The Impact of Changes in Fuel Policies on the Brazilian Economy

Resumo

In order to analyze incentive policies towards biofuel, two groups of scenarios have been proposed: policies that increase gasoline prices, and policies that reduce
hydrous ethanol price. Results showed that hydrous ethanol consumption is
maximized when a federal tax of BRL 0.77/liter is applied on gasoline C, or if
all taxes on hydrous ethanol are eliminated. However, while higher gasoline
taxation reduces GDP and increases fuel prices and government revenues, the
elimination of hydrous ethanol taxes leads to higher GDP and lower government
revenues and inflation.