There's been a lot of debate about the role of biofuels in driving up food prices. What is the Bank's position on this?
There is no question that the impact of biofuels on the surge in food prices is significant. The Bank has consistently said that grain and oil-seed based biofuels are a significant part of the problem, and as such need to be addressed. But it is important to distinguish between different biofuels. Corn-based and oil seed-based biofuels have clearly contributed to the higher prices. The use of corn for ethanol has consumed more than 75 percent of the increase in global corn production over the past three years, essentially taking food off of tables. Cellulosic biofuels, which use non-food residual biomass or non-food crops, do not compete directly with food production and tend to have less of an environmental impact. The choice does not have to be food or fuel.
The Bank is calling for action in the US and Europe to ease subsidies, mandates and tariffs benefiting grain and oilseed-based biofuels. The Bank is also asking policymakers to consider “safety valves”—such as cutting import tariffs—that ease existing policies when prices are high. There is also a call to advance the production of so called second-generation cellulosic biofuels to help put fuel in gas tanks without impacting food production.
A World Bank working paper suggests that biofuels are responsible for pushing food prices up by 75 percent. Just how large is the contribution of biofuels to rising food prices?
A draft research paper was circulated widely to elicit different economic analyses and views from other aid agencies (including, for example, the FAO and USDA). Estimates on the impact of biofuels on the food crisis estimates vary widely. Researchers do agree though that the impact of biofuels on food prices is significant.
Why was the calculation dropped in the report that you put out at Spring Meetings?
The working paper was used as background research for a much broader report on policy options, which was disclosed at the Spring Meetings. There is an ongoing discussion within the Bank on the methodology and estimates. As a result, the Bank chose not to use a specific figure in the Spring Meetings and G8 papers. The paper has been shared with internal and external experts for peer review.
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