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Will Biofuel Mandates Raise Food Prices?

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  • Chakravorty, Ujjayant
  • Hubert, Marie-Hélène
  • Moreaux, Michel
  • Nøstbakken, Linda
Abstract
Biofuels have received a lot of attention as a substitute for gasoline in transportation. They have also been blamed for recent increases in food prices. Both the United States and the European Union have adopted mandatory blending policies that require a sharp increase in the use of biofuels. In this paper, we examine the effect of these mandates on food prices and carbon emissions. The model we use considers future world population growth and income-driven changes in dietary preferences towards higher meat and dairy consumption as well as heterogenous land quality. We find that food prices increase anyway because of increased demand for food, especially due to the higher consumption of meat products, and scarcity of fertile arable lands. The contribution of the biofuel mandates to food prices is quite small, about 5% at most. However, biofuel mandates actually increase global emissions due to land conversion and terms of trade effects, undermining the main reason for imposing the mandates.

Suggested Citation

  • Chakravorty, Ujjayant & Hubert, Marie-Hélène & Moreaux, Michel & Nøstbakken, Linda, 2010. "Will Biofuel Mandates Raise Food Prices?," IDEI Working Papers 653, Institut d'Économie Industrielle (IDEI), Toulouse.
    • Handle: RePEc:ide:wpaper:23815
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    9. Searchinger, Timothy & Heimlich, Ralph & Houghton, R. A. & Dong, Fengxia & Elobeid, Amani & Fabiosa, Jacinto F. & Tokgoz, Simla & Hayes, Dermot J. & Yu, Hun-Hsiang, 2008. "Use of U.S. Croplands for Biofuels Increases Greenhouse Gases Through Emissions from Land-Use Change," Staff General Research Papers Archive 12881, Iowa State University, Department of Economics.
    10. Harry de Gorter & David R. Just, 2010. "The Social Costs and Benefits of Biofuels: The Intersection of Environmental, Energy and Agricultural Policy," Applied Economic Perspectives and Policy, Agricultural and Applied Economics Association, vol. 32(1), pages 4-32.
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    12. Anselm Eisentraut, 2010. "Sustainable Production of Second-Generation Biofuels: Potential and Perspectives in Major Economies and Developing Countries," IEA Energy Papers 2010/1, OECD Publishing.
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    Cited by:

    1. Bryngelsson, David K. & Lindgren, Kristian, 2013. "Why large-scale bioenergy production on marginal land is unfeasible: A conceptual partial equilibrium analysis," Energy Policy, Elsevier, vol. 55(C), pages 454-466.
    2. Quentin Grafton, R. & Kompas, Tom & Van Long, Ngo, 2012. "Substitution between biofuels and fossil fuels: Is there a green paradox?," Journal of Environmental Economics and Management, Elsevier, vol. 64(3), pages 328-341.
    3. Karel Janda & Ladislav Kristoufek & David Zilberman, 2011. "Modeling the Environmental and Socio-Economic Impacts of Biofuels," Working Papers IES 2011/33, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Oct 2011.
    4. repec:dau:papers:123456789/12798 is not listed on IDEAS
    5. Catherine Hausman & Maximilian Auffhammer & Peter Berck, 2012. "Farm Acreage Shocks and Crop Prices: An SVAR Approach to Understanding the Impacts of Biofuels," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 53(1), pages 117-136, September.
    6. Paltsev, Sergey, 2012. "Implications of Alternative Mitigation Policies on World Prices for Fossil Fuels and Agricultural Products," WIDER Working Paper Series 065, World Institute for Development Economic Research (UNU-WIDER).
    7. Ujjayant Chakravorty & Marie-HéLène Hubert, 2013. "Global Impacts of the Biofuel Mandate under a Carbon Tax," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 95(2), pages 282-288.
    8. Sergey Paltsev, 2012. "Implications of Alternative Mitigation Policies on World Prices for Fossil Fuels and Agricultural Products," WIDER Working Paper Series wp-2012-065, World Institute for Development Economic Research (UNU-WIDER).
    9. Nuppenau, Ernst-August, 2015. "Mitigation of Large-Scale Biofuel Expansion with Smallholder Conflict: Modelling of Land Use Dynamics using Control Theory for Policy Design to Sustain Food Security and Improve Productivity," 2015 Conference, August 9-14, 2015, Milan, Italy 225669, International Association of Agricultural Economists.
    10. Elena Claire Ricci & Massimo Peri & Lucia Baldi, 2019. "The Effects of Agricultural Price Instability on Vertical Price Transmission: A Study of the Wheat Chain in Italy," Agriculture, MDPI, vol. 9(2), pages 1-14, February.
    11. Janda, Karel & Kristoufek, Ladislav & Zilberman, David, "undated". "Biofuels: review of policies and impacts," CUDARE Working Papers 120415, University of California, Berkeley, Department of Agricultural and Resource Economics.
    12. Ngo Van LONG, 2014. "The Green Paradox under Imperfect Substitutability between Clean and Dirty Fuels," Cahiers de recherche 02-2014, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
    13. Karel Janda & Ladislav Kristoufek & David Zilberman, 2012. "Biofuels: policies and impacts," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 58(8), pages 372-386.
    14. Onno Kuik, 2014. "REDD+ and international leakage via food and timber markets: a CGE analysis," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 19(6), pages 641-655, August.
    15. repec:unu:wpaper:wp2012-65 is not listed on IDEAS
    16. Gal Hochman & Scott Kaplan & Deepak Rajagopal & David Zilberman, 2012. "Biofuel and Food-Commodity Prices," Agriculture, MDPI, vol. 2(3), pages 1-10, September.

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    JEL classification:

    • Q24 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Land
    • Q32 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Exhaustible Resources and Economic Development
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources

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