33
© The Editor(s) (if applicable) and the Author(s) 2018
K. Takeuchi et al. (eds.), Biofuels and Sustainability, Science for Sustainable
Societies, https://doi.org/10.1007/978-4-431-54895-9_5
Chapter 5
Welfare Effects of the US Corn-Bioethanol
Policy
Hideaki Takagi, Taro Takahashi, and Nobuhiro Suzuki
5.1 Introduction
Because of the surge in international crop prices in 2008, production of biofuel
derived from crops has been criticized for expanding crop demands and threatening
food security. In the USA, where corn is the main raw material for bioethanol, the
demand for corn has rapidly increased from 18 million tons in 2001 to 100 million
tons in 2008. Further, the Renewable Fuel Standard (RFS) included in the Energy
Policy Act of 2005 requires refiners, blenders, and importers to use 36 billion gallons of renewable fuels by 2022, including more than 21 billion gallons of secondgeneration biofuels such as cellulosic ethanol. The use of corn as an energy source
is expected to continue further expansion.
Many studies have simulated the crop price under biofuel production and measured its impact on the market equilibrium. For example, Koizumi and Ohga (2009)
measured the impact of expansion of Brazilian FFV (flexible fuel vehicle) utilization and of the US biofuel policy on production, consumption, export, and import of
sugar and corn.
However, their studies are confined to simulating the impact on market outcome.
This leaves an important question: does higher price really reduce social benefit? It
is sure that high crop price declines consumers’ purchasing power and weighs upon
their household economy. This is a critical issue, especially for low-income households. However, recent prices of agricultural commodities have been too low for
farmers to sustain on. Many developed countries have scrambled to support them
through production control and subsidies. Without these measures, farmers would
be at a loss because of small revenue. In this regard, ethanol production can be
H. Takagi · T. Takahashi · N. Suzuki (*)
Graduate School of Agricultural and Life Sciences, The University of Tokyo,
1-1-1 Yayoi, Bukyo-ku, Tokyo 113-8657, Japan
e-mail: asuzukiz@mail.ecc.u-tokyo.ac.jp
© The Editor(s) (if applicable) and the Author(s) 2018
K. Takeuchi et al. (eds.), Biofuels and Sustainability, Science for Sustainable
Societies, https://doi.org/10.1007/978-4-431-54895-9_5
Chapter 5
Welfare Effects of the US Corn-Bioethanol
Policy
Hideaki Takagi, Taro Takahashi, and Nobuhiro Suzuki
5.1 Introduction
Because of the surge in international crop prices in 2008, production of biofuel
derived from crops has been criticized for expanding crop demands and threatening
food security. In the USA, where corn is the main raw material for bioethanol, the
demand for corn has rapidly increased from 18 million tons in 2001 to 100 million
tons in 2008. Further, the Renewable Fuel Standard (RFS) included in the Energy
Policy Act of 2005 requires refiners, blenders, and importers to use 36 billion gallons of renewable fuels by 2022, including more than 21 billion gallons of secondgeneration biofuels such as cellulosic ethanol. The use of corn as an energy source
is expected to continue further expansion.
Many studies have simulated the crop price under biofuel production and measured its impact on the market equilibrium. For example, Koizumi and Ohga (2009)
measured the impact of expansion of Brazilian FFV (flexible fuel vehicle) utilization and of the US biofuel policy on production, consumption, export, and import of
sugar and corn.
However, their studies are confined to simulating the impact on market outcome.
This leaves an important question: does higher price really reduce social benefit? It
is sure that high crop price declines consumers’ purchasing power and weighs upon
their household economy. This is a critical issue, especially for low-income households. However, recent prices of agricultural commodities have been too low for
farmers to sustain on. Many developed countries have scrambled to support them
through production control and subsidies. Without these measures, farmers would
be at a loss because of small revenue. In this regard, ethanol production can be
H. Takagi · T. Takahashi · N. Suzuki (*)
Graduate School of Agricultural and Life Sciences, The University of Tokyo,
1-1-1 Yayoi, Bukyo-ku, Tokyo 113-8657, Japan
e-mail: asuzukiz@mail.ecc.u-tokyo.ac.jp