Abstract
The wider adoption of flexible-fuel vehicles (FFVs) could play a critical role in expanding biofuel consumption and achieving policy goals established by the Renewable Fuel Standard (RFS). The E85 development is constrained by limited fueling infrastructure, higher-than-parity pricing and low consumer awareness. This study empirically evaluates the importance of E85 fueling stations in FFV adoption, its impacts on the U.S. biofuel market, and the E85 market potential. Based on quarterly vehicle sales and E85 fueling station data from 2010 to 2012 in 362 Metropolitan Statistical Areas, our analysis shows that FFV adoption is affected by the availability of E85 stations, relative fuel prices, and the tax credit for FFVs. The doubling of E85 stations in 2012 would have increased the market share of FFVs from 20% to 33%. Various scenarios of barrier removal are simulated in a partial market equilibrium model of the U.S. biofuel market. The better availability of E85 fuel stations can significantly increase biofuel consumption and there is large market potential for high ethanol-blend gasoline.
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