In this research paper I am going to talk about the Ethanol in the United States and the negative effect in Mexico. Ethanol is an alcohol fuel distilled from plant material, like corn and sugar. The cost for Mexico of the expansion of maize in the United States. “This study is relevant for Mexico, since it explains how policies applied in the United States have negative repercussions in Mexico The case in question, whose research is summarized in this information, is about the production of corn-based ethanol, which estimates that it has reached 1.5 billion dollars in Mexico in the last six years. The situation described has affected drug users, especially those with lower incomes, who consume corn as part of their basic diet.
It should be noted that the aforementioned research has served as a foundation for ActionAid, the organization dedicated to alleviating poverty and injustice, has called on the Group of 20 (G20) to eliminate subsidies to biofuels, take measures to
overcome food dependency and that Mexico use its position in the presidency of the G20 to put the issue on the table.1
ETHANOL PRODUCTIONIN UNITED STATES
Since 2000, the volume and share of corn used in energy production in the United States has grown rapidly. Currently, the nation’s corn production is 5 million liters, nine times more than in 2000. In addition, the share of ethanol derived from corn increased from 5 to 40 percent in the last twelve years (see Graph 1).
The expansion of corn-based ethanol production has been stimulated by some public policies, among which are expected tariffs, credit scales and a mandatory consumption target. The tariff is protectionist and graphic with 0.54 dollars per gallon ethanol imported from countries not belonging to the Treaty of
Free Trade of North America (NAFTA), like the ethanol produced by Brazil based on sugarcane. On the other hand, the production benefits from a credit scal, which has existed in different forms for more than 0 years, which offers producers 0.45 dollars per gallon. It is estimated that the total value of this credit for 2011 was 6 billion dollars. Also, the production is supported by the Renewable Fuels (RFS) standard, established in 2005 and expanded six times in 2007. The RFS requires a higher volume of biofuel consumption per year, with the goal to reach 1 6 275 million liters (6,000 million gallons) by 2022, of which 56 781 million liters (less than 15,000 million gallons) as coming from corn. The rest complete with “advanced” biofuels, which include 60,556 million liters (16,000 million gallons) of cellulose biofuels. However, judging by the pace of production, it is unlikely that this goal will be achieved.
Another important policy is the “mix stop” or how much ethanol can be legally mixed in a gallon of gasoline. This cap is now set at 10% (known as E-10), but the Environmental Protection Agency (EPA) recently approved a request to raise the cap to 15% (E-15). ). Since the E-15 is not compatible with some engines, its contribution to stimulating ethanol demand is not clear.
Although at the end of 2011 the US Congress refused to maintain the tariff and the tax credit, the RFS and the mandatory mix cap remain in effect, which allows maintaining a floor for the ethanol demand. While these policies have been essential in the rapid expansion of corn ethanol production, high oil prices make ethanol a competitive substitute for gasoline, which stimulates production.
Although there is a widespread opinion that biofuels
they have propitiated the increase of the price of the agricultural raw materials, due to the competition that exert by the earth of crop, there is smaller support to the argument of which these have affected the price of the foods. Several researchers have made calculations of the effect of biofuels on the increase in the price of food; They use the production of corn ethanol in the United States as an example. In this regard, the National Academy of Sciences of the United States reviewed eleven studies on the increase in food prices during 2007 and concluded that the prices of agricultural raw materials increased between 20 and 40 percent as a result of the expansion of prices. biofuels at an international level.2
Other studies have focused on the effect of biofuel policies on food prices. Abbott et al. They estimated that, in 2008, these policies were responsible for 25% of the increase in the price of food.3 For their part, Baier et al. calculated that world biofuel production increased prices by 27%; and that the production of biofuels in the United States caused 22% of the price growth from 2006 to 2009.4
As the production of biofuels will continue to expand globally, concerns remain that their effects will remain. The Organization for Economic Co-operation and Development (OECD) considers that if the production of biofuels remains at the level of 2007, food prices (especially corn) will be 12% lower for 2017; while the International Food Policy Research Institute (IFPRI) estimates that the expansion of biofuel production will increase the export price of corn by 17.7% by 2020.5