The impact of biofuels on commodity prices |
Apr 2008
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The purpose of this note is to review the existing research on the impact of biofuels on commodity and food prices.
Over the last few years the rise in energy prices, the political tensions in some oil producing regions, the uncertainties surrounding the future availability and access to non-renewable resources and environmental concerns have made biofuels rise to the top of many countries’ policy agendas. The public policy debate about biofuels has become increasingly polarised. Some point towards the potential impact of biofuels on food security and it has been suggested that biofuels expansion could result in significant implications for world hunger.
The issues around the impact of biofuels on commodity prices are complex and it is important to try to separate the facts from speculation.
This note first summarises trends in biofuels production and trade. Second, it tries to assess the impact of biofuel demand and other drivers on current commodity prices. The following sections summarise available information on the impact of current high crop prices on food prices in developed and developing countries as well as the livestock sector. This is followed by a discussion of currently available projections of demand of food commodities for biofuels production and of the limitations of such projections. In the final section, a short overview of the Malthusian trap is provided.
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