The Causes of Two-way U.S.-Brazil Ethanol Trade and the Consequences for Greenhouse Gas Emissions

Biofuel policies in the US and Brazil can cause two-way ethanol trade, in which the countries export and import with each other simultaneously. A structural economic model and greenhouse gas (GHG) emission calculations are used to assess the interactions of biofuel policies and markets of these two countries. Results show that, at least under certain conditions, ethanol and feedstock prices decrease under a “No RFS” scenario in the U.S., while GHG emissions rise. If the RFS is maintained but Brazil allows domestic gasoline price to rise to reflect global petroleum prices, then ethanol and feedstock prices increase and GHG savings decrease as the use of anhydrous ethanol declines. We find that, at least under some conditions, two-way ethanol trade can have important emission impacts.