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It was supposed to be an emergency conference on food shortages, climate change and energy…. but when the microphone was turned on for the powerful politicians who had flown in from all over the world, they spoke mostly about economic issues in their own countries and political priorities.

The conference was preparing to issue its concluding statement on Thursday, and delegates said the wording of the section on biofuels was a point of contention. The United States said only 2 to 3 percent of the global increase in food prices was attributable to competition from biofuels. But other countries put the figure far higher.

New York Times, June 5, 2008

The assertion by American officials that biofuels have contributed only 2-3 percent to the rise in food prices is consistent with estimates of the impact on food prices in the United States, where most foods are processed and the value of the crop in the final retail product is a tiny fraction. In poor countries, where minimally-processed staple grains make up a much larger share of calories consumed, the impact of recent food prices is much larger.

Nor is it true, as asserted by congressional defenders of ethanol subsidies, that corn-based ethanol cannot have a large effect on food prices because it uses feed corn, which people do not eat. That is true, but people do eat poultry, eggs, and dairy products from animals fed on corn; increased production of corn also means reduced production of other crops, thus raising their prices, and high corn prices lead people to substitute other food products, again putting upward pressure on other crop prices. Mark Rosegrant of the International Food Policy Research Institute estimates that increased biofuel production contributed 30 percent of the rise in grain prices through 2007. [Resegrant's congressional testimony] (The acceleration of price increases in 2008 is likely due primarily to other factors.)

Moreover, as shown in the chart, the level of biofuels mandated by Congress in last year's energy security act that can be derived from corn would rise sharply and would require roughly 40 percent of total US corn production. It is simply folly to believe that would not have an impact on food prices. Far from defending US subsidies for corn-based ethanol, President Bush should order the Environmental Protection Agency to suspend the biofuels mandate, as requested by some states and by Senator John McCain (R-AZ) and 23 other Senate Republicans in a letter to the EPA last month.

Biofuel Mandates

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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.