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Do Biofuel Mandates Raise Food Prices?

  • Ujjayant Chakravorty

    (University of Alberta and Toulouse School of Economics (INRA, LERNA))

  • Marie-Hélène Hubert

    (University of Rennes 1 - CREM, (UMR 6211 CNRS))

  • Michel Moreaux

    (Toulouse School of Economics (IDEI, LERNA))

  • Linda Nøstbakken

    (Department of Marketing, Business Economics and Law, University of Alberta)

Biofuels have received a lot of attention as a substitute for gasoline in transportation. They have been blamed universally for recent increases in world food prices. Both the United States and the European Union have adopted mandatory blending policies that require a sharp increase in their use. Many studies have shown that these energy mandates may have a large (30-60%) impact on food prices. We develop a model that takes into account dietary preferences - the fact that with rising incomes, people in the developing world will consume more meat and dairy products, which are land-intensive relative to cereals. On the supply side, we allow for conversion of new lands to farming. We show that about half the increase in food prices can be attributed to population growth and dietary changes, and only the remaining come from biofuel policy. Moreover, with endogenous land supply, food price increases are likely to be much smaller than predicted by other studies. Finally, these biofuel policies do not lead to any reduction in carbon emissions.

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Paper provided by Center for Research in Economics and Management (CREM), University of Rennes 1, University of Caen and CNRS in its series Economics Working Paper Archive (University of Rennes 1 & University of Caen) with number 201214.

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Date of creation: Mar 2012
Date of revision:
Handle: RePEc:tut:cremwp:201214
Contact details of provider: Postal: CREM (UMR CNRS 6211) – Faculty of Economics, 7 place Hoche, 35065 RENNES Cedex
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Order Information: Postal: CREM (UMR CNRS 6211) - Faculty of Economics, 7 place Hoche, 35065 Rennes Cedex - France

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  1. Gouel, Christophe & Hertel, Thomas, 2006. "Introducing Forest Access Cost Functions into a General Equilibrium Model," GTAP Research Memoranda 2215, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
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  9. Bento, Antonio M. & Goulder, Lawrence H. & Jacobsen, Mark R. & von Haefen, Roger H., 2007. "Distributional and Efficiency Impacts of Increased U.S. Gasoline Taxes," Working Papers 127021, Cornell University, Department of Applied Economics and Management.
  10. Fullerton, Don & Heutel, Garth, 2007. "The general equilibrium incidence of environmental taxes," Journal of Public Economics, Elsevier, vol. 91(3-4), pages 571-591, April.
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  12. Golub, Alla & Hertel, Thomas & Sohngen, Brent, 2008. "Land Use Modeling in Recursively-Dynamic GTAP Framework," GTAP Working Papers 2609, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
  13. Wiebe, Keith D., 2003. "Linking Land Quality, Agricultural Productivity, And Food Security," Agricultural Economics Reports 34073, United States Department of Agriculture, Economic Research Service.
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