Biofuel production has increased drastically in recent years and is expected to continue doing so—by 2020, it is estimated that more than 110 million tons of oil equivalent will be generated by first generation biofuels. With this rapid growth, the role of biofuels in global energy and food markets has come under increasing scrutiny. In particular, the argument that the production of biofuels threatens world food supplies has heightened the sensitivity and controversy surrounding the subject.
As more countries enact biofuels mandates with the goal of reducing CO2 emissions, it is possible that such mandates will contribute global food price volatility and food insecurity. Mandatory levels of biofuel consumption legislated by governments means that in most cases, demand for biofuels is not influenced by higher agricultural prices. This puts enormous pressure on short-term supplies, leading to increased price volatility. Similarly, recent increased demand by the biofuel sector has contributed to lower levels of global grain reserves. A decrease in world reserves tends to increase speculative and panic behavior, again increasing the volatility of world food prices.
See all of IFPRI’s research on biofuels.
Watch Senior IFPRI Research Fellow David Laborde discuss the impact of biofuels mandates.