Biofuels and Poverty

Abstract

Several studies have looked at the aggregate economic effects of biofuels (IFPRI 2008; FAO 2008; Ivanic and Martin 2008; Mitchell 2008; Keyzer et al 2008; Hochman et al. 2011; Timilsina et al. 2012), but only few research have focused on analyzing the income distribution and poverty effects of higher increased biofuel at the global level. deHoyos and Medvedev (2011) examine the poverty effects of higher biofuel production using a global CGE model, a model without an explicit representation of biofuel sectors and land-use. Runge and Senauer (2007) examine the impacts of biofuel promoting policies on food prices and poverty and find that policies that promote ethanol have adverse impact on food prices and poverty especially in developing countries. However, the results of some existing studies have reported opposite results. For example, using a computable general equilibrium (CGE) model for Mozambique, Arndt et al. (2008) find that higher sugar cane production generates favorable effects on growth and distribution; the effects on rent to land and wages are relatively higher if production is through smallholders than through large plantations. A study conducted for Mali using CGE and micro-simulation models, Boccanfuso et al. (2013) find that if the expansion of food crops for biofuel production does not compete for land use in agricultural production, agriculture as a whole improves slightly, but if it competes for land with other crops, then agriculture slightly declines. The distributional effects in Mali indicate that urban households who are net consumers of food loss with the expansion of biofuel production because of higher prices of staple food, but the rural households would gain. Hertel (2009) also finds that increased biofuel production results in higher factor returns in developing countries. Habib-Mintz (2010) finds that higher jatropha-based biofuel in Tanzania reduces poverty and food insecurity if strong regulatory frameworks for land, investment management, and rural development are in place.