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Biofuels and Food Prices: Searching for the Causal Link
... However, contradictory studies suggest that increases in food prices may be the result of other factors. The slow uptake of biofuels would not sufficiently increase the competition of agricultural resources to directly affect food prices [8,[56][57][58][59]. Increasing oil prices [60], unpredictable weather patterns, demand from increasing populations, and most influentially, investment speculation [61,62] have been suggested to be more consequential to rising food prices. ...
Despite the initial environmental and supply benefits associated with conventional biofuels leading to substantial policy support, research has indicated that these benefits might have been overly optimistic. Negative externalities associated with food and resource allocation have also resulted in an increasing scepticism about the long-term potential of transitioning to biofuels. This review presents the economic benefits and costs surrounding conventional biofuels and suggests the need for further development of a third-generation feedstock based on algae. The article provides guidance on the potential for a policy framework for supporting microalgae as a source of biofuels given the numerous associated positive externalities.
Biofuels form part of a complex system comprising their production factors (usually agricultural commodities) and raw and retail fuels. Recently, it has been suggested that biofuels might affect or be affected by financial assets such as exchange rates, interest rates, stocks, and by other commodities. However, further extensive studies are required to investigate this. Here we present a combination of minimum spanning trees correlation filtration and wavelet analysis uncovering the ties in a wide portfolio of 33 commodities and relevant assets for biofuels between 2003 and 2016. We show that for Brazilian and US ethanol, their respective feedstocks lead biofuels prices, and not vice versa. This dynamic remains qualitatively unchanged when controlling for the influence of crude oil prices. In contrast, European biodiesel exhibits only moderate ties to its production factors. Other financial factors do not interact significantly with biofuel prices in general.
This paper connects the biofuels literature with the genetic modifications literature by considering the potential of genetic modifications for increasing the efficiency of the cellulosic biofuels production. This is done for one particular case through analyzing the effect of genetically modified corn adoption on the overall yields of corn for silage. Our econometric model confirms that the use of genetically modified corn with the inserted MON810 gene increases the overall corn biomass yield in the production and environmental conditions of the Central Europe, in particular in the Czech Republic.
The article summarizes the main findings of alternative lines of research on the relationship between the food and fuel markets and identifies gaps and quandaries that warrant further research. There has been a concern about the impacts of biofuel on food prices. Time-series econometrics have been used to investigate the dynamic linkages between food and fuel prices, suggesting that the relationship between the prices of fuels and food commodities depends on location, the food and fuels considered, the modeling specification, and whether the data is daily, weekly, or monthly. The ethanol market provides a strong link between corn and energy markets, and the price of ethanol increases as the prices of both corn and gasoline increase, with the price of corn being the dominant factor when it is relatively high. They found that the ethanol prices are positively related to both sugar and oil prices in equilibrium.
We analyze the impact of trade liberalization and removal of the federal tax credit in the United States on ethanol markets
using a multimarket international ethanol model. We find that U.S. trade barriers have been effective in protecting the ethanol
industry. Under current policy, there is separability of the U.S. ethanol market from world markets. With trade liberalization,
the ethanol market deepens, making it less susceptible to price volatility. The effect of trade liberalization extends beyond
ethanol markets, affecting agricultural markets. The results show that the impact of removal of the tax credit overrides the
impact of the tariff removal.