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Do Biofuel Mandates Raise Food Prices?

Author

Listed:
  • 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)

Abstract

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.

Suggested Citation

  • Ujjayant Chakravorty & Marie-Hélène Hubert & Michel Moreaux & Linda Nøstbakken, 2012. "Do Biofuel Mandates Raise Food Prices?," Economics Working Paper Archive (University of Rennes 1 & University of Caen) 201214, Center for Research in Economics and Management (CREM), University of Rennes 1, University of Caen and CNRS.
  • Handle: RePEc:tut:cremwp:201214
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    File URL: https://crem-doc.univ-rennes1.fr/wp/2012/201214.pdf
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    References listed on IDEAS

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    Cited by:

    1. Mads Greaker & Michael Hoel & Knut Einar Rosendahl, 2014. "Does a Renewable Fuel Standard for Biofuels Reduce Climate Costs?," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 1(3), pages 337-363.
    2. repec:dau:papers:123456789/12798 is not listed on IDEAS
    3. Gbadebo Oladosu & Siwa Msangi, 2013. "Biofuel-Food Market Interactions: A Review of Modeling Approaches and Findings," Agriculture, MDPI, Open Access Journal, vol. 3(1), pages 1-19, February.
    4. Steinbuks, Jevgenijs & Satija, Gaurav & Zhao, Fu, 2015. "Sustainability of solar electricity : the role of endogenous resource substitution and market mediated responses," Policy Research Working Paper Series 7178, The World Bank.
    5. Gal Hochman & Scott Kaplan & Deepak Rajagopal & David Zilberman, 2012. "Biofuel and Food-Commodity Prices," Agriculture, MDPI, Open Access Journal, vol. 2(3), pages 1-10, September.

    More about this item

    Keywords

    Clean Energy; Food Demand; Land Quality; Renewable Fuel Standards; Transportation;

    JEL classification:

    • Q24 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Land
    • Q32 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Exhaustible Resources and Economic Development
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources

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