A Market and Policy Interpretation of Recent Developments in the World Ethanol Industry

The concept of an integrated world ethanol market refers more to a possibility than to a reality. Presently, the value of ethanol exchanged among countries is only a few billion dollars. But the possibility of trade is real in the aftermath of escalating gasoline prices and the worldwide investment boom in ethanol. However, the prospects for continued investment and growth during the next five or six years are uncertain. This perspective considers some important factors that will define the extent of expansion in worldwide ethanol production and trade. Specifically, the balance between impending processing plans and possible technical limits on ethanol use in gasoline is measured. Also, commercial policies, such as subsidies, tariffs, and trade preferences that influence trade are reviewed,; a few policies are also evaluated, and an import policy change for the EU and USA that accommodates growing developed country markets while promoting import diversification and economic development, is discussed.