IDEAS home Printed from https://ideas.repec.org/p/nev/wpaper/wp201305.html
   My bibliography  Save this paper

Impacts of Ethanol Policy on Corn Prices: A Review and Meta-Analysis of Recent Evidence

Author

Listed:
  • Nicole Condon
  • Heather Klemick
  • Ann Wolverton

Abstract

The literature on the impacts of biofuels on food prices is characterized by contradictory findings and a wide range of estimates. To bring more clarity to this issue, we review studies on U.S. corn ethanol production released between 2008 and 2013. Normalizing corn price impacts by the change in corn ethanol volume, we find that each billion gallon expansion in ethanol production yields a 2-3 percent increase in corn prices on average across studies. We also conduct a meta-analysis to identify the factors that drive the remaining variation in crop price impacts across studies. We find that the baseline and policy ethanol volumes, projection year, inclusion of ethanol co-products, biofuel production from other feedstocks, and modeling framework explain much of the differences in price effects across studies and scenarios. Our study also distinguishes between analyses that estimate long-run equilibrium impacts of biofuels and short-run studies that consider the effects of unexpected policy or weather shocks, which can lead to temporary price spikes. Preliminary findings from the gray literature suggest that short-run impacts on corn prices per billion gallons of corn ethanol production in response to unexpected shocks are higher. Last, we examine a small number of studies that consider the implications of biofuel policies for food security worldwide. The literature suggests that biofuels expansion will raise the number of people at risk of hunger or in poverty in developing countries. Updated version posted 10-31-2013

Suggested Citation

  • Nicole Condon & Heather Klemick & Ann Wolverton, 2013. "Impacts of Ethanol Policy on Corn Prices: A Review and Meta-Analysis of Recent Evidence," NCEE Working Paper Series 201305, National Center for Environmental Economics, U.S. Environmental Protection Agency, revised Oct 2013.
  • Handle: RePEc:nev:wpaper:wp201305
    as

    Download full text from publisher

    File URL: https://www.epa.gov/environmental-economics/working-paper-impacts-ethanol-policy-corn-prices-review-and-meta-analysis
    File Function: First version, 2013
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. David Zilberman & Gal Hochman & Deepak Rajagopal & Steve Sexton & Govinda Timilsina, 2013. "The Impact of Biofuels on Commodity Food Prices: Assessment of Findings," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 95(2), pages 275-281.
    2. Scott L. Baier & Mark Clements & Charles Griffiths & Jane E. Ihrig, 2009. "Biofuels impact on crop and food prices: using an interactive spreadsheet," International Finance Discussion Papers 967, Board of Governors of the Federal Reserve System (U.S.).
    3. Devadoss, Stephen & Bayham, Jude, 2010. "Contributions of U.S. Crop Subsidies to Biofuel and Related Markets," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 42(04), November.
    4. repec:oup:revage:v:30:y:2008:i:3:p:387-396. is not listed on IDEAS
    5. Raymond J. G. M. Florax & Chiara M. Travisi & Peter Nijkamp, 2005. "A meta-analysis of the willingness to pay for reductions in pesticide risk exposure," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 32(4), pages 441-467, December.
    6. Amani Elobeid & Simla Tokgoz & Dermot J. Hayes & Bruce A. Babcock & Chad E. Hart, 2006. "Long-Run Impact of Corn-Based Ethanol on the Grain, Oilseed, and Livestock Sectors: A Preliminary Assessment, The," Center for Agricultural and Rural Development (CARD) Publications 06-bp49, Center for Agricultural and Rural Development (CARD) at Iowa State University.
    7. Gardebroek, Cornelis & Hernandez, Manuel A., 2013. "Do energy prices stimulate food price volatility? Examining volatility transmission between US oil, ethanol and corn markets," Energy Economics, Elsevier, vol. 40(C), pages 119-129.
    8. McPhail, Lihong Lu & Babcock, Bruce A., 2012. "Impact of US biofuel policy on US corn and gasoline price variability," Energy, Elsevier, vol. 37(1), pages 505-513.
    9. Farzad Taheripour & Thomas W. Hertel & Wallace E. Tyner, 2011. "Implications of biofuels mandates for the global livestock industry: a computable general equilibrium analysis," Agricultural Economics, International Association of Agricultural Economists, vol. 42(3), pages 325-342, May.
    10. Tyner, Wallace E. & Taheripour, Farzad & Perkis, David, 2010. "Comparison of fixed versus variable biofuels incentives," Energy Policy, Elsevier, vol. 38(10), pages 5530-5540, October.
    11. Hertel, Thomas & Golub, Alla & Jones, Andrew & O'Hare, Michael & Plevin, Richard & Kammen, Daniel, 2009. "Global Land Use and Greenhouse Gas Emissions Impacts of U.S. Maize Ethanol: The Role of Market-Mediated Responses," GTAP Working Papers 3160, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
    12. V. Smith & Subhrendu Pattanayak, 2002. "Is Meta-Analysis a Noah's Ark for Non-Market Valuation?," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 22(1), pages 271-296, June.
    13. Govinda R. Timilsina & John C. Beghin & Dominique van der Mensbrugghe & Simon Mevel, 2012. "The impacts of biofuels targets on land‐use change and food supply: A global CGE assessment," Agricultural Economics, International Association of Agricultural Economists, vol. 43(3), pages 315-332, May.
    14. Chakravorty, Ujjayant & Hubert, Marie-Helene & Ural Marchand, Beyza, 2012. "Food for Fuel: The Effect of the U.S. Biofuel Mandate on Poverty in India," Working Papers 2012-17, University of Alberta, Department of Economics, revised 01 Jan 2015.
    15. Xiaoguang Chen & Madhu Khanna, 2013. "Food vs. Fuel: The Effect of Biofuel Policies," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 95(2), pages 289-295.
    16. Mosnier, A. & Havlík, P. & Valin, H. & Baker, J. & Murray, B. & Feng, S. & Obersteiner, M. & McCarl, B.A. & Rose, S.K. & Schneider, U.A., 2013. "Alternative U.S. biofuel mandates and global GHG emissions: The role of land use change, crop management and yield growth," Energy Policy, Elsevier, vol. 57(C), pages 602-614.
    17. Gehlhar, Mark J. & Somwaru, Agapi & Somwaru, Agapi, 2010. "Effects of Increased Biofuels on the U.S. Economy in 2022," Economic Research Report 96758, United States Department of Agriculture, Economic Research Service.
    18. Christian A. Gregory & Alisha Coleman-Jensen, 2013. "Do High Food Prices Increase Food Insecurity in the United States?," Applied Economic Perspectives and Policy, Agricultural and Applied Economics Association, vol. 35(4), pages 679-707.
    19. Huang, Jikun & Yang, Jun & Msangi, Siwa & Rozelle, Scott & Weersink, Alfons, 2012. "Biofuels and the poor: Global impact pathways of biofuels on agricultural markets," Food Policy, Elsevier, vol. 37(4), pages 439-451.
    20. 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.
    21. Huang, Jikun & Yang, Jun & Msangi, Siwa & Rozelle, Scott & Weersink, Alfons, 2012. "Global biofuel production and poverty in China," Applied Energy, Elsevier, vol. 98(C), pages 246-255.
    22. Ivanic, Maros & Martin, Will & Zaman, Hassan, 2012. "Estimating the Short-Run Poverty Impacts of the 2010–11 Surge in Food Prices," World Development, Elsevier, vol. 40(11), pages 2302-2317.
    23. Tol, Richard S. J., 2008. "The Social Cost of Carbon: Trends, Outliers and Catastrophes," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy (IfW), vol. 2, pages 1-22.
    24. Huang, Haixiao & Khanna, Madhu & Önal, Hayri & Chen, Xiaoguang, 2013. "Stacking low carbon policies on the renewable fuels standard: Economic and greenhouse gas implications," Energy Policy, Elsevier, vol. 56(C), pages 5-15.
    25. John D. Anderson & Keith H. Coble, 2010. "Impact of renewable fuels standard ethanol mandates on the corn market," Agribusiness, John Wiley & Sons, Ltd., vol. 26(1), pages 49-63.
    26. Lihong Lu McPhail & Bruce A. Babcock, 2008. "Ethanol, Mandates, and Drought: Insights from a Stochastic Equilibrium Model of the U.S. Corn Market," Center for Agricultural and Rural Development (CARD) Publications 08-wp464, Center for Agricultural and Rural Development (CARD) at Iowa State University.
    27. Trostle, Ronald, 2008. "Factors Contributing to Recent Increases in Food Commodity Prices (PowerPoint)," Seminars 43902, USDA Economists Group.
    28. Jon Nelson & Peter Kennedy, 2009. "The Use (and Abuse) of Meta-Analysis in Environmental and Natural Resource Economics: An Assessment," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 42(3), pages 345-377, March.
    29. Cororaton, Caesar B. & Timilsina, Govinda R. & Mevel, Simon, 2010. "Impacts Of Large Scale Expansion Of Biofuels On Global Poverty And Income Distribution," Proceedings Issues, 2010: Climate Change in World Agriculture: Mitigation, Adaptation, Trade and Food Security, June 2010, Stuttgart- Hohenheim, Germany 91279, International Agricultural Trade Research Consortium.
    30. 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.
    31. Timilsina, Govinda R. & Shrestha, Ashish, 2010. "Biofuels : markets, targets and impacts," Policy Research Working Paper Series 5364, The World Bank.
    32. 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.
    33. Hayes, Dermot J. & Babcock, Bruce A. & Fabiosa, Jacinto F. & Tokgoz, Simla & Elobeid, Amani E. & Yu, Tun-Hsiang (Edward) & Dong, Fengxia & Hart, Chad E. & Chavez, Eddie C. & Pan, Suwen & Carriquiry, M, 2009. "Biofuels: Potential Production Capacity, Effects on Grain and Livestock Sectors, and Implications for Food Prices and Consumers," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 41(02), August.
    34. Marco Lagi & Yavni Bar-Yam & Karla Z. Bertrand & Yaneer Bar-Yam, 2011. "The Food Crises: A quantitative model of food prices including speculators and ethanol conversion," Papers 1109.4859, arXiv.org.
    35. Gal Hochman & Deepak Rajagopal & David Zilberman, 2010. "Are Biofuels the Culprit? OPEC, Food, and Fuel," American Economic Review, American Economic Association, vol. 100(2), pages 183-187, May.
    36. Abbott, Philip C. & Hurt, Christopher & Tyner, Wallace E., 2009. "What's Driving Food Prices? March 2009 Update," Issue Reports 48495, Farm Foundation.
    37. Gohin, Alexandre & Treguer, David, 2010. "On the (De)Stabilization Effects of Biofuels: Relative Contributions of Policy Instruments and Market Forces," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 35(1), April.
    38. Bruce A. Babcock, 2012. "Updated Assessment of the Drought's Impacts on Crop Prices and Biofuel Production," Center for Agricultural and Rural Development (CARD) Publications 12-pb8, Center for Agricultural and Rural Development (CARD) at Iowa State University.
    39. Condon, Nicole & Klemick, Heather & Wolverton, Ann, 2015. "Impacts of ethanol policy on corn prices: A review and meta-analysis of recent evidence," Food Policy, Elsevier, vol. 51(C), pages 63-73.
    40. Wallace E. Tyner & Farzad Taheripour, 2008. "Policy Options for Integrated Energy and Agricultural Markets," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 30(3), pages 387-396.
    41. Roberts, Michael J. & Tran, A. Nam, 2012. "Commodity Price Adjustment in a Competitive Storage Model with an Application to the US Biofuel Policies," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 124869, Agricultural and Applied Economics Association.
    42. Jingbo Cui & Harvey Lapan & GianCarlo Moschini & Joseph Cooper, 2011. "Welfare Impacts of Alternative Biofuel and Energy Policies," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 93(5), pages 1235-1256.
    43. Bruce A. Babcock & Sebastien Pouliot, 2013. "Price It and They Will Buy: How E85 Can Break the Blend Wall," Center for Agricultural and Rural Development (CARD) Publications 13-pb11, Center for Agricultural and Rural Development (CARD) at Iowa State University.
    44. Kretschmer, Bettina & Narita, Daiju & Peterson, Sonja, 2009. "The economic effects of the EU biofuel target," Open Access Publications from Kiel Institute for the World Economy 32984, Kiel Institute for the World Economy (IfW).
    45. Roberts, Michael J. & Tran, A. Nam, 2013. "Conditional Suspension of the US Ethanol Mandate using Threshold Price inside a Competitive Storage Model," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 150717, Agricultural and Applied Economics Association.
    46. Mitchell, Donald, 2008. "A note on rising food prices," Policy Research Working Paper Series 4682, The World Bank.
    47. Kretschmer, Bettina & Peterson, Sonja, 2010. "Integrating bioenergy into computable general equilibrium models -- A survey," Energy Economics, Elsevier, vol. 32(3), pages 673-686, May.
    48. 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.
    49. Loomis, John B. & White, Douglas S., 1996. "Economic benefits of rare and endangered species: summary and meta-analysis," Ecological Economics, Elsevier, vol. 18(3), pages 197-206, September.
    50. Seth Meyer & Wyatt Thompson, 2012. "How Do Biofuel Use Mandates Cause Uncertainty? United States Environmental Protection Agency Cellulosic Waiver Options," Applied Economic Perspectives and Policy, Agricultural and Applied Economics Association, vol. 34(4), pages 570-586.
    51. Van Houtven, George & Powers, John & Pattanayak, Subhrendu K., 2007. "Valuing water quality improvements in the United States using meta-analysis: Is the glass half-full or half-empty for national policy analysis?," Resource and Energy Economics, Elsevier, vol. 29(3), pages 206-228, September.
    52. 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.
    53. Martin Banse & Hans van Meijl & Andrzej Tabeau & Geert Woltjer, 2008. "Will EU biofuel policies affect global agricultural markets?," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 35(2), pages 117-141, June.
    54. Thompson, Wyatt & Meyer, Seth & Westhoff, Pat, 2009. "How does petroleum price and corn yield volatility affect ethanol markets with and without an ethanol use mandate?," Energy Policy, Elsevier, vol. 37(2), pages 745-749, February.
    55. Qiu, Cheng & Colson, Gregory & Escalante, Cesar & Wetzstein, Michael, 2012. "Considering macroeconomic indicators in the food before fuel nexus," Energy Economics, Elsevier, vol. 34(6), pages 2021-2028.
    56. Hochman, Gal & Rajagopal, Deepak & Timilsina, Govinda & Zilberman, David, 2011. "The role of inventory adjustments in quantifying factors causing food price inflation," Policy Research Working Paper Series 5744, The World Bank.
    57. 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.
    58. Elobeid, Amani & Tokgoz, Simla & Hayes, Dermot J. & Babcock, Bruce & Hart, Chad E., 2007. "The Long-Run Impact of Corn-Based Ethanol on the Grain, Oilseed, and Livestock Sectors with Implications for Biotech Crops," ISU General Staff Papers 200701010800001003, Iowa State University, Department of Economics.
    59. Bruce A. Babcock, 2012. "Preliminary Assessment of the Drought's Impacts on Crop Prices and Biofuel Production," Center for Agricultural and Rural Development (CARD) Publications 12-pb7, Center for Agricultural and Rural Development (CARD) at Iowa State University.
    60. Hector M. Nuñez & Hayri Önal & Madhu Khanna, 2013. "Land use and economic effects of alternative biofuel policies in Brazil and the United States," Agricultural Economics, International Association of Agricultural Economists, vol. 44(4-5), pages 487-499, July.
    61. Michael J. Roberts & Wolfram Schlenker, 2013. "Identifying Supply and Demand Elasticities of Agricultural Commodities: Implications for the US Ethanol Mandate," American Economic Review, American Economic Association, vol. 103(6), pages 2265-2295, October.
    62. Bruce A. Babcock, 2012. "The impact of US biofuel policies on agricultural price levels and volatility," China Agricultural Economic Review, Emerald Group Publishing, vol. 4(4), pages 407-426, November.
    63. Zibin Zhang & Luanne Lohr & Cesar Escalante & Michael Wetzstein, 2009. "Ethanol, Corn, and Soybean Price Relations in a Volatile Vehicle-Fuels Market," Energies, MDPI, Open Access Journal, vol. 2(2), pages 1-20, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Héctor M. Núñez & Andrés Trujillo-Barrera, 2015. "Impact of U.S. Biofuel Policy in the Presence of Drastic Climate Conditions," Working papers DTE 585, CIDE, División de Economía.
    2. repec:eee:enepol:v:113:y:2018:i:c:p:368-375 is not listed on IDEAS
    3. Ha, Sang su & Welch, J. Mark & Anderson, David P., 2016. "Time Varying Correlation Research Among Corn, Ethanol, And Gasoline: Copula –Garch Approach," 2017 Annual Meeting, February 4-7, 2017, Mobile, Alabama 252741, Southern Agricultural Economics Association.
    4. Regmi, Madhav & Featherstone, Allen M., 2017. "U.S. Energy Price Volatility Spillover in Global Corn Markets," 2017 Annual Meeting, February 4-7, 2017, Mobile, Alabama 252776, Southern Agricultural Economics Association.
    5. Johanna Choumert & Pascale Combes Motel & Charlain Guegang, 2017. "The Biofuel-Development Nexus: A Meta-Analysis," Working Papers 2017.04, FAERE - French Association of Environmental and Resource Economists.
    6. Condon, Nicole & Klemick, Heather & Wolverton, Ann, 2015. "Impacts of ethanol policy on corn prices: A review and meta-analysis of recent evidence," Food Policy, Elsevier, vol. 51(C), pages 63-73.
    7. Choumert Nkolo, Johanna & Combes Motel, Pascale & Guegang Djimeli, Charlain, 2018. "Income-generating Effects of Biofuel Policies: A Meta-analysis of the CGE Literature," Ecological Economics, Elsevier, vol. 147(C), pages 230-242.
    8. Jones, Jason P.H. & McCarl, Bruce A., 2016. "Impacts of U.S. Production-Dependent Ethanol Policy on Agricultural Markets," 2016 Annual Meeting, July 31-August 2, 2016, Boston, Massachusetts 236258, Agricultural and Applied Economics Association.
    9. repec:eee:rensus:v:82:y:2018:i:p3:p:3907-3912 is not listed on IDEAS
    10. repec:gam:jsusta:v:9:y:2017:i:11:p:2056-:d:118140 is not listed on IDEAS
    11. repec:fpr:ifpric:9780896292499-01 is not listed on IDEAS
    12. Araujo Enciso, Sergio René & Fellmann, Thomas & Pérez Dominguez, Ignacio & Santini, Fabien, 2016. "Abolishing biofuel policies: Possible impacts on agricultural price levels, price variability and global food security," Food Policy, Elsevier, vol. 61(C), pages 9-26.
    13. Glauber, Joseph W. & Effland, Anne, 2016. "United States agricultural policy: Its evolution and impact:," IFPRI discussion papers 1543, International Food Policy Research Institute (IFPRI).
    14. Hector, Nuñez & Andres, Trujillo-Barrera, 2014. "Impact of U.S. Biofuel Policy in the Presence of Uncertain Climate Conditions," 2014 Annual Meeting, July 27-29, 2014, Minneapolis, Minnesota 170620, Agricultural and Applied Economics Association.

    More about this item

    Keywords

    ethanol; biofuels; Renewable Fuel Standard; food prices; food security; meta-analysis;

    JEL classification:

    • Q16 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - R&D; Agricultural Technology; Biofuels; Agricultural Extension Services
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nev:wpaper:wp201305. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Cynthia Morgan). General contact details of provider: http://edirc.repec.org/data/nepgvus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.