Despite the co-benefits of bioethanol, such as energy security, environmental
improvement, CO2 emission reduction and development of associated industry, bioethanolblended
gasoline without subsidy is more expensive than pure gasoline in Korea. The
renewable fuel standard (RFS) can contribute to the development of a bioethanol market.
However, without controlling the portions of domestic bioethanol, it is highly plausible that
a new bioethanol market will be filled with imported bioethanol. If the entire supply of
bioethanol is imported, Korea can no longer expect those co-benefits. This study aims at
simulating the desirable ratios of domestic versus imported bioethanol as well as domestic
versus imported feedstock for producing bioethanol in Korea by combining the marginal
social benefit (MSB) with the marginal social cost (MSC) for bioethanol supply. MSB is
derived from a choice experiment and the MSC is derived from the differences in the
bioethanol production costs and the petroleum price. The simulation results show that
considerable portions of bioethanol should be produced domestically under the condition
that MSB is equivalent to MSC in bioethanol production. Thus, the upcoming RFS policy
should allow for some quota on behalf of domestic bioethanol with domestic feedstock or
more credit should be given to the petroleum companies that use domestic bioethanol with
domestic feedstock.