U.S. Biofuel Expansion Cost Developing Countries $6.6 Billion: Tufts

by Marlo Lewis on October 12, 2012

in Features

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U.S. biofuel expansion has cost developing countries $6.6 billion in higher food costs, estimates Tufts University economist Timothy A. Wise in Fueling the Food Crisis, a report published by ActionAid. A 10-minute video interview with Wise about his research is available here.

The 2007 Renewable Fuel Standard (RFS), established by the Energy Independence and Security Act (EISA), exerts long-term upward pressure on grain prices by diverting an ever-growing quantity of corn from food and feed to auto fuel. This is great for corn farmers but not good for U.S. consumers and harmful to millions of people in developing countries, many of whom live in extreme poverty.

“Commodity prices are a small percentage of the retail price of food in the US” because “we heavily process our food,” notes Wise. In contrast, in developing countries, ”commodity prices are a bigger percentage of the retail price, in part because people buy whole foods more often than processed foods.” Even small commodity price increases ”can have a big impact on local market prices in developing countries.”

As it happens, during the same period that U.S. ethanol production and corn prices increased, many developing countries became more dependent on grain imports to feed their people and livestock. The recent drought-induced spike in U.S. corn prices is “just the latest episode in a devastating, protracted global food crisis that has pushed millions into poverty and hunger around the globe over the past 6 years,” argues the ActionAid report.

To assess the impact of biofuel expansion on developing countries, Wise used a conservative estimate of ethanol’s contribution to corn prices and multiplied that by the quantity of U.S. corn imported by those countries. A summary of key findings follows:

  • Net Food Importing Developing Countries, among the most vulnerable to food price increases, incurred ethanol-related costs of $2.1 billion.
  • Thirteen developing countries incurred per-capita impacts greater than Mexico’s (where tortilla prices have risen 69% since 2005), and they include a wide spectrum of large and small countries from all regions of the developing world – Colombia, Malaysia, Botswana, Syria.
  • North African countries saw large impacts, with $1.4 billion in ethanol-related import costs, led by Egypt ($679 million). Other countries experiencing social unrest – Tunisia, Libya, Syria, Iran, Yemen – also suffered high impacts, highlighting the link between rising food prices and political instability.
  • Central American countries felt impacts nearly those of Mexico, scaled to population. The region has seen its dependence on food imports rise over the last 20 years, and corn imports cost an extra $368 million from 2006-11 due to U.S. ethanol expansion. Guatemala saw the largest impacts, with $91 million in related costs. In 2010-11 alone, U.S. biofuel expansion cost Guatemalans $28 million – an amount nearly equivalent to U.S. food aid to Guatemala over the same period.
  • Latin American partners to trade agreements with the United States saw high costs, as import-dependence grows. The six-year ethanol-related cost of corn imports was $2.4 billion for Latin American nations involved in NAFTA, CAFTA-DR, and the bilateral agreements with Panama, Colombia, Peru, and Chile.
James Rust October 12, 2012 at 7:36 pm

This report outlines the disaster of the U. S. Renewable Fuel Mandate administered by the EPA. I recommend viewing the TV interview of the Tuft report writer Dr. Timothy Wise that is given by the link at the end of the first paragraph of this article.

Ethanol from corn has been impractical from its inception. Many studies show it requires more energy to produce ethanol than is contained in the product. In addition, it is reported that 1600 gallons of water are required to produce one gallon of ethanol. When you multiply that number by the 2011 production of 12 billion gallons of ethanol, you have 20 trillion gallons of water tied up in producing that one product. This is more water than used by everyone living in the United States for domestic home use–washing, eating, and bathroom needs. This type of waste is not tolerable in drought situations.

After the 2012 election, this monster needs to be addressed by the citizens of the country who should demand repeal of the 2007 Energy Independence and Security Act. Present biofuels are questionable from a practical and economic standpoint; in particular with the United States vast quantities of transportation fuels in oil and natural gas. Ethanol from corn bears on being criminal.

James H. Rust, Professor of nuclear engineering

James Rust October 12, 2012 at 8:35 pm

In January 2011, Peter Brabeck, chairman of the $100 billion Swiss food giant
Nestle, addressed the World Economic Forum in Davos, Switzerland and stated
using food for biofuels was “absolute madness

Larry Cramer October 13, 2012 at 6:50 am

Yes and even worse the highly subsidized developed world farming community competes in the same market as the developing world’s agricultural industry, lowering their sales and profits. Do they really care about poverty in the 3rd world?? Import tariffs do exactly the same by excluding poor farmers in the developing world from potentially lucrative markets in the EU and USA. Shame on the taxpayers who continue to fund this madness.

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