Abstract
The Renewable Fuel Standard (RFS) program, which mandates the commercialization of bio-fuels through 2022, is the U.S.’s most significant renewable energy policy. It was first established in 2005 in order to create a viable market for bio-fuels based on the policy goals of enhancing U.S. energy security, reducing transportation-related GHG emissions, and stimulating rural economic development. In this Paper, we provide the first empirical study addressing whether the RFS is an effective policy instrument to incentivize the efficient development of an economically sustainable bio-fuels industry. Our analysis focuses on data associated with the first-generation bio-ethanol industry and suggests that the RFS contributes to increasing production-related economies of scale. More specifically, our empirical findings suggest that the RFS has a positive significant effect on: (1) the survival rate of first-generation bio-ethanol plants; and (2) the production capacity of first-generation bio-ethanol plants.
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