Roger Cohen at the NYT insists that biofuel is not the cause of food crisis, or at least not a major one if one wants to be accurate about magnitude, since it is still a small industry. Instead, he is convinced that what is causing it is protectionism.
Much larger trends are at work. They dwarf the still tiny biofuel industry (roughly a $40 billion annual business, or the equivalent of Exxon Mobil’s $40.6 billion profits in 2007). I refer to the rise of more than one-third of humanity in China and India, the disintegrating dollar and soaring oil prices.
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What sense does it make to have a surplus of environmentally friendly Brazilian sugar-based ethanol with a yield eight times higher than U.S. corn ethanol and zero impact on food prices being kept from an American market by a tariff of 54 cents on a gallon while Iowan corn ethanol gets a subsidy?
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The real scam lies in developed world protectionism and skewed subsidies, not the biofuel idea. [Bring on the Right Biofuels. Roger Cohen. NYT. April 25 2008]
Honestly, it is hard for me to say without looking at the data but I am leaning to his conclusion. Maybe, this warrants a short essay by itself.
Anyway, another go at the Doha Round, anybody?
One reply on “[1629] Of is biofuel the cause of the food crisis?”
Nobody is blaming biofuel per se for the rising food prices – just biofuel subsidies and mandates. Yes, reducing tariffs like the kind slapped on Brazillian ethanol would go a long way to increasing the use of biofuels, but it is unlikely such environmentally-friendly biofuel sources would be capable of supplying the biofuel market.
The problem is biofuel mandates. European petrol pumps need to comply with biofuel mandates, meaning they need the biofuel. They are going to be targeting the cheapest source of the biofuel component. Currently, it is from what could otherwise be food.
I’m skeptical that if markets were to open to environmentally-friendly sources of biofuel, it would solve the crowding out of the biofuel sector in the agriculture sector and escalating food prices. Alleviate – yes, but I’m not sure it would make a huge difference.