UC Davis Institute of Transportation Studies

Most of the fuel ethanol plants in Canada were built recently and either use corn or wheat as feedstock. It is important to determine what factors affect decisions about when and where to invest in building new ethanol plants and which feedstock is chosen as feedstock. In this paper we model the decision to invest in ethanol plants using a structural model of a dynamic game. We find that competition between plants is enough to deter local investments, the availability of feedstock is important in determining plant location, and the effects of policy support for wheat-based plants are significant.