EU biofuel use and agricultural commodity prices: a review of the evidence base

Jun 2012

In 2012, the European Commission (EC) will produce a report reviewing the social impacts of EU biofuel policy. Under Article 17 (5) of the Renewable Energy Directive (RED)1, the EC is obliged to conduct this review into the impacts on 1) food affordability and availability; 2) land rights; 3) whether producer countries have implemented various International Labour Organisation conventions and 4) ‘wider development issues’. To support Action Aid in its participation in the debate about the future of EU level biofuels policy, it commissioned IEEP to provide an independent review of the evidence base on the link between policy driven EU biofuels demand and global agricultural prices in particular through reviewing a selection of modelling based studies. The next step in the causal chain from agricultural prices to food price impacts, i.e. prices to consumers on the ground, whilst highly important lies outside the scope of the study. In Section 5 we provide a brief discussion of the complexity of the relationship between global agricultural and food prices.
This report is structured as follows: Section 2 gives a brief overview of EU policy driving biofuel demand and sets out what is currently known about the likely scale and nature of this demand to 2020. Section 3 outlines the major concerns and uncertainties in the discussions on biofuel use and agricultural and food price impacts or, in other words, the ‘food versus fuel’ debate. To separately analyse the effects of biofuel policy we have to understand the wider context of the high volatility in agricultural commodity prices experienced in recent years. Section 4 gives an overview of some of the most important factors shaping agricultural commodity prices. Section 5 reviews the results of a selection of modelling based studies examining the impacts of EU and global biofuel policies on agricultural markets and prices. Section 6 spells out some implications that might be drawn for policy on the basis of the modelling studies. Section 7 provides a brief conclusion.

By: B. Kretschmer,C. Bowyer, A. Buckwell (IEEP)

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