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Will Biofuel Mandates Raise Food Prices?

  • Chakravorty, Ujjayant
  • Hubert, Marie-Hélène
  • Moreaux, Michel
  • Nostbakken, Linda

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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Paper provided by LERNA, University of Toulouse in its series LERNA Working Papers with number 10.20.326.

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Date of creation: Dec 2010
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Handle: RePEc:ler:wpaper:10.20.326
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  1. Banse, Martin & van Meijl, Hans & Tabeau, Andrzej A. & Woltjer, Geert B., 2008. "Impact of EU Biofuel Policies on World Agricultural and Food Markets," 107th Seminar, January 30-February 1, 2008, Sevilla, Spain 6476, European Association of Agricultural Economists.
  2. 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 12881, Iowa State University, Department of Economics.
  3. Hamelinck, Carlo N & Faaij, Andre P.C., 2006. "Outlook for advanced biofuels," Energy Policy, Elsevier, vol. 34(17), pages 3268-3283, November.
  4. 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.
  5. 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.
  6. Mark W. Rosegrant & Tingju Zhu & Siwa Msangi & Timothy Sulser, 2008. "Global Scenarios for Biofuels: Impacts and Implications ," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 30(3), pages 495-505.
  7. Chantreuil, Frederic & Tabeau, Andrzej A. & van Leeuwen, Myrna, 2008. "Estimation of impact of EU agricultural policies on the world market prices," 107th Seminar, January 30-February 1, 2008, Sevilla, Spain 6671, European Association of Agricultural Economists.
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