Evaluating the Effects of Expanding Grain-based Fuel Ethanol on Chinese Economy Using a Computable General Equilibrium Model

Abstract

In this study, we use a computable general equilibrium (CGE) model to examine the effects of expanding grain-based fuel ethanol production on Chinese economy. The results show that reasonable development of grain-based fuel ethanol will accelerate China's economy, improve rural household income, and narrow the gap between the rich and the poor. However, expanding the production of grain-based fuel ethanol will also stimulate consumer price index (CPI), increase the domestic prices of agricultural products, reduce the output and supply of agricultural products other than grains, and decrease the disposable income and welfare of urban households, resulting in an excessive concentration of agricultural labor and capital input on grains.

JEL Classification: C68, E65, O53, Q42, R13, R38