Evaluation of U. S. Ethanol Production Using Dilute Acid Hydrolysis : A General Equilibrium Analysis

This paper evaluates economy-wide the U.S. economy-wide impacts of the current ethanol production with a government subsidy and the MSW (municipal solid waste)-to-ethanol production using a new TVA s dilute acid hydrolysis process in a general equilibrium framework. The model, developed in this paper, is innovative in three ways: a production subsidy, existence of co-products and perfect substitutability between products. The results show that the current ethanol production expands grain crop production by creating an additional demand but the economy gets worse off with its substitution with gasoline in a fuel market. It is also found that, even though ethanol production using MSW with a TVA s conversion technology is economically viable, it is not favorable to the economy.