How Much are American Drivers Willing to Pay for Ethanol?

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New AAEA member research on E85 versus E10 gasolines

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Motorists in California are willing to pay more for E85 than motorists in other states

The Renewable Fuel Stanard (RFS) is a program, set by federal law in 2005, which mandates that motor fuels sold in the United States contain minimum amounts of renewable fuels. The objectives of the program are to reduce greenhouse gas emissions, support the farm sector, and reduce the United States dependence on oil imports. Increasing amounts of renewable fuels have been blended into transportation fuel every year.

According to the Environmental Protection Agency, E85 fuel is a blend of gasoline and denatured ethanol containing up to 85% ethanol, making it the highest ethanol fuel blend available in the market. E10, on the other hand, is a low-level blend composed of no more than 10% ethanol. With these two fuel blends at opposite ends of the spectrum, how much are motorists really willing to pay for E85 compared to E10?

This is the question that Sebastien Pouliot from Iowa State University, Kenneth Liao from Farmingdale State College, and Bruce Babcock from the University of California, Riverside, wanted to answer in their research “Estimating Willingness to Pay for E85 in the United States Using an Intercept Survey of Flex Motorists.”

“E85 contains less energy per gallon than E10 and therefore we compare E85 and E10 in terms of cost per mile. On a cost per mile basis, we find a median willingness to pay for E85 between 55 and 76 percent of the price of E10. We find that motorists in California are willing to pay more for E85 than motorists in other states” said Pouliot.

Their research published in the American Journal of Agricultural Economics is available now and opened to the public for a limited time. If you are interested in setting up an interview with Sebastien Pouliot, please contact Allison Scheetz in the AAEA Business Office.

ABOUT AAEA: Established in 1910, the Agricultural & Applied Economics Association (AAEA) is the leading professional association for agricultural and applied economists, with 2,500 members in more than 60 countries. Members of the AAEA work in academic or government institutions as well as in industry and not-for-profit organizations, and engage in a variety of research, teaching, and outreach activities in the areas of agriculture, the environment, food, health, and international development. The AAEA publishes two journals, the American Journal of Agricultural Economics and Applied Economic Perspectives & Policy, as well as the online magazine Choices. To learn more, visit http://www.aaea.org.

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Allison Scheetz
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