A literature review of the market effects of federal biofuel policy and recommendations for future policy

摘要

The United States has had a federal biofuels policy since the 1970s. The purpose of this policy was to help the development of a biofuel industry during a time of high fuel prices in order to provide a domestic alternative to expensive foreign oil. Later the policy was changed to help lower the environmental impact caused by conventional fuels. Since that time the industry has grown and currently produces around 15 billion gallons of biofuels every year.The current federal biofuel policy is largely based on one program, the Renewable Fuel Standard (RFS), which mandates the production and blending of several different classes of biofuels and provides a form of subsidy to the biofuel industry. This paper examines the market effects of the federal biofuel policy and provides recommendations for improving the policy to counteract any negative effects.Federal biofuel policy has many far-reaching market effects. Some are easily calculable through expenditures and lost revenues, while others are harder to quantify because their full effects are not yet known. By evaluating these market effects, this paper will provide ample evidence that the federal biofuels policy needs to change, and will show what effects these changes could induce.The biofuels industry largely owes its existence to government policies, however as the research shows the industry can now stand on its own. This paper will examine what will happen if the federal policy is eliminated and what the future of the biofuels industry could hold. Based on these examinations, it is unlikely that the industry needs further government support and policies should be adjusted in light of this.