We’ve written a lot about ethanol here at KP, including a post on the excellent Runge & Senauer Foreign Affairs article, which remains a recommended read (and which I assigned to my freshman seminar this fall).
Now the Economist is on the story; their cover this week has a striking photo and a title of “The End of Cheap Food”. They highlight the various reasons why, after two decades of falling food prices (and commensurate falling hunger worldwide, and commensurate obesity in some places …), food prices are rising again, and are unlikely to fall in the foreseeable future. In particular, they note the role that U.S. biofuels policy plays in driving these high food prices:
But the rise in prices is also the self-inflicted result of America’s reckless ethanol subsidies. This year biofuels will take a third of America’s (record) maize harvest. That affects food markets directly: fill up an SUV’s fuel tank with ethanol and you have used enough maize to feed a person for a year. And it affects them indirectly, as farmers switch to maize from other crops. The 30m tonnes of extra maize going to ethanol this year amounts to half the fall in the world’s overall grain stocks.
Dearer food has the capacity to do enormous good and enormous harm. It will hurt urban consumers, especially in poor countries, by increasing the price of what is already the most expensive item in their household budgets. It will benefit farmers and agricultural communities by increasing the rewards of their labour; in many poor rural places it will boost the most important source of jobs and economic growth.
But it will also make the food that those farmers and poor rural residents eat more expensive, so then the question in estimating their net welfare effect is the magnitude of each of these two offsetting consequences.
Ron Bailey’s recent Reason column on the same subject hints at this concern; note the calorie decrease he cites for Africa:
Another big concern is that fuel is now competing with food. A new study from AEI/Brookings Joint Center points out that in 2005, the ethanol program consumed about 15% of U.S. corn production but displaced less than 2% of gasoline use. The International Food Policy Research Institute (IFPRI) just issued a report projecting that if countries simply pursue their current biofuel expansion plans the global price of corn will increase by 26 percent and the price for oilseeds will rise by 18 percent. If biofuel production doubles over current projections, the price of corn rises by 72 percent and oilseeds by 44 percent. The IFPRI report notes that “The increase in crop prices resulting from expanded biofuel production is also accompanied by a net decrease in the availability of and access to food.” Even in North America, access to food calories drops by between 2 to almost 5 percent depending on which biofuel production scenario plays out. In food stressed sub-Saharan Africa, available food calories drop by between 4 and 8 percent.
And all of this for a set of technologies that we aren’t even sure provide net environmental benefits. I’m afraid I share Ron’s cynicism:
Biofuels are commercially questionable, do not materially advance energy independence, and may not even help reduce greenhouse gas emissions. Naturally, Congress wants to mandate them. Why? Well, Iowa caucus voters win; Archer Daniels Midland wins; and special interest contributors to political campaigns win. Bioethanol is just a subsidy boondoggle masquerading as a solution to America’s energy problems. But it does help get some politicians elected.