8. The Global Bioenergy Expansion: How Large Are the Food−Fuel Trade-Offs?

We summarize a large set of recent simulations and policy analyses based on FAPRI’s world multimarket, partial-equilibrium models. We first quantify and project the emergence of biofuel markets in US and world agriculture for the coming decade. Then, we perturb the models with incremental shocks in US and world ethanol consumption in deviation from this projected emergence to assess their effects on world agricultural and food markets. Various food−biofuel trade-offs are quantified and examined. Increases in food prices are moderate for the US ethanol expansion and even smaller for the ethanol expansion outside the United States, which is based on sugarcane feedstock, and which has little feedback on other markets. With the US expansion, the high protection in the US ethanol market limits potential adjustments in the world ethanol markets and increases the demand for feedstock within the United States. Changes in US grain and oilseed market prices propagate to world markets, as the United States is a large exporter in these markets. With changes in world prices, land allocation in the rest of the world responds to the new relative prices as in the United States but with smaller magnitudes because price transmission to local markets is less than full.