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The impact of biofuel growth on agriculture: Why is the range of estimates so wide?

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  • Zhang, Wei
  • Yu, Elaine A.
  • Rozelle, Scott
  • Yang, Jun
  • Msangi, Siwa

Abstract

The rapid expansion of biofuel production has generated considerable interest within the body of empirical economic literature that has sought to understand the impact of biofuel growth on the global food economy. While the consensus within the literature is that biofuel emergence is likely to have some effect on future world agricultural market, there is a considerable range in the estimated size of the impact. Despite the importance of this topic to policy makers, there has been no study that has tried to reconcile the differences among various outlook studies. This paper undertakes an in-depth review of some key outlook studies which quantify the impacts of biofuels on agricultural commodities, and which are based on either general-equilibrium (GE) or partial-equilibrium (PE) modeling approaches. We attempt to reconcile the systematic differences in the estimated impacts of biofuel production growth on the prospective prices and production of three major feedstock commodities, maize, sugar cane, and oilseeds across these studies. Despite the fact that all models predict positive impacts on prices and production, there are large differences among the studies. Our findings point to a number of key assumptions and structural differences that seem to jointly drive the variations we observe, across these studies. The differences among the PE models are mainly due to differences in the design of scenarios, the presence or absence of biofuel trade, and the structural way in which agricultural and energy market linkages are modeled. The differences among the GE models are likely to be driven by model assumptions on agricultural land supply, the inclusion of the byproducts, and assumptions on crude oil prices and the elasticity of substitution between petroleum and biofuels.

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  • Zhang, Wei & Yu, Elaine A. & Rozelle, Scott & Yang, Jun & Msangi, Siwa, 2013. "The impact of biofuel growth on agriculture: Why is the range of estimates so wide?," Food Policy, Elsevier, vol. 38(C), pages 227-239.
  • Handle: RePEc:eee:jfpoli:v:38:y:2013:i:c:p:227-239
    DOI: 10.1016/j.foodpol.2012.12.002
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    8. Karel Janda & Ladislav Kristoufek, 2019. "The relationship between fuel and food prices: Methods, outcomes, and lessons for commodity price risk management," CAMA Working Papers 2019-20, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    9. van Wijk, Mark T., 2014. "From global economic modelling to household level analyses of food security and sustainability: How big is the gap and can we bridge it?," Food Policy, Elsevier, vol. 49(P2), pages 378-388.
    10. Cheteni, Priviledge, 2017. "Sustainability development: Biofuels in agriculture," MPRA Paper 80969, University Library of Munich, Germany, revised 24 Jun 2017.
    11. Edeseyi, Margaret E. & Kaita, Aminu Y. & Harun, Razif & Danquah, Michael K. & Acquah, Caleb & Sia, Joseph Kee Ming, 2015. "Rethinking sustainable biofuel marketing to titivate commercial interests," Renewable and Sustainable Energy Reviews, Elsevier, vol. 52(C), pages 781-792.
    12. Ji Yong Lee & Allen Featherstone & Rodolfo M. Nayga & Doo Bong Han, 2019. "The Long-Run and Short-Run Effects of Ethanol Production on U.S. Beef Producers," Sustainability, MDPI, Open Access Journal, vol. 11(6), pages 1-14, March.
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    14. Gal Hochman & David Zilberman, 2018. "Corn Ethanol and U.S. Biofuel Policy 10 Years Later: A Quantitative Assessment," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 100(2), pages 570-584.
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    17. Massimo Peri & Daniela Vandone & Lucia Baldi, 2017. "Volatility Spillover between Water, Energy and Food," Sustainability, MDPI, Open Access Journal, vol. 9(6), pages 1-16, June.

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