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The Economics of Biofuel Policies

10.1057/9781137414854 - The Economics of Biofuel Policies, Harry de Gorter, Dusan Drabik and David R. Just

Palgrave Studies in Agricultural Economics and Food Policy

Agricultural and food policy lies at the heart of many pressing societal issues today, and economic analysis occupies a privileged place in contemporary policy debates. The global food price crises of 2007–2008 and 2010–2011 underscored the mounting challenge of meeting rapidly increasing food demand in the face of increasingly scarce land and water resources. The twin scourges of poverty and hunger quickly resurfaced as high-level policy concerns, partly because of food price riots and mounting insurgencies fomented by contestation over rural resources. Meanwhile, agriculture’s heavy footprint on natural resources motivates heated environmental debates about climate change, water and land use, biodiversity conservation, and chemical pollution. Agricultural technological change, especially associated with the introduction of genetically modified organisms, also introduces unprecedented questions surrounding intellectual property rights and consumer preferences regarding credence (i.e., unobservable by consumers) characteristics. Similar new agricultural commodity consumer behavior issues have emerged around issues such as local foods, organic agriculture, and fair trade, even motivating broader social movements. Public health issues related to obesity, food safety, and zoonotic diseases such as avian or swine flu also have roots deep in agricultural and food policy. And, agriculture has become inextricably linked to energy policy through biofuels production. Meanwhile, the agricultural and food economy is changing rapidly throughout the world, marked by continued consolidation at both farm production and retail distribution levels, elongating value chains, expanding international trade, and growing reliance on immigrant labor and information and communications technologies. In summary, a vast range of topics of widespread popular and scholarly interest revolve around agricultural and food policy and the economics of those issues. This series features leading global experts writing accessible summaries of the best current economics and related research on topics of widespread interest to both scholarly and lay audiences. The Economics of Biofuel Policies: Impacts on Price Volatility in Grain and Oilseed Markets by Harry de Gorter, Dusan Drabik, and David R. Just

10.1057/9781137414854 - The Economics of Biofuel Policies, Harry de Gorter, Dusan Drabik and David R. Just

Copyright material from www.palgraveconnect.com - licensed to npg - PalgraveConnect - 2017-01-22

Series Editor: Christopher B. Barrett, Cornell University, USA.

Impacts on Price Volatility in Grain and Oilseed Markets

Harry de Gorter, Dusan Drabik, and David R. Just

10.1057/9781137414854 - The Economics of Biofuel Policies, Harry de Gorter, Dusan Drabik and David R. Just

Copyright material from www.palgraveconnect.com - licensed to npg - PalgraveConnect - 2017-01-22

The Economics of Biofuel Policies

the economics of biofuel policies

Copyright © Harry de Gorter, Dusan Drabik, and David R. Just, 2015. All rights reserved.

Where this book is distributed in the UK, Europe and the rest of the world, this is by Palgrave Macmillan, a division of Macmillan Publishers Limited, registered in England, company number 785998, of Houndmills, Basingstoke, Hampshire RG21 6XS. Palgrave Macmillan is the global academic imprint of the above companies and has companies and representatives throughout the world. Palgrave® and Macmillan® are registered trademarks in the United States, the United Kingdom, Europe and other countries. ISBN: 978–1–137–41484–7 Library of Congress Cataloging-in-Publication Data De Gorter, Harry, author.      The economics of biofuel policies : impacts on price volatility in grain and oilseed market / Harry de Gorter, Dusan Drabik, David R. Just.        pages cm.—(Palgrave studies in agricultural economics and food policy)      Includes bibliographical references and index.      ISBN 978–1–137–41484–7 (hardback : alk. paper)      1. Biomass energy—Prices—Government policy. 2. Biomass energy— Economic aspects. I. Drabik, Dusan, author. II. Just, David R., author. III. Title. IV. Series: Palgrave studies in agricultural economics and food policy. HD9502.5.B542D44 2015 338.1331—dc23

2014040145

A catalogue record of the book is available from the British Library. Design by Newgen Knowledge Works (P) Ltd., Chennai, India. First edition: April 2015 10  9  8  7  6  5  4  3  2  1

10.1057/9781137414854 - The Economics of Biofuel Policies, Harry de Gorter, Dusan Drabik and David R. Just

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First published in 2015 by PALGRAVE MACMILLAN® in the United States—­a division of St. Martin’s Press LLC, 175 Fifth Avenue, New York, NY 10010.

10.1057/9781137414854 - The Economics of Biofuel Policies, Harry de Gorter, Dusan Drabik and David R. Just

Copyright material from www.palgraveconnect.com - licensed to npg - PalgraveConnect - 2017-01-22

To my mom, the true intellectual in the family To my parents To my father who taught me to think and learn for myself

10.1057/9781137414854 - The Economics of Biofuel Policies, Harry de Gorter, Dusan Drabik and David R. Just

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List of Figures

ix

List of Tables

xi

List of Boxes

xiii

Foreword Christopher B. Barrett

xv

Preface

xix

Acknowledgments

xxvii

Abbreviations

xxix

Introduction

1

1. How Biofuel Policies Ushered in the New Era of High and Volatile Grain and Oilseed Prices

9

2. The Economics of Biofuel Policies: The Theory of Corn–Ethanol and Ethanol–Gasoline Price Links

23

3. Measures of Biofuel Policy Impact on Food Commodity Prices

47

4. A Forensic Analysis of the Food Commodity Price Boom of 2008

67

5. A Critique of the Literature Analyzing Biofuel Policy and the 2008 Food Commodity Price Boom

85

6. The Economics of Developing Country Policy Responses and Biofuel Policies

109

7. An Enhanced Exposition of the Corn–Ethanol–Energy Price Linkages and Implications for Time Series Analysis of Biofuel Policy Impacts

121

10.1057/9781137414854 - The Economics of Biofuel Policies, Harry de Gorter, Dusan Drabik and David R. Just

Copyright material from www.palgraveconnect.com - licensed to npg - PalgraveConnect - 2017-01-22

Contents

Contents

  8. The Impact of Biofuel Policies on Food Commodity Price Volatility

137

  9. The Economics of Biodiesel and the Central Role of the European Union’s Policies

151

10. The Complex Structure of the US Biofuel Mandate: A Handbook

171

11. The Economics of Brazil’s Sugarcane–Ethanol/Sugar Complex and Policies

191

12. The Interaction Effects Among Biofuels, Policies, and Countries

207

13. The Impact of Biofuel Policies in the Future: Some Concluding Remarks

221

Notes

233

Definitions

251

References

255

Data Sources

271

Index

273

10.1057/9781137414854 - The Economics of Biofuel Policies, Harry de Gorter, Dusan Drabik and David R. Just

Copyright material from www.palgraveconnect.com - licensed to npg - PalgraveConnect - 2017-01-22

viii