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Will Biofuel Mandates Raise Food Prices?

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Author Info

  • Chakravorty, Ujjayant

    ()
    (University of Alberta, Department of Economics)

  • Hubert, Marie-Helene

    (University of Rennes)

  • Moreaux, Michel

    (Toulouse School of Economics)

  • Nostbakken, Linda

    ()
    (University of Alberta, School of Business)

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.

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Bibliographic Info

Paper provided by University of Alberta, Department of Economics in its series Working Papers with number 2011-1.

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Length: 44 pages
Date of creation: 01 Jan 2011
Date of revision: 01 May 2011
Handle: RePEc:ris:albaec:2011_001

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Keywords: agriculture; energy policy; global warming; land quality; renewable fuel standards;

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Cited by:
  1. Quentin Grafton & Tom Kompas & Ngo Van Long, 2012. "Substitution between bio-fuels and fossil fuels: is there a Green Paradox?," CIRANO Working Papers, CIRANO 2012s-10, CIRANO.
  2. Koliai, Lyes & Avouyi-Dovi, Sanvi & Ano Sujithan, Kuhanathan, 2014. "On the determinants of food price volatility," Economics Papers from University Paris Dauphine 123456789/12798, Paris Dauphine University.
  3. Paltsev, Sergey, 2012. "Implications of Alternative Mitigation Policies on World Prices for Fossil Fuels and Agricultural Products," Working Paper Series, World Institute for Development Economic Research (UNU-WIDER) UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  4. Janda, Karel & Kristoufek, Ladislav & Zilberman, David, 2011. "Biofuels: review of policies and impacts," CUDARE Working Paper Series, University of California at Berkeley, Department of Agricultural and Resource Economics and Policy 1119, University of California at Berkeley, Department of Agricultural and Resource Economics and Policy.
  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, European Association of Environmental and Resource Economists, European Association of Environmental and Resource Economists, vol. 53(1), pages 117-136, September.
  6. Karel Janda & Ladislav Kristoufek & David Zilberman, 2011. "Modeling the Environmental and Socio-Economic Impacts of Biofuels," Working Papers IES, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies 2011/33, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Oct 2011.
  7. Ngo Van LONG, 2014. "The Green Paradox under Imperfect Substitutability between Clean and Dirty Fuels," Cahiers de recherche, Centre interuniversitaire de recherche en économie quantitative, CIREQ 02-2014, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
  8. Gal Hochman & Scott Kaplan & Deepak Rajagopal & David Zilberman, 2012. "Biofuel and Food-Commodity Prices," Agriculture, MDPI, Open Access Journal, vol. 2(3), pages 272-281, September.

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