Biofuel Subsidies Are Terrible/Awesome

Here’s a pop quiz: Biofuels were A) largely responsible for the jump in food prices earlier this year, B) had very little to do with the food price sticker shock, or C) the effects of biofuels are unclear and complex. If you picked ‘C’ then you’re way too reasonable to write press releases for either of the two partisan trade groups that issued statements this week — one calling for the end of U.S. biofuels subsidies and the other lauding their economic benefits.

The Food Before Fuel organization, which includes companies that rely on food prices for their livelihood, like the Grocery Manufacturers Organization, the American Beverage Association and the American Meat Institute, say that subsidies for ethanol should be phased out.

The group’s proposal is based on a national study it commissioned from Ipsos Public Affairs, which found that when those surveyed were told of the USDA’s claim that corn ethanol was responsible for 10 percent of food price inflation, about half of them said they were less likely to support policies backing corn ethanol. And a little over half of those surveyed said that Congress should reduce or eliminate mandates and subsidies for corn ethanol.

Well, the problem with their study is that there is a lot of conflicting data out there. Some, like the President’s Council of Economic Advisers, have said that food price increases can thank biofuels for a 3 percent of bump, while a formerly secret, and then not-at-all secret, World Bank report claimed that biofuels were responsible for as much as three-fourths of the former jump in food prices. And from looking at the recent drop in oil prices, which coincided with a drop in food prices, some are speculating that the main contributor is the price of crude.

That’s what the Biotechnology Industry Organization (BIO) — a trade group that includes biofuel sellers — are saying:

American consumers should not be fooled by ongoing attempts to misplace blame for this year’s rise in food prices on biofuels. The evidence before consumers is clear: crop prices have fallen dramatically in the past few months as oil and gas prices have declined…This connection between oil and crop prices has been noted by agricultural economists throughout the year. Yet many policymakers continue to be distracted by a spurious food vs. fuel debate.

BIO says it thinks that the current federal mandates that call for the production of 21 billion gallons of advanced biofuels by 2022 is “a tremendous opportunity for jobs and growth,” that will “replace 4.1 percent of U.S. oil imports” and keep “$8.4 billion in the U.S. economy rather than sending it overseas.” Well, when you put it that way, that sounds pretty good.

It’s all rather depressing for someone trying to figure out how to effectively fight climate change. The data is so conflicting that we’re compelled to do the following: Call 50 people and tell them that biofuels are responsible for poverty, hunger, and high food prices and ask them if they back policies that support them. Call another 50 and tell them that biofuels can reduce carbon emissions and oil imports and have no effect on food prices, and ask if they would back policies that would support them. Take the results and line your cat’s litter box and you’re all set.


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