The Social Costs Of Increases In Biofuel Production

High food prices led to violent riots in 21 countries and non-violent riots in 44 countries according to the International Food Policy Research Institute

2000- 2001- 2002- 2003- 2004 2005- 2006- 2007- 2008-Jan Jan Jan Jan Jan Jan Jan Jan Jan

2000- 2001- 2002- 2003- 2004 2005- 2006- 2007- 2008-Jan Jan Jan Jan Jan Jan Jan Jan Jan

Figure 6.5 World food prices

(IFPRI) (von Braun, 2008). Figure 6.5 charts the IMF's commodity food price index since 2000. The World Bank has highlighted the problem of rising food prices: 'Based on a very rough analysis, we estimate that a doubling of food prices over the last three years could potentially push 100 million people in low-income countries deeper into poverty' (Zoellick, 2008).

Some authorities are in denial about the role of biofuels as a major driver of the increase in food prices (US Department of Energy, 2008a). But the analysis of many authoritative commentators has laid much of the blame at the door of subsidized biofuels production using food grains and oilseeds. The IFPRI, for example, estimated that the biofuel demand increase between 2000 and 2007 accounted for 30 percent of the increase in weighted average grain prices. Mitchell (2008: 17) estimates that 70 to 75 percent of the increase in food commodity prices between June 2002 and 2008 to be due to biofuel production, together with the related consequences of large land-use shifts, speculative activity and export bans. Mitchell (2008) suggests that the increase in land area devoted to maize and oilseeds for biofuels prevented an expansion of wheat production that would have alleviated the declines in wheat stocks and the resulting rise in wheat prices. The large increase in the price of rice was largely a response to the rise in wheat price rather than to a change in rice production or stocks. To contain domestic price increases caused by the switch to biofuel production, many countries placed bans or restrictions on grain exports, which further forced up grain prices.

Without the subsidization, mandates and tariffs of the US and the EU, biofuel production would have been lower and food commodity prices increases smaller. The balance of the price increase can be explained by a combination of higher energy prices and the related increases in fertilizer prices and transport costs, as well as the weakness of the US dollar.

Brazilian ethanol production is at a much lower cost than in the US and EU and its increase has not raised sugar prices because sugarcane production has grown fast enough to meet the demand for sugar and ethanol. Removing the tariffs in the US and EU would enable Brazil and many African countries to produce ethanol profitably for export (Mitchell, 2008).

The chapter continues to review the costs and benefits of biofuels by considering the climate change implications of increases in global biofuel production, including from forests.

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