Biofuels Are Raising the Cost of Food

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The impact of biofuel production on food prices has been disputed not so much on the basis of whether there is such an impact, but rather about the dimension of that impact. Many have argued that the effect is relatively small. A new study by a panel of experts for the United Nations Committee on World Food Security finds that the impact is substantial.

The panel’s report claims that rising oil prices and government-mandated biofuel production have combined to raise the price of food. From the report:

In the present context, oil prices can play a central role [in higher prices for food]. … In practice, given the current regulatory frameworks in the U.S. and the EU and level of biofuel markets, mandates and targets can become transformed into technical or political ceilings, as in the case of the blending wall in the U.S. or the global limits established by both the U.S. and the EU … [T]he growth of biofuel demand could continue so long as oil prices remain higher than the cost of biofuel production.

The panel recommends that governments adopt the following principle:

[B]iofuels shall not compromise food security and therefore should be managed so that food access or the resources necessary for the production of food, principally land, biodiversity, water and labour are not put at risk.

Exactly how that might be accomplished is further elucidated in five more detailed recommendations, the most important of which is to develop a comprehensive food-energy policy that goes beyond a simple mandate for biofuel production.

Nothing is particularly radical about any of this. What the panel’s report does, however, is suggest how to reshape the way governments think about food and energy. Achieving that outcome likely will be more difficult and to take more time than anyone expects.

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