An Empirical Assessment of Simultaneous Ethanol Policy Changes on U.S. Agricultural Markets

Abstract

In the late 2000s, corn prices rose rapidly and were closely followed by prices of other major agricultural commodities. A widespread explanation for these market changes is an increased demand for corn in the production of ethanol, prompted by the introduction of programs intended to encourage biofuels production in the United States. In response to political pressures, the U.S. Congress considered amending three ethanol policies. It is likely that the interaction among the three policies can exacerbate these distortions. This study seeks to model the effects of simultaneous policy changes on multiple sectors of the blended gasoline marketing channel.