@TechReport{iza:izadps:dp4584,
            	author={Bandyopadhyay, Subhayu and Bhaumik, Sumon K. and Wall, Howard J.},
            	title={Biofuel Subsidies: An Open-Economy Analysis},
            	year={2009},
	month={Nov},
            	institution={Institute of Labor Economics (IZA)},
            	address={Bonn},
            	type={IZA Discussion Paper},
            	number={4584},
            	url={https://www.iza.org/index.php/publications/dp4584},
	abstract={We present a general equilibrium analysis of biofuel subsidies in an open-economy context. In the small-country case, when a Pigouvian tax on conventional fuels such as crude is in place, the optimal biofuel subsidy is zero. When the tax on crude is not available as a policy option, however, a second-best biofuel subsidy (or tax) is optimal. In the large-country case, the optimal tax on crude departs from its standard Pigouvian level and a biofuel subsidy is optimal. A biofuel subsidy spurs global demand for food and confers a terms-of-trade benefit to the food-exporting nation. This might encourage the food-exporting nation to use a subsidy even if it raises global crude use. The food importer has no such incentive for subsidization. Terms-of-trade effects wash out between trading nations; hence, any policy intervention by the two trading nations that raises crude use must be jointly suboptimal.},
	keywords={pollution externality;Pigouvian tax;optimal biofuel subsidy;terms-of-trade},
            }