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Fuel Subsidy Pass-Through and Market Structure: Evidence from the Renewable Fuel Standard
CARD Working Papers
  • Gabriel E. Lade, Iowa State University
  • James Bushnell, University of California, Davis
Publication Date
12-1-2016
Series Number
16-WP 570
Abstract

The Renewable Fuel Standard (RFS) is among the largest renewable energy mandates in the world. The policy is enforced using tradeable credits that implicitly subsidize biofuels and tax fossil fuels. The RFS relies on these taxes and subsidies to be passed through to consumers to stimulate demand for biofuels and decrease demand for gasoline and diesel. Using station-level prices for E85 (a high-ethanol blend fuel) from over 450 retail fuel stations, we show that pass-through of the ethanol subsidy is, on average, complete. However, we find that full pass-through takes four to six weeks and that local market structure of gasoline stations influences both the speed and overall level of pass-through.

Citation Information
Gabriel E. Lade and James Bushnell. "Fuel Subsidy Pass-Through and Market Structure: Evidence from the Renewable Fuel Standard" (2016)
Available at: http://works.bepress.com/gabriel-lade/4/