Potential Effect of Ethanol on the U.S. Economy: A General Equilibrium Approach

Several studies have analyzed the effect of bioenergy tax credits on agriculture and energy markets using a partial equilibrium framework. Most of these studies focus on a detailed description of the effects of bioenergy in specific commodity markets such as corn. An alternative approach used here is to analyze the effect of these policies on the economy using a general equilibrium model that directly accounts for feedback effects in the economy. These feedback effects reduce the production possibilities in the overall economy.