Portal Red Investigadores de Economía

This article aims to develop a framework to forecast bioethanol policies impacts a decade ahead in Mexico, where there have been several attempts to introduce biofuels into the market but so far, no success. Technically, an endogenous-price mathematical programming model is developed emphasizing the Mexican agricultural and fuel sectors, which are embedded in a multi-region, multi-product, spatial partial equilibrium model of the world economy. There is a module for the U.S. and another for ROW. Mexico is disaggregated into 193 crop districts. Production functions are specified for 14 major crops and pasture. Bioethanol can be produced both from a dedicated crop and from agroindustrial residues. Three policy alternatives are considered as well as a base case in which, as now, liquid fuels are all derived from fossil sources. The rest alternative consists of subsidies to biofuel producers, the second of blending mandates and the third of both combined. Biofuel imports are allowed in all cases. Results show some losses for fuel and agricultural consumers, that are not o set by both ethanol producer and GHG emissions reduction gains. This suggests that some compensating redistribution may be needed if these policies are to be seen as politically sustainable.

Building a Bioethanol Market in Mexico