Energy Subsidies

Biofuels: Starving Guatemalans to Feed Cars


The Sunday New York Times has a terrific article, "As Biofuel Demand Grows, So Do Guatemala's Hunger Pangs," detailing the unintended consequences of U.S. and European Union biofuels subsidies and mandates on poor people in Guatemala. Some excerpts:

Recent laws in the United States and Europe that mandate the increasing use of biofuel in cars have had far-flung ripple effects, economists say, as land once devoted to growing food for humans is now sometimes more profitably used for churning out vehicle fuel.

In a globalized world, the expansion of the biofuels industry has contributed to spikes in food prices and a shortage of land for food-based agriculture in poor corners of Asia, Africa and Latin America because the raw material is grown wherever it is cheapest….

In 2011, corn prices would have been 17 percent lower if the United States did not subsidize and give incentives for biofuel production with its renewable fuel policies, according to an analysis by Bruce A. Babcock, an agricultural economist at Iowa State University. The World Bank has suggested that biofuel mandates in the developed world should be adjusted when food is short or prices are inordinately high.

Instead of "adjusting" mandates, let's just eliminate them entirely. Of course, Reason has long been opposed to subsidies and mandates for the production of biofuels. (Reason is, in principle, against distorting markets by any subsidies, period.)

Back in 2007, i reported in my column, "Feed SUVs and Starve People?," that Federal subsidies and mandates were increasing the prices of grain making it harder for poor people to feed their families. In particular, bioethanol subsidies and mandates boost the price corn which is used to feed livestock. In addition, subsidies and mandates push up the price of other agricultural products because…

… farmers choose to plant less of them. For example, the U.S. Department of Agriculture projects that farmers will boost corn acreage from 80 million in 2006 to 94 million acres this year. Most of the increased acreage devoted to corn will come from reduced soybean acreage. Fewer soybeans means translates into higher prices.

Futhermore, an analysis by the International Food Policy Research Institute (IFPRI) projected by 2020…

…that corn prices will go up 23 percent, wheat, 16 percent, cassava, 54 percent, and sugar cane, 43 percent. If there is no cellulosic ethanol breakthrough and crop productivity increases at the current rate, the price of corn would increase 41 percent, wheat, 30 percent, cassava, 135 percent, and sugar cane, 66 percent.

Another way to look at the issue is that…

…it takes 450 pounds of corn to make enough ethanol to fill a 25-gallon gas tank. Four hundred and fifty pounds of corn supplies enough calories to feed a person for one year. The USDA projects that in 2010 the ethanol industry will consume 2.6 billion bushels of corn. A bushel weighs 56 pounds, so a quick calculation yields the result that 2.6 billion bushels of corn could supply enough calories to feed nearly 325 million people for a year.

Producing hordes of hungry people is no way to protect the natural environment.