50
the most rational policy for the USA becomes acceptable by the world. Note, however, that we use the word “acceptable” in a narrow sense that the most rational tax
credit for the world is not necessarily 3.6 cent/gallon even in this case.
5.5 Conclusion
In this study, we simulated corn price under the current and alternative sets of bioethanol policy and then analyzed the social benefit associated with each scenario.
First, the simulation result showed the following:
(a) Corn price in any scenario will decline even if crude oil price rises 2% a year.
(b) Although too much support for bioethanol production might induce higher corn
price than the usual level, the current policy of tax concession will contribute to
support the price. On the contrary, suspension of bioethanol production might
cause price slashing.
(c) Switching E10 to E20 has a much larger impact on corn price than changing the
level of the tax credit policy.
(d) The hike in corn price in 2008 is scarcely explained by supply and demand only,
which indicates that the major cause was not expansion of bioethanol production but external factors. Thus, although bioethanol production induced excessive expectation of investors, it will unlikely persist.
The second step of our study aimed to measure the impact of the US bioethanol
production on household economy. The result of this step showed the following:
(a) The current policy of tax concession (5.1 cents) is at a rational level for the US
society.
(b) The USA is expected to gain another 11.3 million dollars of benefit (average of
2011–2020) by reducing the tax credit to 3.6 cent/gallon, the theoretical
maximum.
(c) Ethanol production without tax credit brings most beneficial result for the
whole world combined.
(d) The value of CO 2 reduction must be more than $116.9/t in order for the 3.6 cent/
gallon scenario to become acceptable to the world.
(e) Although the E20 policy might produce much more benefit for the world than
the tax credit policy, the distribution of benefit will likely to be less equal than
the current situation.
Overall, three observations can be made in relation to the present analysis.
First, the most rational policy is not exactly the same as the most appropriate
policy. Any policy change generates winners and losers both internationally and
domestically. The problem can be solved if benefit transfer is carried out successfully,
however it is very difficult especially to dissolve international inequality. It is a critical problem when low-income countries or such households become “losers” even
if the policy is the most efficient for the whole world or for the USA.
H. Takagi et al.
the most rational policy for the USA becomes acceptable by the world. Note, however, that we use the word “acceptable” in a narrow sense that the most rational tax
credit for the world is not necessarily 3.6 cent/gallon even in this case.
5.5 Conclusion
In this study, we simulated corn price under the current and alternative sets of bioethanol policy and then analyzed the social benefit associated with each scenario.
First, the simulation result showed the following:
(a) Corn price in any scenario will decline even if crude oil price rises 2% a year.
(b) Although too much support for bioethanol production might induce higher corn
price than the usual level, the current policy of tax concession will contribute to
support the price. On the contrary, suspension of bioethanol production might
cause price slashing.
(c) Switching E10 to E20 has a much larger impact on corn price than changing the
level of the tax credit policy.
(d) The hike in corn price in 2008 is scarcely explained by supply and demand only,
which indicates that the major cause was not expansion of bioethanol production but external factors. Thus, although bioethanol production induced excessive expectation of investors, it will unlikely persist.
The second step of our study aimed to measure the impact of the US bioethanol
production on household economy. The result of this step showed the following:
(a) The current policy of tax concession (5.1 cents) is at a rational level for the US
society.
(b) The USA is expected to gain another 11.3 million dollars of benefit (average of
2011–2020) by reducing the tax credit to 3.6 cent/gallon, the theoretical
maximum.
(c) Ethanol production without tax credit brings most beneficial result for the
whole world combined.
(d) The value of CO 2 reduction must be more than $116.9/t in order for the 3.6 cent/
gallon scenario to become acceptable to the world.
(e) Although the E20 policy might produce much more benefit for the world than
the tax credit policy, the distribution of benefit will likely to be less equal than
the current situation.
Overall, three observations can be made in relation to the present analysis.
First, the most rational policy is not exactly the same as the most appropriate
policy. Any policy change generates winners and losers both internationally and
domestically. The problem can be solved if benefit transfer is carried out successfully,
however it is very difficult especially to dissolve international inequality. It is a critical problem when low-income countries or such households become “losers” even
if the policy is the most efficient for the whole world or for the USA.
H. Takagi et al.