Chakravorty, Ujjayant, Hubert, Marie-Hélène, Moreaux, Michel and Nøstbakken, Linda (2010) Will Biofuel Mandates Raise Food Prices? LERNA Working Paper, n. 10.20.326, Toulouse

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Abstract

Biofuels have received a lot of attention as a substitute for gasoline in transportation. They have
also been blamed for recent increases in food prices. Both the United States and the European
Union have adopted mandatory blending policies that require a sharp increase in the use of
biofuels. In this paper, we examine the effect of these mandates on food prices and carbon
emissions. The model we use considers future world population growth and income-driven
changes in dietary preferences towards higher meat and dairy consumption as well as
heterogenous land quality. We find that food prices increase anyway because of increased
demand for food, especially due to the higher consumption of meat products, and scarcity of
fertile arable lands. The contribution of the biofuel mandates to food prices is quite small, about
5% at most. However, biofuel mandates actually increase global emissions due to land
conversion and terms of trade effects, undermining the main reason for imposing the mandates.