Chapter 2


Andrew Schmitz, Norbert L. Wilson, Charles B. Moss and David Zilberman


Biofuel production has expanded in Brazil in part because of hidden subsidies. Likewise, ethanol production from corn in the United States has expanded in part because of ethanol tariffs and ethanol processor tax credits. Without these subsidies, ethanol production in the United States would be much smaller. Even so, subsidies from biofuels will likely continue. Biofuel production has both negative and positive effects. The net benefits from biofuels are positive, providing there are significant positive environmental impacts, as well as significant negative price impacts in the overall fuels market. Biofuels produced from wood residues could have a bright future as wood residues can be used for electric power generation.

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