Who Did the Ethanol Tax Credit Benefit? An Event Analysis of Subsidy Incidence

David A. Bielen, Richard G. Newell, William A. Pizer

NBER Working Paper No. 21968
Issued in February 2016
NBER Program(s):Environment and Energy Economics, Industrial Organization, Public Economics

Using commodity futures contract and spot prices, we estimate the incidence of the US ethanol subsidy accruing to corn farmers, ethanol producers, gasoline blenders, and gasoline consumers at expiration in 2011. We find compelling evidence that ethanol producers captured two-thirds of the subsidy, and suggestive evidence that a small portion of this benefit accrued to corn farmers. The remaining one-third appears to have been captured by blenders, as we find no evidence that oil refiners or gasoline consumers captured any part of the subsidy. This paper contributes to understanding of biofuels markets and policy and empirical estimation of economic incidence.

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Document Object Identifier (DOI): 10.3386/w21968

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