Harry de Gorter, Dusan Drabik, and David R. Just
Biofuels policies have a large impact on food-grain commodity prices, first and foremost by linking biofuel prices to feedstock prices. The multiplier effect of higher biofuel prices on feedstock prices is shown to be very large (about 4) and the biofuel price premiums due to biofuel policies are also very high (above the tax credits) compared to what the biofuel price would have been otherwise. This has important implications for future energy, environmental, and agricultural policies, and for food-grain commodity prices.
Key words: Biofuels, mandates, subsidies, environmental regulations, energy.