Abstract

Special seminar to be held on a Wednesday – all are welcome!

We assess the effects of the 2005 and 2007 US Renewable Fuel Standards (RFS) on agricultural export competitiveness and market power. Using a generalized event study we find that the 2005-2007 RFS mandates reduced US exports by approximately 43% for corn, 49% for soybeans, and 34% for wheat relative to a counterfactual without the policy. These outcomes align with or  xceed the upper-level ex-ante projections of changes in US crop exports in published work using the GTAP-BIO and FAPRI models underlying the calculations of international indirect land use of biofuels included in the California’s Low Carbon Fuel (2009) Standard and the US Renewable Fuel Standard II (2010). Despite reducing US market power by 42% (Lerner index), back-of-the-envelope calculations using a stylized partial equilibrium model suggest the welfare-maximizing mandate decreased by only 5% since 2005, as domestic supply and demand rigidities dominate
the welfare calculation.

Co-authors : Jisang Yu and Shawn Arita

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