Analysis and Comparison of China’s Biofuel Ethanol Subsidy Modes
DOI:
https://doi.org/10.13052/spee1048-5236.4043Keywords:
fuel ethanol, Stackelberg model, social welfare, subsidy modeAbstract
Choosing an effective subsidy mode is crucial for promoting the healthy development of the biofuel ethanol industry. After considering the differences in the social welfare effects of different subsidy models, we construct a Stackelberg game model to examine the chain of the fuel ethanol industry consisting of a downstream channel intermediary as the leader and an upstream production enterprise as the follower. We then discuss how the R&D subsidy mode and production subsidy mode affect social welfare, and what kind of subsidy mode should be adopted under different conditions. The study found that different subsidy modes affect corporate profits and consumer surplus by affecting the price and demand of fuel ethanol, which in turn affect the level of social welfare. In addition, the study found that both R&D subsidy mode and production subsidy model are not always efficient. The optimal subsidy mode depends mainly on the R&D difficulty coefficient and the slope of the inverse demand function.
Downloads
References
Niu, X. S., and Dong, J. W., ‘Effectiveness of government R&D
under different states of enterprise cooperation’, Journal of Systems &
Management, vol. 17, no. 4, pp. 520–524, 2008.
Analysis and Comparison of China’s Biofuel Ethanol Subsidy Modes 383
Menanteau, P., Finon, D., and Lamy, M. L., ‘Prices versus quantities:
choosing policies for promoting the development of renewable energy’,
Energy policy, vol. 31, no. 8, pp. 799–812, 2003.
Phomsoda, K., Puttanapong, N., and Piantanakulchai, M., ‘Economic
Impacts of Thailand’s Biofuel Subsidy Reallocation Using a Dynamic
Computable General Equilibrium (CGE) Model. Energies’, vol. 14,
no. 8, pp. 2–21, 2021.
Xu Jia-yun, Mao Qi-lin, ‘Government subsidies, Governance environ-
ment and the Survival of Chinese Enterprises’, The Journal of World
Economy, vol. 39, no. 2, pp. 75–99, 2016.
Peters, Michael, et al., ‘The impact of technology-push and demand-
pull policies on technical change’, Research policy, vol. 41, no. 8,
pp. 1296–1308, 2012.
Valverde, J. C., Arias, D., Campos, R., Jim ́enez,, M. F., and Brenes, L.,
‘Forest and agro-industrial residues and bioeconomy: perception of use
in the energy market in Costa Rica’, Energy, Ecology and Environment,
no. 6, pp. 232–243, 2021.
Jiao, J., Li, J., and Bai, Y., ‘Ethanol as a vehicle fuel in China: A
review from the perspectives of raw material resource, vehicle, and
infrastructure’, Journal of cleaner production, vol. 180, pp. 832–845,
Weng, Y., Chang, S., Cai, W., and Wang, C., ‘Exploring the impacts of
biofuel expansion on land use change and food security based on a land
explicit CGE model: A case study of China’, Applied Energy, vol. 236,
pp. 514–525, 2019.
Qiu, H., Sun, L., Huang, J., and Rozelle, S., ‘Liquid biofuels in China:
current status, government policies, and future opportunities and chal-
lenges’, Renewable and Sustainable Energy Reviews, vol. 16, no. 5,
pp. 3095–3104, 2012.
Hao, H., Liu, Z., Zhao, F., Ren, J., Chang, S., Rong, K., and Du,
J., ‘Biofuel for vehicle use in China: Current status, future potential
and policy implications’, Renewable and Sustainable Energy Reviews,
vol. 82, pp. 645–653, 2018.
H. De Gorter, D. R. Just, ‘The welfare economics of a biofuel tax credit
and the interaction effects with price contingent farm subsidies’, Amer-
ican Journal of Agricultural Economics, vol. 91, no. 2, pp. 477–488,
X. Wang and H. Zhao
H. De Gorter, D. R. Just, ‘The social costs and benefits of biofuels: The
intersection of environmental, energy and agricultural policy’, Applied
Economic Perspectives and Policy, vol. 32, no. 1, pp. 4–32, 2010.
Cardoso, L. C., Bittencourt, M. V., Litt, W. H., and Irwin, E. G.,
‘Biofuels policies and fuel demand elasticities in Brazil’, Energy policy,
vol. 128, 296–305.
Cotti, C., and Skidmore, M. ‘The impact of state government subsidies
and tax credits in an emerging industry: Ethanol production 1980–2007’,
Southern Economic Journal, 2010, vol. 76, no. 4, pp. 1076–1093, 2019.
Chanthawong, A., Dhakal, S., Kuwornu, J. K., and Farooq, M. K.,
‘Impact of subsidy and taxation related to biofuels policies on the
economy of Thailand: A dynamic CGE modelling approach’, Waste and
Biomass Valorization, vol. 11, no. 3, pp. 909–929, 2020.
Sun Peng, Zhang Li, ‘Who will Pay the Price Subsidies to the New
Energy Industry ’, Collected Essays on Finance and Economics, no. 2,
pp. 90–97, 2014.