Long-run impact of biofuels on food prices

Abstract

About 40 percent of US corn is now used to produce biofuels, which are used as substitutes for gasoline in transportation. In this paper, we use a Ricardian model with differential land quality to show that world food prices could rise by about 32 percent by 2022. About half of this increase is from the biofuel mandate and the rest is a result of demand-side effects in the form of population growth and income-induced changes in dietary preferences, from cereals to meat and dairy products. However, aggregate world carbon emissions would increase, because of significant land conversion to farming and leakage from lower oil prices.