Bandyopadhyay, Subhayu and Bhaumik, Sumon and Wall, Howard J. (2010): Biofuel subsidies and international trade.
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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.
|Item Type:||MPRA Paper|
|Original Title:||Biofuel subsidies and international trade|
|Keywords:||Biofuel Subsidy, Pigouvian Tax, Pollution Externality|
|Subjects:||O - Economic Development, Technological Change, and Growth > O1 - Economic Development
H - Public Economics > H2 - Taxation, Subsidies, and Revenue
F - International Economics > F1 - Trade
|Depositing User:||Howard J. Wall|
|Date Deposited:||22. Sep 2012 20:08|
|Last Modified:||12. Feb 2013 22:19|
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