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“A leading World Bank economist's claims that biofuels are a major cause of soaring world food prices could further undermine support for the alternative fuel worldwide and cause tensions with the White House, which fervently supports the new industry.

The draft report by the World Bank's top agricultural economist, Don Mitchell, estimates that the growing use of food for fuel, combined with low grain stocks, market speculation and export food bans, contributed as much as 75 percent of the 140 percent rise in prices between January 2002 and February 2008.” (Reuters, July 9, 2008)
The draft report by Don Mitchell is yet another volley in the debate over the role biofuels are playing in the food price crisis. The stakes are high because, if his estimates are accepted as credible, it would be unconscionable for US and EU policymakers to maintain their policies supporting the production of food-based biofuels, especially corn-based ethanol and vegetable oil-based biodiesel.
The biofuels industry and corn-state policymakers are sure to fight back, arguing that biofuels are only a small part of the problem. The looming battle over “the number” should not distract us from a more fundamental fact: support for the current generation of biofuels makes no sense, regardless of the impact on food prices. The two key rationales for government subsidies for biofuels are to promote “energy security,” by reducing dependence on imported oil, and to slow climate change, by reducing greenhouse gas emissions.
Ethanol does neither. Around a quarter of the US corn crop will go into ethanol this year but even this huge amount of corn will displace only around 4 percent of US gasoline consumption. And, contrary to hopes, producing corn ethanol and biodiesel is speeding rather than slowing climate change, which is perhaps the biggest threat to agriculture and food security in many developing countries, especially in Africa (See William R. Cline’s book Global Warming and Agriculture: Impact Estimates by Country). Chopping down forests or plowing up grasslands to raise food to replace the crops being diverted to fuel releases more than enough carbon dioxide to swamp any gains from burning biofuels rather than gasoline.
Whether biofuels are responsible for 75 percent of the recent food price hikes, as Don Mitchell contends, or 30 percent, or even just 5 percent, tax incentives and subsidies for biofuels make no sense.

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CGD blog posts reflect the views of the authors drawing on prior research and experience in their areas of expertise. CGD does not take institutional positions.