Biofuel subsidies: an open-economy analysis

Arbeitspapier

We present a general equilibrium analysis of biofuel subsidies in an open-economy context. In the small-country case, when a Pigouvian tax on conventional fuels such as crude is in place, the optimal biofuel subsidy is zero. When the tax on crude is not available as a policy option, however, a second-best biofuel subsidy (or tax) is optimal. In the large-country case, the optimal tax on crude departs from its standard Pigouvian level and a biofuel subsidy is optimal. A biofuel subsidy spurs global demand for food and confers a terms-of-trade benefit to the food-exporting nation. This might encourage the food-exporting nation to use a subsidy even if it raises global crude use. The food importer has no such incentive for subsidization. Terms-of-trade effects wash out between trading nations; hence, any policy intervention by the two trading nations that raises crude use must be jointly suboptimal.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: IZA Discussion Papers ; No. 4584

Klassifikation und Themen

• Klassifikation: Wirtschaft
• Thema: Optimal biofuel subsidy ; Pigouvian tax ; terms-of-trade ; pollution externality ; Biokraftstoff ; Subvention ; Internalisierung externer Effekte ; Optimale Besteuerung ; Allgemeines Gleichgewicht ; Offene Volkswirtschaft ; Terms of Trade ; Theorie

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Bandyopadhyay, Subhayu ; Bhaumik, Sumon Kumar ; Wall, Howard J.
• Ereignis: Veröffentlichung
• (wer): Institute for the Study of Labor (IZA)
• (wo): Bonn
• (wann): 2009

Weitere Informationen

• Handle: http://hdl.handle.net/10419/35888
• Letzte Aktualisierung: 10.03.2025, 11:43 MEZ