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Potential Future Impacts of Increased Biofuels Use

Govinda Timilsina's picture

This entry is part of a series of posts written by members of the Environment and Energy team of the World Bank's Research Group on economic and policy issues involving energy and climate change mitigation.

Ongoing controversy has surrounded production of crop-based biofuels, ostensibly for the purposes of increase renewable energy use and reducing carbon dioxide (CO2) emissions that causes global warming.   To illustrate, a recent report on price volatility in food and agricultural markets prepared by numerous international organizations, including the World Bank, at the request of G20 Governments recommended elimination of current national policies that subsidize or mandate biofuels production or consumption. Some international non-governmental organizations, such as Action Aid strongly supported the recommendation, while some other organizations, such as Renewable Fuel Association opposed it. The June meeting of G20 agriculture ministers did not make any decision in favor or against biofuels, deciding instead to have further analysis.

Watch out for minimal food stocks! But don’t assume the worst has come…

Merrell Tuck-Primdahl's picture

Food price spikes happen when stocks are low and when unpredictable events occur. That was the main message of Professor Brian Wright at his Development Economics Lecture at the World Bank on March 11.

Wright, who is Professor & Chair Department of Agricultural & Resource Economics, has long followed the markets for storable commodities. He is also an expert in invention incentives, intellectual property rights, the economics of agricultural research and development, and the economics of conservation and innovation of genetic resources.

Today’s food and fuel concerns do not constitute the ‘perfect storm’, Wright said. However, he warned that if several important crop-producing countries have a bad season in the coming year, and if the demand for biofuels rises faster than the rate of production of major grains, we could be in real trouble.

What’s the best fix for this situation? Wright argues it’s keeping food supplies cheap and investing in the Consultative Group for International Agricultural Research (CGIAR), since it will be super-seeds, drought resilient crops, and innovations to boost yields that will turn things around. He also emphasized that, during a crisis, it’s essential to put minimum food needs above animal feed and fuel uses. 

Watch the video interview with Wright below.