Biofuels: Effects on Global Agricultural Prices and Climate Change

Starting with the so-called food price crisis in 2007/2008, global agricultural prices have increased substantially. This constitutes a concern from a food security perspective, as most of the world’s poor are net food buyers. Due to its contribution to high prices as well as a questionable contribution of biofuels to climate change mitigation, the high political support in the EU for so-called first generation biofuels, i. e. biodiesel from plant oils and bioethanol from sugar crops or cereals, has been criticised heavily by various scientific expert committees. The general consensus is that such support should be ended.

This study finds that EU biofuel policy results in 16% higher prices for plant oils, 10% higher prices for oilseeds and about 2.6% higher global crop prices on average. This is substantial, as it is the isolated effect of just one policy of the EU, not yet including other bioenergy policies or other countries, such as the USA. Furthermore, this study reviews the literature and concludes that supporting first generation biofuels is not an efficient, if at all effective climate policy. This is because of the significant effects of using biomass for biofuels:
intensified global agriculture as well as conversions of non-agricultural land to agricultural use. The 2012 proposal for a new biofuel directive by the European Commission represents a move in the right direction, albeit much too hesitant. However, it is in danger of being watered down by Member States under the pressure of interest groups. While the quantification of the effects of biofuel support is surrounded by numerous uncertainties, these uncertainties do not justify ignoring land use change and the intensification impacts of biofuels. Instead of denying the existence of such effects due to their complexity, efforts should rather focus on continuously improving the validity of assessments of land use and the intensification implications of biofuels.

Product details
Date of Publication
December 2013
Institute of Agricultural Policy and Markets, Universität Hohenheim
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