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Brooks Wilson's Economics Blog: Biofuels and Government Subsidies

Thursday, April 7, 2011

Biofuels and Government Subsidies

The United States is not the only country that mandates that food crops be converted to fuel.  These mandates are a factor driving up food costs (“Biofuel rush driving up global food prices”). 
Each year, an ever larger portion of the world's crops - cassava and corn, sugar and palm oil - is being diverted for biofuels as developed countries pass laws mandating greater use of nonfossil fuels and as emerging powerhouses like China seek new sources of energy to keep their cars and industries running. Cassava is a relatively new entrant in the biofuel stream.

But with food prices rising sharply in recent months, many experts are calling on countries to scale back their headlong rush into green fuel development, arguing that the combination of ambitious biofuel targets and mediocre harvests of some crucial crops is contributing to high prices, hunger and political instability.

This year, the United Nations Food and Agriculture Organization reported that its index of food prices was the highest in its more than 20 years of existence. Prices rose 15% from October to January alone, potentially "throwing an additional 44 million people in low- and middle-income countries into poverty," the World Bank said.
These renewable sources of fuel were to make oil importing nations less dependent on Middle Eastern oil.  Maybe we are somewhat less dependent, but not sufficiently independent to free us from military entanglements. 

The article concludes

While no one is suggesting that countries abandon biofuels, Dubois and other food experts suggest that they should revise their policies so that rigid fuel mandates can be suspended when food stocks get low or prices become too high.
My blogging voice is small, but I would be honored to be the first to suggest that governments eliminate all programs that subsidize or mandate the use of crops for fuel.


  1. I read once that the United States contains 4% of the global population, yet consumes over 25% of its natural resources. I know that many people believe that the world is over populated but I truly believe with the proper distribution of food and natural resources, developing nations would have a better chance of economic, social and political normalcy.

    Obviously it is not simple matter of redistribution of resources, as we learned about in Chapter 12. However, it seems to me that a headlong persute of an environmentally safe and political entanglement free energy source can, and is causing more problems than it is solving. Not to mention the vast amounts of capitol and domestic political resource used to perpetuate the subsidization of these programs.

  2. I like the idea of making appropriate changes to be able to suspend the mandates in time of need. It is very concerning how many more families will fall below the poverty line. I, myself, have been making different choices at the grocery store, and not all for the better - I have been scaling back on meats and higher cost items to be able to purchase the same quantity. I feel bad for families that are doing the same and their children's nutrition will now suffer from it. However, I think families can also scale back on luxuries such as cable TV, etc. It's all in our choices and the "trade offs" we face with what we are presented with.

  3. Morgan Heeke10/7/11 11:52 AM

    We sometimes forget how much of an impact we leave on the rest of the world. By overconsuming natural resources here in America, in a third world country we are having more people die for our greedy needs. If we take the staple food of a nation to support our fuel needs, thats just wrong. We have so many luxuries and all we want is more. If we put more people under the poverty line just so we can have slightly lower costs, we need to reevaluate what we want for our country.