Biomedical Engineering Reference
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Fig. 18.4 Food, crude oil, and ethanol price developments, 1990-2012 (Based on data from Refs.
[
1
,
59
,
60
])
Various approaches have been used to estimate biofuel policies' contribution on
food prices.
17
Although the findings tend to confirm the inflationary effect of
biofuel policies on food prices, the magnitude of this effect is subject to significant
uncertainty. For example, although the European Commission acknowledges the
energy input channel (i.e., higher oil prices) as the contributor to the recent increase
in food prices, it argues that the impact of biofuels is rather small [
6
,
65
]. Similarly,
Yu et al. [
62
] and Zhang and Reed [
66
], employing a vector autoregressive model,
find an insignificant impact of higher crude oil prices on food.
18
The studies that find a significant biofuel price effect are more prevalent. For
example, in their recent paper, Roberts and Schlenker [
70
] find that the 2009
Renewable Fuel Standard caused corn, rice, soybean, and wheat prices to increase
by 20 %. Analyzing the U.S. corn market only, Drabik [
16
] also finds a substantial
increase in corn prices due to corn ethanol policies - an estimated increase of 33-
46.5 % in the period 2008-2011. Baier et al. [
15
] explored the role of the food price
increase in the period 2006-2008. Their estimates suggest that the increase in
biofuel production had a sizeable impact on corn, sugar, barley, and soybean prices
but a much smaller impact on global food prices. According to their estimates, the
increase in worldwide biofuel production over the period 2006-2008 accounted for
just over 12 % of the rise in the IMF's food price index. The increase in U.S. biofuel
production accounted for roughly 60 % of this effect, while Brazil accounts for
17
Two types of approaches have been followed in the empirical literature. First, time series
econometric analyses were performed to estimate the long-run relationship between fuel and
food prices [
7
,
50
,
62
,
63
]. Second, partial and general equilibrium models have been developed
to simulate the interdependencies between agricultural, biofuel, and energy markets [e.g.,
64
]. Fur-
ther, studies either investigate directly the impact of biofuels (production or prices) on food prices
or indirectly through crude oil prices. The studies using the second approach may overstate the
overall effect because crude oil price impacts agricultural sector not only through the biofuel
channel but also through the indirect input channel.
18
Other studies that find a lower impact of biofuels on food prices include [
67
-
69
].
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