Andrew Swanson, PhD 

 Job Market Paper

The Pass-Through of California Low Carbon Fuel Standard Credits to Ethanol Plant Corn Prices

 Abstract: California’s Low Carbon Fuel Standard (LCFS) uses a system of carbon credits to subsidize low-carbon fuels based on their carbon emissions per megajoule of energy. Corn ethanol producers are the second largest source of renewable energy in California’s transportation sector, and they can earn over $0.10 per gallon of ethanol sold in California from LCFS credits. I estimate the impact of weekly credit price changes on the cash corn prices of ethanol plants selling into California, and I use data from the California Air Resources Board and a fixed-proportions model of ethanol production to determine the per bushel value of LCFS credits. I find that 40% of credit price changes pass-through to corn prices. My results are consistent with a spatial-competition model of the LCFS providing some corn buyers with a competitive advantage over others. Heterogeneity among commodity buyers can lead to the incomplete pass-through of market-based emissions policies to energy feedstock prices. Policymakers seeking to develop markets for climate-smart commodities need to be aware that a significant portion of the value for commodities with reduced carbon emissions could accrue to large processors market power. 

Selection of Refereed and Policy Publications

 Smith, Aaron, and Andrew Swanson. 2024. The Economic and Policy Challenges of Climate Smart Agriculture. Conditionally accepted at Review of Environmental Economics and Policy. Working paper draft.

 Swanson, Andrew. 2024. Is Sustainable Aviation Fuel the Future of Ethanol? farmdoc daily (14):39. Available here.