US Ethanol Trade Policy: Pollution Reduction or Domestic Protection
To mitigate dependence on fossil fuel and reduce pollution, the US government has undertaken several policies—an import tariff, tax credit, and mandate—to augment domestic ethanol production and increase ethanol in the fuel supply. This study uses a general equilibrium model to analyze the effects of the US ethanol import tariff on welfare by internalizing the externality and incorporating US fuel and ethanol policies and to determine the optimal tariff. The results show that because of the environmental benefits of imported ethanol, the adverse effects of domestic ethanol on the environment, the need for the imported ethanol to boost the blended gasoline production, and the economy-wide interactions of various markets, the optimal trade policy may call for subsidizing rather than taxing ethanol imports.
Background ::: Smallholders have begun to take advantage of a growing pool of investment in climate change mitigation. Meanwhile, early movers in this area are working to develop innovative models that will allow projects to be financially sustainable and scalable while benefiting local actors. This study focuses on two of these projects in East Africa, managed by Vi Agroforestry in Kenya and ECOTRUST in Uganda. They engaged in a participatory action research process to identify ways that local actors could take on expanded roles within the projects.