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Interdependencies in the Energy-Bioenergy-Food Price Systems: A Cointegration Analysis

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  • Pavel Ciaian
  • d'Artis Kancs

Abstract

The present paper examines a long-run relationship between the energy, bioenergy and food prices. In the recent years the bioenergy production has increased significantly around the world. The increase has been driven by rising energy prices as well as by environmental policies aiming at reducing the harmful effects of conventional sources of energy, such as climate change. Bioenergy, in turn, affects agricultural markets, because it uses agricultural commodities as inputs. The theoretical model we develop predicts that, because of price inelastic food demand, the agricultural price increase may be substantial. The empirical findings confirm the theoretical hypothesis that energy prices do affect prices of agricultural commodities. However, the co-integration is weaker than theoretically predicted. The price effect of bioenergy might be mitigated by new technological development, which improve yields and lead to an offsetting effect in the supply of agricultural commodities, and by fallow land brought into cultivation, when agricultural profitability is rising.

Suggested Citation

  • Pavel Ciaian & d'Artis Kancs, 2009. "Interdependencies in the Energy-Bioenergy-Food Price Systems: A Cointegration Analysis," EERI Research Paper Series EERI_RP_2009_06, Economics and Econometrics Research Institute (EERI), Brussels.
  • Handle: RePEc:eei:rpaper:eeri_rp_2009_06
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    More about this item

    Keywords

    Energy; bioenergy; crude oil; prices; cointegration.;
    All these keywords.

    JEL classification:

    • Q11 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Aggregate Supply and Demand Analysis; Prices
    • Q13 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Markets and Marketing; Cooperatives; Agribusiness
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources

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