Sustainability, Vol. 12, Pages 1411: Role of Comparative Advantage in Biofuel Policy Adoption in Latin America (Sustainability)

The primary objective of this study is to evaluate whether renewable energy initiativesrecently developed and implemented in Latin American and Caribbean countries are consistentwith their national resource endowments, policy goals, and the general postulates of economictheory. Most classical and neoclassical theories suggest that international trade enhances economicefficiency and welfare of both parties involved in the exchange when they focus on producing anddistributing products and services in which they have a comparative advantage. To achieve thisgoal, we analyze ethanol policy drivers using panel data from four major economies—Argentina,Brazil, Colombia, and Mexico. Since there is no universally accepted measure of comparativeadvantage, three separate models with different indicators—relative feedstock price, comparativeexport performance, and revealed comparative advantage—along with control variables, includingthe availability of production resources such as land and farm labor, are estimated. As expected,results show that the comparative advantage in feedstock production was one of the crucial factorsin determining biofuel policy development and implementation in the four countries.