Greenvoice

The large land requirement of biofuels means that their production will affect commodity prices and agricultural markets, causing indirect impacts on land use and crop management.

Leading world bodies such as the OECD, FAO and United Nations Energy have warned that there could be serious negative impacts on food prices resulting from governments' support of biofuels (1).

Although, to date, the role of biofuels in determining overall prices of crop commodities has been small, the large scale of production required to meet government targets across the EU and North America will soon see this situation change.

Environmental implications

As well as the social impact of these prices rises - in terms of increasing the cost of food - there are negative implications for the environment, too. Higher crop prices give producers an incentive to intensify and expand their production. Extensive farming systems and less utilized land (such as scrub, fallow and set-aside in the EU) are likely to be pressed into intensive arable production. In the EU, distorted market signals given by biofuel subsidies and incentives undermine the environmental advantages that have been gained through decoupling EU subsidies from commodity production.

These indirect impacts of biofuel policies are being seen worldwide. There is already evidence to suggest that the increase in soya prices has been driven at least in part by the switch by US farmers to growing corn for biofuel production (subsidized by government). This could be linked to a renewed increase in deforestation rates in South America as a result of soya expansion.

(1) UN 2007; Dornbosch and Steenblik OECD 2007; OECD/FAO 2007; Kojima et al, 2007

Created by: Rene Jorgensen 5 months ago