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We use a Bayesian approach to estimate elasticities of former Conservation Reserve Program (CRP) land allocation and the impact of the US–China trade conflict on post-CRP land transitions. Economically acceptable elasticities of land exiting CRP are important for applied analysis, including market shocks and environmental policy. Taking as given the total area exiting the CRP, the Phase 1 deal raised the posterior mean of national post-CRP soybean area by 155 thousand acres and the market facilitation program by 89 thousand acres. Cross-commodity effects are important, and elasticities vary depending on the direction and magnitude of changes in net returns and payments.

We analyze the Russian restriction on chicken imports as an example of a non-tariff barrier (NTB). Cointegration test results support the hypothesis that the NTB limited trade. We calibrate an equilibrium market model to cointegration results to assess the market impact. The tariff equivalent of the Russian chicken NTB is estimated to be 30 − 40% depending on the representation of consumer demand. Removing the NTB decreases domestic production by 4–5% and domestic price by 27%–34%, while imports increase by 326–423 thousand tons annually in 2015–2019.

This study examines the persistent impacts of the bovine spongiform encephalopathy (BSE) outbreak in the United States on Japanese beef demands. An Armington model with time‐varying parameters allows us to separate BSE effects from other factors. A counter‐factual case estimates that, if the BSE outbreak had not occurred, demand for Australian beef would have been lower and demand for U.S. beef would have been higher, with domestic beef demand only modestly affected. The BSE outbreak affected imported frozen beef demands more than imported chilled beef demands. Our estimation method is relevant for researchers studying the impacts of disease‐related or other trade disruptions, as well as to traders and policy makers with interest in Japanese beef markets. [EconLit citations: F14, Q17].

Korea replaced its rice import quota with a tariff rate quota (TRQ) in 2015. A structural model representing the Korean rice market is developed to evaluate this new trade policy and examine the possibility of Korean rice imports under uncertainty. Results indicate that rice imports in excess of the current TRQ quantity are unlikely for a range of market conditions. Two scenarios, which are the over-quota tariff rate reduction and the TRQ quantity expansion, show how the market responds to policy changes. In addition, Korean rice imports are sensitive to consumer preferences for different rice types.

This research employs a partial equilibrium model to estimate the short- and long-run effects of COVID-19 and rice policies on Bangladesh’s rice market and food security. We also analyze the impact of relevant policies in terms of their effectiveness in mitigating stresses stemming from a hypothetical pandemic with a COVID-19-like impact. The results indicate that the effect of COVID-19 on Bangladeshi food security during FY 2019/20 was mixed, as the indicators of food availability improved by 5%, and decreased by 17% for food stability, relative to what they would have been otherwise. Policy simulation results indicate that a higher import tariff improves self-sufficiency status, but undermines rice availability and accessibility by bending the market toward a restrictive trade regime. Results also indicate that unlike stock enhancement policy, closing the existing yield gap improves rice availability, accessibility, and moderates the depressing effect of a future event with repercussions similar to COVID-19, although the yield policy appears more speculative and could be too costly. The insights generated contribute to the understanding of policies that aim to achieve sustainable development goals related to aggregate food security, and build resilience against future shocks akin to COVID-19.

Climate change has the potential to affect crop prices and price volatility. However, the economic models used in prior assessments largely do not include known, automatic, stabilizing factors. Crop storage can stabilize prices and U.S. crop policy tends to provide support that moves opposite prices. We quantify effects of circa 2050 climate forcing on the inter-annual variability of U.S. Corn Belt corn and soybean yields using statistical crop models and climate scenarios from regional and global climate models. Climate change generally reduces mean yields and increases the inter-annual variability of yields in the Midwestern U.S. Using these yield impacts and an economic model with automatic market stabilizers, we find only modest increases in price volatility. Although individual producers and states are negatively affected by the yield reductions, the aggregate effect for all corn and soybean producer returns can be positive because of price increases. Moreover, agricultural policies based on price levels or revenue variation offset some of the impacts of market variation on farm income. Our results differ from other recent results and temper concerns that increasing climate instability necessarily translates to greater uncertainty about agricultural commodity uses, including as food and biofuels, in the near future.

Environmental economists might recommend a cap-and-trade program as a good way to lower emissions of greenhouse gases (GHGs), but US carbon cap-and-trade legislation was proposed and failed to become law. Instead, the biofuel use mandate is the primary existing GHG reduction program in the United States. The mandate effectively requires a rising amount of GHG abatement each year, but allows regulated parties to buy and sell credits to meet annual obligations. Although many aspects of the biofuel mandate look similar to a cap-and-trade program, there are additional requirements, such as feedstock eligibility limitations and waivers. The existence of the mandates is presumably conditional on all the legal requirements, but these conditions represent a departure from a strict GHG cap-and-trade program. We estimate GHG abatement costs of the mandate and compare them to a hypothetical cap-and-trade program targeting vehicle fuels. The mandate abatement cost is found to be higher than a hypothetical GHG cap-and-trade. Our results show that the RFS might be judged as a feasible substitute for a cap-and-trade regime that can deliver GHG reductions, but at a higher cost reflecting its multiple objectives.

Biofuel policies in the U.S. and Brazil can influence two-way ethanol trade, in which the countries export to and import from each other simultaneously. A multi-market, multi-region partial equilibrium economic model is used to assess the interactions of the biofuel policies and markets of these two countries. The market effects are converted to greenhouse gas (GHG) emission effects using calculations that include the emissions associated with the transportation of ethanol between Brazil and the U.S. Results show that under certain conditions ethanol and feedstock producer prices decrease in a “No Renewable Fuel Standard (RFS)” scenario, while GHG emission could rise. If the RFS is maintained in the U.S., but Brazilian gasoline prices are allowed to move freely with rising global crude oil prices, then ethanol and feedstock prices increase and GHG emissions decrease as the use of ethanol increases. We find that two-way ethanol trade can have important, if moderate, GHG emission impacts.

Using wheat market support data from 55 countries for 1961–2011 from the World Bank Agricultural Distortion database, we develop a fixed effect model that shows a more complicated, nonlinear relationship between income and wheat support and its components than previously realised. We find that income generally has a greater effect on border market price support than on domestic price support. Moreover, the difference between these types of support is greater for net importers than for net exporters and has increased with the URAA or WTO accession. Holding other variables constant, the wheat support level of China, driven mainly by border market price support, is projected to rise with future income growth. Meanwhile, Japan is projected to maintain its high level of support, while the US and EU are projected to maintain their lower levels of support. These results are relevant in the context of multilateral trade negotiations, arguing against a narrow focus on past or current policy profiles and for long-run analyses that might mistakenly rest on the inconsistent assumptions of constant agricultural policies against the backdrop of rising incomes.

Ethanol demand depends on the crude oil price and domestic biofuel mandate, but the aggregate effect on consumer fuel choices and export demand is uncertain. The relationship between crude oil and ethanol price is complex, and the presence of policy driven domestic biofuel use (mandate) make the modeling of the world ethanol market challenging. A structural economic multi-market multi-region partial equilibrium model considering the complementary and substituting effects between gasoline and ethanol demand is developed. In this study, a kinked ethanol demand curve that reflects those relationships is used to depict ethanol demand. We further simulate two forward-looking alternative crude oil price scenarios to identify how the crude oil price interacts with ethanol use mandates and trace the consequences on the U.S. Renewable Identification Number (RIN) market. The study finds that, under high crude oil prices, the substitution effect might trigger a large increase in ethanol demand by the rest of the world and the U.S. and Brazil will be the key ethanol exporting countries. In the U.S., the overall biofuel mandate might become non-binding.

Growth in crop yields, population, Chinese demand and biofuel production can explain important developments in world grain and oilseed markets over the last 35 years. The same indicators provide clues about what to expect between now and 2050. Proportional rates of growth in both crop yields and population are slowing. Chinese demand and biofuel production account for the entire net increase in world per-capita grain and oilseed consumption since 1980. If biofuel expansion and Chinese consumption growth slow, a key question is whether a new engine of demand growth will emerge. Decisions made by farmers, agribusinesses, policy makers and consumers will all affect future food supplies and prices. [EconLit citations: Q11, Q13, Q18]

This study investigates the economic interactions between a national renewable fuel policy, namely the Renewable Fuel Standard (RFS) in the United States, and a sub-national renewable fuel policy, the Low Carbon Fuel Standard (LCFS) in California. The two policies have a similar objective of reducing greenhouse gas emissions, but the policies differ in the manner in which those objectives are met. The RFS imposes a hierarchical mandate of renewable fuel use for each year whereas the LCFS imposes a specific annual carbon-intensity reduction with less of a fuel specific mandate. We model the interactions using a partial-equilibrium structural model of agricultural and energy markets in the US and Rest-of-World regions. Our results suggest the policies are mutually reinforcing in that the compliance costs of meeting one of the requirements is lower in the presence of the other policy. In addition, the two policies combine to create a spatial shift in renewable fuel use toward California even though overall renewable fuel use remains relatively unchanged.

In this chapter, we highlight two prominent and overlapping renewable fuel policies in the United States: the Renewable Fuel Standard (RFS) at the federal level and the Low Carbon Fuel Standard (LCFS) in California. Although they are implemented at different levels, the policies have important cross-effects that influence consumer prices in both “regions,” the ability of obligated parties to meet policy requirements, and the ability to achieve social goals. We analyze hypothetical policy regimes using a set of partial equilibrium models covering both agricultural and biofuel markets. We find that the policies are mutually reinforcing, in that the implementation of one of these policies makes meeting the other policy easier.

International audience; Crop yields are endogenous as long as economic agents adjust to permanent changes in expected prices. The literature, however, does not offer a definitive value of how much yield would change in response to sustained price changes. To fill the gap, we use available scientific findings and data to estimate yield elasticities that enable agricultural commodity and food policy analysis. Using a world market model with short- to long-run yield response, we show the impacts of sustained energy price shocks on global cereal supply and demand. The results highlight substantial differences in quantity and price effects depending on the yield elasticities. These results demonstrate the need to recognize yield response when assessing impacts of energy prices or biofuel production on food uses or, more generally, on food security in the face of income and population growth, evolving dietary patterns, climate change implications, or other long-run pressures.; Les rendements des cultures sont endogènes tant que les agents économiques s’adaptent aux changements permanents des prix attendus. Cependant, la littérature n'offre pas de valeur définitive sur l'évolution du rendement qui évoluerait en réponse à des changements de prix durables. Pour combler cette lacune, nous utilisons les résultats scientifiques et les données disponibles pour estimer les élasticités de rendement permettant l’analyse des produits agricoles et des politiques alimentaires. En utilisant un modèle de marché mondial avec une réponse du rendement à court et à long terme, nous montrons les impacts des chocs durables du prix de l'énergie sur l'offre et la demande mondiales de céréales. Les résultats mettent en évidence des différences substantielles dans les effets de quantité et de prix en fonction des élasticités de rendement. Ces résultats démontrent la nécessité de reconnaître la réponse du rendement lors de l’évaluation des impacts des prix de l’énergie ou de la production de biocarburants sur les utilisations alimentaires ou, plus généralement, sur la sécurité alimentaire.

This paper improves on existing methods of testing price links between biofuels, petroleum, petroleum products, and agricultural commodity feedstocks by incorporating information contained in the prices of Renewable Identification Numbers (RINs) that are used for biofuel mandate compliance. Theoretical equations are developed to show the role RIN prices can play in the relationships among energy, biofuel, and agricultural commodity prices. RIN price data are used (a) to infer values of fuels where market data are unavailable and (b) to define binding and non-binding mandate regimes. A specific empirical exercise exploits the RIN price data to conduct cointegration tests on high frequency data representing spot and futures prices relating to ethanol and biodiesel from February 2009 through March 2015, finding little evidence of short-term biofuel and petroleum product substitution during this period.

In Turkey, the government initiated an irrigation project in the Southeastern Anatolia region, which is expected to irrigate an additional 1.07 million hectares of land. This study estimates the consequence of increased Turkish cotton production area on the world cotton market. We use a multi-market, multi-region partial equilibrium model to simulate the impact of increasing cotton harvest area in Turkey. Results suggest that with the increase in cotton production area in Turkey the world cotton price would decrease by about 9.5 percent. Effects on prices and area planted in other countries depend on whether the project converts non-agricultural lands to cotton, or re-allocates area currently planted to grains.

The United States biofuel mandate might be the largest operating program to reduce greenhouse gas (GHG) emissions. This paper uses regulatory information about abatement and compliance cost estimates to measure the greenhouse gas abatement cost curve of the mandate. Historical compliance costs per unit of biofuel appear readily available, yet findings here show that using these data along with observed biofuel quantities biases biofuel mandate abatement cost estimates upward. Unbiased estimation requires that related biofuel mandate costs and emissions are estimated along with associated market effects, including on fuel use, using an economic model. Moreover, this approach relates greenhouse gas abatement to the implications for crop prices and land use, taking account of interactions within the crop sector. Results show that the United States biofuel mandate causes up to 20 million metric tons of carbon dioxide equivalent abatement for compliance costs that are equivalent to carbon prices ranging up to $20 per ton, with a large part coming from reductions in petroleum product use as the mandate encourages substitution to biofuels. Abatement costs are reduced if ethanol is made at new facilities with fewer emissions or if petroleum output expansion causes greater emissions than the historical average. Findings also indicate that GHG abatement via the mandate is initially costly due to the nature of biofuel demand, there can be a trade-off between corn price increase and GHG reduction, and the increase in total area planted to crops in the U.S. is less important than the reallocation of land among crops.

Analysis of stated preferences from over 2300 U.S. respondents shows that general attitudes nationwide favor the use of ethanol as a motor fuel but a sizeable segment (~ 20%) indicated strong unwillingness to buy ethanol blend fuels. Results from a discrete choice experiment analyzed using mixed logit regressions show that, all else constant, price-per-gallon and miles-per-gallon dominated preferences for fuel attributes but ethanol content made the average consumer more likely to choose a blend fuel. Findings provide strong evidence of heterogeneity in preferences driven by attitudes but also affected by age and income. At a point of price per mile equivalence for ethanol and gasoline, in a market where gasoline, E20 and E85 were available with no regulatory, supply or technological constraints, E85 would dominate market share. In this case ethanol would account for 56% of volume of motor fuels consumed. Our results show a high level of consumer substitutability of gasoline with ethanol and willingness to choose high ethanol blend fuels – which could help expand ethanol use beyond the current regulatory and technological limits of the blend wall.

We conducted a meta-analysis of food and agricultural demand elasticities for China, and used the results to derive estimates of income, own-price, and cross-price elasticities of demand that can be used in models of food and agricultural markets. Consistent with expectations, we find that income elasticities of demand for many food products decline as per capita income increases. The declines are relatively large for alcohol and tobacco, and smaller for livestock products. Contrary to expectations, own-price elasticities for some products become more price-elastic as per capita income increases. One explanation may be that economic development brings with it improvements in food supply chains that provide people more choices with respect to food products than those traditionally consumed in rural villages, leading to greater substitution possibilities and more price-elastic demands. Estimates for 2011 of income and own-price demand elasticities are generally reasonable, whereas deriving reliable estimates of cross-price elasticities is difficult. The estimates suggest that China's meat and dairy demands, and in turn livestock feed demands, will continue growing strongly. Policy-makers should continue to monitor the evolution of demand for these products with an eye toward ensuring food security, particularly given the sheer size of the population and relatively tight domestic food supply situation in China.

Using subregional models of crop production choices in central Wisconsin and southwest Michigan, we predict biomass production, land use, and environmental impacts with details that are unavailable from national scale models. When biomass prices are raised exogenously, we find that the subregional models overestimate the supply, the land use, and the beneficial environmental aspects of perennial biomass crops. Multi-market price feedbacks tied to realistic policy parameters predict high threshold absolute prices for biomass to enter production, resulting in intensified production of biomass from annual grain crops with damaging environmental impacts. Multi-market feedbacks also predict regional specialization in energy biomass production in areas with lower yields of food crops. Policies promoting biofuels will not necessarily generate environmental benefits in the absence of environmental regulations.

© The Author 2016. Scientists estimate that U.S. Corn Belt crop yields will increase or decrease, on average, and become more variable with climate change. Corn and soybeanfarming dominates this region, but studies typically do not assess the joint impact of new distributions of corn and soybean yields on markets. We use a structural economic model with projections of climate-driven yield changes to simulate these effects. Our findings suggest that a narrow focus on a single crop in this key growing region risks underestimating the impact on price distributions and average crop receipts, and can lead to incorrect signs on estimated impacts.

This paper investigates the impact of CAFE standards and alternative-fuel vehicle production incentives on the biofuel market and mandate, in particular. The study develops a structural model of the domestic light-duty vehicle sector, as well as reduced-form versions of domestic gasoline, diesel, and biofuel markets. The results suggest that holding CAFE standards at the 2010 level could facilitate U.S. ethanol market expansion, making it easier to meet the mandate. Alternative-fuel vehicle production incentives appear to have small effects. However, there is uncertainty about the level of automaker response to those incentives, and analysis indicates the model is fairly sensitive to the assumed level of response.

This study observationally and statistically assesses theories put forth regarding expected price behavior of Renewable Identification Numbers (RINs) using a dataset of daily RIN price observations from January 2009 through May 2013. RIN price behavior tends to follow theoretical expectations, but some notable exceptions occur, the causes of which remain uncertain. Information provided by RIN prices is used to test the implications of a binding renewable fuel standard (RFS) versus a nonbinding RFS on ethanol-gasoline and corn-gasoline price relationships. In certain cases, cointegration tests provide evidence that the relationships are weaker when the RFS mandates are believed to be binding.

Stylized experiments of an economic model show that second generation biofuels can hurt or help food security. Impacts depend critically on whether the feedstock competes with traditional crops or is a co-product in their production. Dedicated biomass, like warm season grasses, likely competes at least somewhat with food crop production. To the extent that agricultural land is allocated to dedicated biomass, food prices will increase. Biofuel from crop residues, such as corn stover and wheat straw, can lead to more land in these uses, potentially reducing food and feed prices. Second generation biofuel impacts also depend on policy mechanisms and market context. For example, the US biofuel mandates that encourage new biofuels might limit their ability to displace other biofuels.

summary The Costs and Consequences of Multi-lateral Policies Against Price Spikes Startling volatility in food commodity prices leads policymakers to reconsider their policy options, with widespread interest in buffer stocks and targeted consumer subsidies, including among G8 and G20 leaders who committed themselves to action. Stored grains would be released in the event of severe price increases, thus relieving pressure on commodity markets and decreasing prices. As we show, the downside of stocks large enough to temper a surge in world rice prices are high prices during the stock building phase. Direct and targeted aid to affected consumers is very effective at helping selected consumers. Any consumer subsidy encourages demand by lowering prices for its beneficiaries, but their ability to sustain their commodity purchases drives prices even higher so other consumers suffer even more. In choosing between these two options, the decision is whether to shift the burden of a price spike to other years, or to other consumers – at taxpayer cost. Additional challenges are to identify targeted consumers, set public stock rules and avoid displacement of private stocks. Current discussions about how to mitigate price surges should weigh the benefits of alternative policies against their budgetary costs and unintended consequences to design optimal responses to potential price surges. L’inquietante volatilite des prix des produits alimentaires a conduit les decideurs de l’action publique a reconsiderer leurs options : les reserves tampon et les subventions a la consommation ciblees ont fait l’objet d’un grand interet, y compris parmi les chefs d’Etat des pays du G8 et du G20 qui se sont engages a agir. Les stocks cerealiers seraient vendues en cas de forte hausse des prix, ce qui reduirait la pression sur les marches de produits de base et ferait baisser les prix. Comme nous le montrons, l’inconvenient de stocker des quantites assez importantes pour moderer une hausse brutale des prix mondiaux du riz est de maintenir des prix eleves pendant la periode d’accumulation des stocks. Les aides directes et ciblees vers les consommateurs affectes sont un moyen efficace d’aider les consommateurs vises. Toute subvention a la consommation stimule la demande en abaissant les prix payes par les beneficiaires, ce-pendant en maintenant leur capacite d’achats de produits, elle conduit a relever davantage les prix, ce qui penalise d’autant plus les autres consommateurs. Entre ces deux options, le choix est de transferer le poids de la hausse de prix vers d’autres annees ou vers d’autres consommateurs, en faisant payer le contribuable. Des questions supplementaires se posent concernant l’identification des consommateurs cibles, l’etablissement de regles de gestion des stocks publics, et le moyen d’eviter que les stocks publics ne remplacent les stocks prives. Les discussions actuelles sur la facon d’attenuer les hausses brutales des prix devraient considerer les avantages des politiques alternatives par rapport a leur cout budgetaire et leurs consequences non desirees afin de concevoir des reponses optimales a d’eventuelles poussees des prix futures. Die erschreckenden Schwankungen bei den Lebensmittelrohstoffpreisen fuhren dazu, dass die Politikakteure ihre politischen Moglichkeiten uberdenken und ein weitverbreitetes Interesse an stabilisierenden Lagerbestanden und zielgerichteten Verbrauchersubventionen zeigen. Dies findet sich z.B. unter den Staats- und Regierungschefs der G8 und G20 wieder, die sich selbst zu diesen Masnahmen bereits verpflichtet haben. Eingelagertes Getreide wurde im Falle heftiger Preissteigerungen wieder freigegeben werden, wodurch der Druck auf die Rohstoffmarkte sanke und die Preise fielen. Wir zeigen auf, dass Lagerbestande in einer Grose, welche einen plotzlichen Anstieg der Weltmarktpreise fur Reis abmildern konnte, als Nachteil hohe Preise wahrend der Einlagerungsphase nach sich ziehen. Die direkte und zielgerichtete Unterstutzung betroffener Verbraucher ist sehr effektiv, wenn es darum geht, ausgewahlten Verbrauchern zu helfen. Jegliche Verbrauchersubvention kurbelt die Nachfrage durch sinkende Preise auf Seiten der Begunstigten an, jedoch treiben deren fortgesetzte Rohstoffkaufe die Preise immer weiter in die Hohe, so dass andere Verbraucher noch starker benachteiligt werden. Beim Abwagen zwischen diesen beiden Optionen stehen wir vor der Wahl, die Belastung einer Preissteigerung entweder auf die Zukunft zu verschieben oder anderen Verbrauchern aufzuburden - zu Lasten der Steuerzahler. Zusatzlich gilt es, die Zielgruppe unter den Verbrauchern zu identifizieren, Regeln fur die staatliche Lagerhaltung festzulegen und die Verdrangung privater Lagerhaltung zu vermeiden. Die derzeitigen Diskussionen daruber, wie plotzliche Preisanstiege abgeschwacht werden konnen, sollten die Vorteile alternativer Politikmasnahmen gegen deren Haushaltskosten und unbeabsichtigte Folgen abwagen, um optimal auf potenziell auftretende plotzliche Preisanstiege reagieren zu konnen.

Biofuel policy in the United States sets minimum use mandates for different biofuels, but the cellulosic mandate, introduced in 2010 has been waived and reduced to nearly zero since then. This waiver has shifted the burden of compliance to other biofuels, but other options exist. We examine some alternatives using a structural model of biofuel, agricultural, and mandate markets. Our estimates show that crop price levels, crop and livestock farm income, compliance costs, and greenhouse gas emissions are all sensitive to whether and how the cellulosic mandate is waived. Mandate analysis that does not consider Environmental Protection Agency implementation, or waiver analysis that disregards the hierarchical nature of the mandates could be misleading. Copyright 2012, Oxford University Press.

US biofuel policy includes greenhouse gas reduction targets. Regulators do not address the potential that biofuel policy can have indirect impacts on greenhouse gases through its impacts on petroleum product markets, and scientific research only partially addresses this question. We use economic models of US biofuel and agricultural markets and US and world petroleum and petroleum product markets to show that discontinuing biofuel tax credits and ethanol tariff lower biofuel use could lead to increased US petroleum product use, and a reduction in petroleum product use in other parts of the world. The net effect is lower greenhouse gas emissions. Under certain assumptions, we show that biofuel use mandate elimination can have positive or negative impacts on greenhouse gas emissions. The magnitude and the direction of effects depend on how US biofuel trade affects biofuel in other countries with different emissions, context that determines how important use mandates are in the first place, who pays mandate costs, and the price responsiveness of global petroleum supplies and uses. However, our results show that counter-intuitive effects are possible and discourage broad conclusions about the greenhouse gas impacts of removing these elements of US biofuel policy.

Studies of individual biodiesel feedstocks or broad approaches that lump animal fats and vegetable oils into a single aggregate straddle the true case of imperfect but by no means inconsequential substitution among fats and oils by different users. United States biofuel policy includes a biodiesel use mandate that rises to almost 4 hm3 by 2012, calling for biomass feedstock analysis that recognizes the complex interdependence among potential feedstocks and competition for food and industrial uses. We model biodiesel input markets to investigate the implications of the mandate for quantities and prices with and without a provision disallowing biodiesel made from soybean oil. Findings suggest a hierarchy of price effects that tends to be largest for cheaper fats and oils typically used for industrial and feed purposes and smallest for fats and oils traditionally used exclusively for direct consumption, with the cross-commodity effects and other key economic parameters playing a critical part in determining the scale in each case. Although sensitive to the exact parameters used, our results argue against overly simplifying feedstock markets by holding prices constant when considering the economics of a particular feedstock or if estimating the broader impacts of rising biodiesel production on competing uses.

In recent years, there has been a push to increase biofuel production in the United States. The biofuel of choice, so far, has been ethanol produced from corn. The effects of increased corn-ethanol production on the consumer prices of food and energy continue to be studied and debated. This study examines, in particular, the effects of increased corn-ethanol production on US natural gas prices. A structural model of the natural gas market is developed and estimated using two stage least squares. A baseline projection for the period 2007–2018 is determined, and two scenarios are simulated. In the first scenario, current biofuel policies including EISA mandates, tariffs, and tax credits are removed. In the second scenario, we hold ethanol production to the level required only for largely obligatory additive use. The results indicate that the increased level of corn-ethanol production occurring as a result of the current US biofuel policies may lead to natural gas prices that are as much as 0.25% higher, on average, than if no biofuel policies were in place. A similar comparison between the baseline and second scenario indicates natural gas prices could be as much as 0.5% higher, on average, for the same period.

Debate has raged about the consequences of US corn-based ethanol. Studies sought to identify how much it affected world commodity markets (Josef Schmidhuber 2006; Dileep Birur, Thomas Hertel, and Wallace Tyner 2008; Seth D. Meyer, Pat Westhoff, and Wyatt W. Thompson 2009). The popular press speculated on the potential for growing US ethanol production to drive up world prices, with unintended consequences for world food supplies and changes in land use outside the United States, possibly leading to increased greenhouse gas emissions (Angelo Gurgel, John M. Reilly, and Sergey Paltsev 2007; Martin Banse, Hans van Meijl, and Geert Woltjer 2008). But these discussions focus narrowly on one set of related markets, namely those for agricultural commodities. Other studies have estimated that greater ethanol availability reduces gasoline prices to the benefit of US motor fuel consumers (Xiaoyang Wang 2008; Xiaodong Du and Dermot J. Hayes 2009). We focus on the direct effects on the US natural gas market of US biofuel policies, specifically tax credits, ethanol tariff, and mandates. Increased ethanol production based on current technologies and policies is likely to lead to greater corn demand and indirectly to more land allocated to growing corn. Both these activities use natural gas either directly for firing an ethanol plant or indirectly through the fertilizers and other chemical inputs used to grow corn. Ethanol Policy Effects on US Natural Gas Prices and Quantities

Renewable Identification Numbers (RINs) were developed to act as tracking mechanisms that ensure compliance with the U.S. biofuel use mandates legislated in 2005 and increased and adjusted to include sub-mandates in 2007. Reviewing the rules for RIN production and use, we conclude that RIN prices will be hierarchical, and rollover provisions allow stock-holding. We illustrate our interpretation by constructing RIN supply and use tables, and by discussing how expiring tax credits and the specific tariff raise RIN prices and mandate costs. RIN markets are critical for estimating biofuel use mandate effects on biofuel and feedstock markets and welfare. Copyright 2010, Oxford University Press.

US energy policy mandates minimum levels of biofuel use. The four interdependent mandates of the 2007 legislation - EISA - are defined by their feedstocks and greenhouse gas reduction targets, and are each set to rise over the coming years. If the volumes of use would be below the mandated amount, due perhaps to a low petroleum price or some other circumstance, then the mandate becomes binding. It forces fuel blenders to bid higher the price at which they buy biofuel and discount the price at which they sell biofuels. Conversely, if biofuel use would exceed the mandated volumes anyway, then this policy will not affect markets. Renewable Identification Numbers (RINs) are the traded instruments for implementing these mandates, and key indicators of the degree to which mandates affect biofuel markets, if at all. RIN values will rise if the mandate is binding, as fuel blenders scramble to get enough RINs to meet their mandates. A high RIN price signals that this policy affects biofuel markets, and consequently probably drives agricultural commodity prices higher. But the EISA gives considerable flexibility that will affect RIN values in practice, causing great uncertainty about how they will affect biofuel markets and, through them, agricultural commodity markets. Copyright (c) 2009 The Authors. Journal compilation (c) The Agricultural Ecomomics Society and the European Association of Agricultural Economists 2009.

The recent increase in ethanol use in the US strengthens and changes the nature of links between agricultural and energy markets. Here, we explore the interaction of market volatility and the scope for policy to affect this interaction, with a focus on how corn yields and petroleum prices affect ethanol prices. Mandates associated with new US energy legislation may intervene in these links in the medium-term future. We simulate stochastically a structural model that represents these markets, and that includes mandates, in order to assess how shocks to corn or oil markets can affect ethanol price and use. We estimate that the mandate makes ethanol producer prices more sensitive to corn yields and less sensitive to changes in petroleum prices overall. We note a discontinuity in these links that is caused by the mandate. Ethanol use can exceed the mandate if petroleum prices and corn yields are high enough, but the mandate limits downside adjustments in ethanol use to low petroleum prices or corn yields.

Much of the public discussion of the food price crisis has focused on the sharply increased use of food commodities for biofuel production, framing debate in simple food versus fuel terms. Reality is more complex. Multiple forces drove food prices to high levels and, according to findings we report in this article, these forces will sustain high prices over the medium term. We also find that the distinction between high world prices for food commodities and the consumer costs of food is an important one to make. Food consumers do not buy raw food commodities at international prices. The degree to which the price of traded food commodities and the price of food are related depends on a long list of factors, most of which operate to dampen price transmission. In the search for appropriate policy response, it is essential to measure consumer effects correctly and to apportion properly the causes of current high prices.

Group expenditure has often been treated as exogenous when estimating demand parameters for a group of commodities with an almost ideal demand system. Researchers draw demand elasticities from past literature to use in their own analysis, but elasticities contingent on exogenous group expenditure may be inappropriate. Here, the approach is considered in the case of Japanese meat demand with a simple equation added to estimate group expenditures. The results show that elasticities should be revised and that a group expenditure equation is not a panacea as it may result in the violation of theoretical restrictions, such as symmetry. Copyright 2004, Oxford University Press.

Summary Consumption versus Demand - Recovery after BSE?:A Fuller Analysis Counterpoint–Hubbard – By 1999 consumption of beef in the UK had recovered to its pre-BSE level of 1995, but what about demand? Simple market analysis demonstrates that given an initial negative shift in the demand schedule, there are five possible combinations of subsequent shifts in demand and supply that result in consumption returning to its original level. Thompson and Tallard (EuroChoices, Spring 2003) contend that demand did not recover until 2001, which implies a positive shift in supply, i.e. more beef supplied at any given price. A more likely outcome, however, is a negative supply shift, because of additional BSE-related costs and the removal of beef from the food chain. This requires demand to have more than recovered by 1999. Thus any investigation of the impact of BSE on the beef market needs to consider supply as well as demand changes. Reply–Thompson Consumption data alone are an inappropriate benchmark to evaluate shifts in demand caused by BSE. Our estimates of the demand shift account for changes in the determining economic factors, namely meat prices and income; but consumer demand does not depend directly on beef supply. Full market analysis, however, could add useful insight if based on similar evaluations of shifts in supply, trade and stocks. La demande s'est elle retablie au meme niveau que la consommation apres I'ESB ? Un complement ?analyse. Counterpoint–Hubbard En 1999, la consommation de viande bovine au Royaume-Uni a retrouve son niveau de 1995, avant ľEapidEmie ?ESB. Mais qu'en est-il de la demande ? La theorie elementaire des marches montre qu'a partir ?une chute initiale donnee, le retour au niveau de consommation originel peut resulter de cinq combinaisons de deplacements dans les courbes ?offre et de demande. Thompson et Tallard (Eurochoices, printemps 2003) soutiennent que la demande n'est pas revenue a son niveau original avant 2001, ce qui suppose un deplacement vers le haut de la courbe ?offre, c'est-a-dire, une augmentation de ľoffre de bceuf pour un prix donne quelconque. Un glissement vers le bas de la courbe ?offre est cependant bien plus vraisemblable, du fait des couts supplementaires lies aux mesures sanitaires et aľinterruption de la presence du bœuf dans les filieres alimentaires. Cela implique que la demande en 1999 aurait plus que compense la chute anterieure. Ainsi, toute analyse de ľimpact de ľESB sur le marche du bœuf doit envisager la possibilitye de changements aussi bien dans ľoffre que dans la demande. Reponse de Thompson A elles seules, les donnees concernant la consommation sont bien insuffisantes pour evaluer les changements dans les courbes de demande apportes par ľESB. Notre estimation du glissement de la demande resulte de ia consideration des facteurs qui la commandent, a savoir le prix et les revenus, sans que la demande depende directement de ľoffre. Cependant, une analyse complete du marche pourrait en effet Jeter une certaine lumiere sur la question, a condition ?etre basee sur des evaluations coherentes des glissements dans ľoffre, le commerce exterieur et les stocks. Verbrauch versus Nachfrage –Erholung nach dem BSE-Skandal? Eineausfuhrlichere Analyse Counterpoint–Hubbard Bis zum Jahr 1999 hatte sich der Verbrauch von Rindfleisch in Grosbritannien wieder auf den Stand vor dem BSE-Skandal aus dem Jahr 1995 eingestellt, was aber war mit der Nachfrage geschehen? Eine einfache Marktanalyse zeigt, dass bei einer anfanglichen negativen Verschiebung der Nachfrage funf Kombinationen nachfolgender Verschiebungen moglich sind, die dazu fuhren, dass der Verbrauch wieder seinen ursprunglichen Stand erreicht. Thompson und Tallard (EuroChoices, Fruhjahr 2003) behaupten, dass sich die Nachfrage erst im Jahr 2001 erholt habe, was eine positive Verschiebung des Angebots impliziert, d.h. ein hoheres Rindfleischangebot zu jedem beliebigen Preis. Ein wahrscheinlicheres Ergebnis ware jedoch eine negative Angebotsverschiebung aufgrund von zusatzlichen mit BSE verbundenen Kosten und ein Herausfallen von Rindfleisch aus der Nahrungskette. Dies bedeutet, dass sich die Nachfrage bis zum Jahr 1999 mehr als erholt haben muss. Daher ist es erforderlich, dass jede Untersuchung der Auswirkung von BSE auf den Rindfleischmarkt sowohl Angebots- als auch Nachfrageanderungen berucksichtigt. Antwort–Thompson Verbrauchsdaten allein reichen nicht aus, um durch BSE verursachte Nachfrageverschiebungen zu evaluieren. Unsere Schatzungen zur Nachfrageverschiebung erklaren die Anderungen in den okonomischen Bestimmungsgrunden, Fleischpreise und Einkommen; dieVerbrauchernachfrage hangt allerdings nicht direkt vom Rindfleischangebot ab. Eine ausfuhrliche Marktanalyse konnte jedoch zusatzliche nutzliche Erkenntnisse erbringen, wenn sie auf ahnlichen Bewertungen von Verschiebungen des Angebots, des Handels und der Lagerbestande beruht.