Energy: BioethanolLECTURE ON THE ECONOMICS OF ENERGY

Why does Energy matter?National Security Issues

Continued decline in energy reserves

What actions have been taken?Incentive building for alternative fuels

Creation of alternative fuels

Model Redesign

What fuels are currently available?Biodiesel

Ethanol

Electricity

Hydrogen

Natural Gas

Propane

Costs of Biodiesel

Costs of Ethanol

Costs of Electric Cars:

Costs of Hydrogen

BioethanolWhat is Bioethanol?

Current Ethanol RegulationClean Air Act

1977 Amendments1990 Amendments

Fuel Additive and Fuel RegistrationE15 Registration

E10 Regulation

E15 Regulation

Offsetting CostsNet Gain in Consumer Welfare (Assumed)

Incentives (Federal Incentives)

Additional Costs: Agricultural Issue Interconnectedness of Food Market and Fuel Market

Raises costs of cropsCommonly seen as a demand issue

My QuestionQuestion: Is bioethanol a viable and good solution?

Viable: Sustainable

Good: Increases net social welfare

Terminology:

Hectare

Land Grabs

Supply Side Approach (My Argument)

Bioethanol is another industry and has different costs.

The supply curve is also the marginal cost curve of an industryIncentives for Land Grabs by ethanol

corporations

Land Grabs reduce supply of land for agricultural purposes

S

D

S’

Demand Side Approach (Consensus)

Bioethanol increases demands for certain crops

Agricultural food suppliers also supply fuel industries with crops

No division in suppliers between markets, entirely a demand issue.

S

D D’

What does this result in?Higher Food Prices

Lower Gas Prices (My Argument)

Evidence?Food Crisis of 2008

GFRP

Is this worth it?Do the social costs of pollution offset the resulting costs of bioethanol?

What are the alternatives?

Questions?