skip to main content
OSTI.GOV title logo U.S. Department of Energy
Office of Scientific and Technical Information

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

Abstract

At the end of 2011, the Volumetric Ethanol Excise Tax Credit (VEETC), which had subsidized the blending of ethanol in gasoline, was allowed to expire. During its tenure, the subsidy was the subject of intense scrutiny concerning who benefited from its existence. Using commodity price data, we estimate the subsidy incidence accruing to corn farmers, ethanol producers, gasoline blenders, and gasoline consumers around the time of expiration. Our empirical approach contributes methodologically to the event studies literature by analyzing futures contract prices (as opposed to spot prices) when possible. Ultimately, we find compelling evidence that, at the date of VEETC expiration, ethanol producers captured about 25 cents of the 45 cents subsidy per gallon of ethanol blended. We find suggestive, albeit inconclusive, evidence that a portion of this benefit (about 5 cents per gallon) was passed further upstream from ethanol producers to corn farmers. Most of the remainder seems most likely to have been captured by the blenders themselves. On the petroleum side, we find no evidence that oil refiners captured any part of the subsidy. We also find no evidence that the subsidy was passed downstream to gasoline consumers in the form of lower gasoline prices.

Authors:
; ORCiD logo;
Publication Date:
Research Org.:
National Renewable Energy Lab. (NREL), Golden, CO (United States)
Sponsoring Org.:
USDOE Office of Energy Efficiency and Renewable Energy (EERE)
OSTI Identifier:
1485574
Report Number(s):
NREL/JA-6A20-72911
Journal ID: ISSN 0047-2727
DOE Contract Number:  
AC36-08GO28308
Resource Type:
Journal Article
Journal Name:
Journal of Public Economics
Additional Journal Information:
Journal Volume: 161; Journal Issue: C; Journal ID: ISSN 0047-2727
Country of Publication:
United States
Language:
English
Subject:
29 ENERGY PLANNING, POLICY, AND ECONOMY; ethanol; subsidy; tax credit; policy; incidence; event study; futures price

Citation Formats

Bielen, David A., Newell, Richard G., and Pizer, William A. Who Did the Ethanol Tax Credit Benefit? An Event Analysis of Subsidy Incidence. United States: N. p., 2018. Web. doi:10.1016/j.jpubeco.2018.03.005.
Bielen, David A., Newell, Richard G., & Pizer, William A. Who Did the Ethanol Tax Credit Benefit? An Event Analysis of Subsidy Incidence. United States. doi:10.1016/j.jpubeco.2018.03.005.
Bielen, David A., Newell, Richard G., and Pizer, William A. Tue . "Who Did the Ethanol Tax Credit Benefit? An Event Analysis of Subsidy Incidence". United States. doi:10.1016/j.jpubeco.2018.03.005.
@article{osti_1485574,
title = {Who Did the Ethanol Tax Credit Benefit? An Event Analysis of Subsidy Incidence},
author = {Bielen, David A. and Newell, Richard G. and Pizer, William A.},
abstractNote = {At the end of 2011, the Volumetric Ethanol Excise Tax Credit (VEETC), which had subsidized the blending of ethanol in gasoline, was allowed to expire. During its tenure, the subsidy was the subject of intense scrutiny concerning who benefited from its existence. Using commodity price data, we estimate the subsidy incidence accruing to corn farmers, ethanol producers, gasoline blenders, and gasoline consumers around the time of expiration. Our empirical approach contributes methodologically to the event studies literature by analyzing futures contract prices (as opposed to spot prices) when possible. Ultimately, we find compelling evidence that, at the date of VEETC expiration, ethanol producers captured about 25 cents of the 45 cents subsidy per gallon of ethanol blended. We find suggestive, albeit inconclusive, evidence that a portion of this benefit (about 5 cents per gallon) was passed further upstream from ethanol producers to corn farmers. Most of the remainder seems most likely to have been captured by the blenders themselves. On the petroleum side, we find no evidence that oil refiners captured any part of the subsidy. We also find no evidence that the subsidy was passed downstream to gasoline consumers in the form of lower gasoline prices.},
doi = {10.1016/j.jpubeco.2018.03.005},
journal = {Journal of Public Economics},
issn = {0047-2727},
number = C,
volume = 161,
place = {United States},
year = {2018},
month = {5}
}