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The Energy Independence and Security Act of 2007 imposes a Renewable Fuel Standard met through a combination of corn and cellulosic ethanol. A variety of rationales support this policy including the recycling of atmospheric carbon. This study examines the economic dimensions of this problem focusing on the role of zero prices for environmental goods and the use of an environmental equivalent. When environmental goods are taken into account, the optimal price policy cannot be defined with certainty.

Valuing Carbon Recycling through Ethanol: Zero Prices for Environmental Goods