Report summary – Biofuels impact on food supply
The Biofuel Directive, launched in 2003 by the EU enables production of ethanol through fermentation of grains and sugars, and biodiesel through transesterification of vegetable oils.
Biofuels is an important part of the EU aim of de-carbonizing transport. Concerns has however been raised that usage of food commodities for energy could increase food prices and negatively affect food security, especially in the developing world. This study is an assessment of several studies and concludes that U.S. maize ethanol demand was responsible for the increase in global maize prices during the crisis, and had a significant impact on linked markets, such as soybeans and wheat. The study also concludes that EU biodiesel demand played a significant role in increased vegetable oil prices and raised cereals prices although much lower than the impact in the U.S..
At present food commodity stocks have increased in comparison to the period of food crisis and the crude oil price has dropped meanwhile the global rate of food-based biofuel production has been much reduced. The biofuels impact on food price volatility has been significantly reduced in the last ten years. On the other hand climate change increases the regularity of extreme weather events and as a consequence poor harvests and in combination with long term increase of biofuel demand this will continue to add tension to food commodity markets.
According to the GLOBIOM study on indirect land use change for the European Commission, a maintained food-based biofuel demand at 7% of transport energy to 2030 could result in increased global vegetable oil prices by 8% higher. Since food consumption of poor households in the developing world is more sensitive to food commodity prices these poorer households will be disproportionately affected by food price increases caused by biofuel demand.