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Biofuels : markets, targets and impacts

  • Timilsina, Govinda R.
  • Shrestha, Ashish

This paper reviews recent developments in biofuel markets and their economic, social and environmental impacts. Several countries have introduced mandates and targets for biofuel expansion. Production, international trade and investment have increased sharply in the past few years. However, several existing studies have blamed biofuels as one of the key factors behind the 2007-2008 global food crisis, although the magnitudes of impacts in these studies vary widely depending on the underlying assumptions and structure of the models. Existing studies also have huge disparitiesin the magnitude of long-term impacts of biofuels on food prices and supply; studies that model only the agricultural sector show higher impacts, whereas studies that model the entire economy show relatively lower impacts. In terms of climate change mitigation impacts, there exists a consensus that current biofuels lead to greenhouse gas mitigation only when greenhouse gas emissions related to land-use change are not counted. If conversion of carbon rich forest land to crop land is not avoided, the resulting greenhouse gas release would mean that biofuels would not reduce cumulative greenhouse gas emissions until several years had passed. Overall, results from most of the existing literature do not favor diversion of food for large-scale production of biofuels, although regulated production of biofuels in countries with surplus land and a strong biofuel industry are not ruled out. Developments in second generation biofuels offer some hope, yet they still compete with food supply through land use and are currently constrained by a number of technical and economic barriers.

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Paper provided by The World Bank in its series Policy Research Working Paper Series with number 5364.

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Date of creation: 01 Jul 2010
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Handle: RePEc:wbk:wbrwps:5364
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  1. Scott Baier & Mark Clements & Charles Griffiths & Jane 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.).
  2. Abler, David G & Shortle, James S, 1992. "Environmental and Farm Commodity Policy Linkages in the U.S. and the EC," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 19(2), pages 197-217.
  3. de Vries, Bert J.M. & van Vuuren, Detlef P. & Hoogwijk, Monique M., 2007. "Renewable energy sources: Their global potential for the first-half of the 21st century at a global level: An integrated approach," Energy Policy, Elsevier, vol. 35(4), pages 2590-2610, April.
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