VEETC), commonly known as the blenders credit. Both proponents and opponents of the blenders credit liked to cite data to support their positions. Proponents pointed out the number of jobs created by new ethanol plants, while opponents cited unfavorable energy balances from the use of ethanol and the overall budgetary impact of the blenders credit. What was less clear but potentially much more important than the selective data cited by advocates and critics of ethanol was the overall impact of the blenders credit on the U.S. economy. In particular, to what extent did the ethanol subsidy by influencing the allocation of resources to the ethanol market act as a drag on efficiency in the U.S. economy? This case presents a history of ethanol in the U.S. and an overview of the market for ethanol-based motor fuel, including data on demand and supply fundamentals. It also discusses the broader U.S. energy market, as well as the U.S. market for corn. The case reviews other policy interventions besides the ethanol tax credit that have an impact on the market for ethanol-based motor fuel, such as tariffs and mandates. Finally, it surveys the ways other countries around the world, such as Brazil, have supported the use of ethanol-based fuel.
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Originally published in Besanko, D., & Ulan, M. (2011). Should the Ethanol Blenders Credit Be Eliminated?. 5-111-001. Evanston, IL: Kellogg School of Management, Northwestern University.

In December 2010, one U.S. legislative action was largely overlooked in the popular press: the one-year extension of the 45-cent-per-gallon Volumetric Ethanol Excise Tax Credit (VEETC), commonly known as the blenders credit. Both proponents and opponents of the blenders credit liked to cite data to support their positions. Proponents pointed out the number of jobs created by new ethanol plants, while opponents cited unfavorable energy balances from the use of ethanol and the overall budgetary impact of the blenders credit. What was less clear but potentially much more important than the selective data cited by advocates and critics of ethanol was the overall impact of the blenders credit on the U.S. economy. In particular, to what extent did the ethanol subsidy by influencing the allocation of resources to the ethanol market act as a drag on efficiency in the U.S. economy? This case presents a history of ethanol in the U.S. and an overview of the market for ethanol-based motor fuel, including data on demand and supply fundamentals. It also discusses the broader U.S. energy market, as well as the U.S. market for corn. The case reviews other policy interventions besides the ethanol tax credit that have an impact on the market for ethanol-based motor fuel, such as tariffs and mandates. Finally, it surveys the ways other countries around the world, such as Brazil, have supported the use of ethanol-based fuel.

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