Chris Knittel of MIT looks at the cost effectiveness of ethanol subsidies

#Knittel argues that #ethanol subsidies (for him the term includes performance based policies like RFS and LCFS) exist to support farmer wealth, reduce dependence on foreign oil and reduce GHG emissions. He claims that subsidies create market inefficiency and hence social costs and points out the risk of indirect land use change (#iLUC). He suggests that lump-sum payments to farmers and a cap and trade system would be more economically efficient ways to deliver intended ethanol program benefits. Download the report.