Author’s note: This article provides a short overview of the more prominent research, media articles and organisations that have been involved in the debate about increased biofuel production and rising food prices – the ‘food vs. fuel’ debate. As literature on the subject is extensive and growing, it does not claim to be comprehensive, nor to evaluate the accuracy of the research papers and statements to which it refers.

From 2006 to 2008, the world saw new price highs for a number of food commodities, with prices for grains like maize rising substantially, despite record crops, and many poor communities no longer able to afford their basic needs. When an internal World Bank report was leaked to the British newspaper The Guardian, worldwide attention turned to the role that biofuels might be playing in the crisis. It argued that increased biofuel production – in many countries, driven by generous subsidy programmes – had resulted in food commodities being diverted for use as biofuel feedstocks, such that food markets were now in direct competition with energy markets. The heated arguments over its findings have come to be known as the ‘food vs. fuel’ debate.

The study, written by Dr. Donald Mitchell, Lead Economist at the World Bank’s Development Prospects Group, put forward the idea that expanding biofuel markets had led farmers to produce crops for the biofuels sector at the expense of local and international food markets. The study principally identified biofuels as the most important driver of food price volatility, responsible for 75% of the recent price increases, although recognizing that other factors were also important, including weather-related production shortfalls, market speculation and economic growth in developing countries leading to increased grain consumption.

Much debate and analysis followed, with studies scrutinizing Mitchell’s methodology and findings. Among the critics who emerged, economist John M. Urbanchuk, who had previously prepared research papers and position statements for industry associations representing the biofuels sector, was one of the most vocal. He expressed a number of concerns about the methodology by which sharp global food price rises had been attributed principally to biofuel production, arguing that the weak U.S. dollar and the direct and indirect effect of high petroleum prices had not been sufficiently taken into account.

At the same time, evidence that biofuels were contributing to rising food prices was emerging from a number of research institutions. The Organisation for Economic Co-operation and Development (OECD), whose own research on the issue, published just one month after Mitchell’s paper was leaked, established the same basic relationship between increased biofuel production and higher food prices for some grains, such as wheat and maize.

From its beginnings, the debate has been strikingly emotive, with many organisations adopting hard-line, polar-opposite positions, and the media, intergovernmental organisations, non-governmental organisations, and politicians all being drawn in. Even before Mitchell’s paper drew attention to the issue, Jean Ziegler, the United Nations Special Rapporteur on the Right to Food, had spoken out against the increasing practice of turning crops into biofuel as "a crime against humanity", which left millions of poor people hungry.

In response, representatives of the biofuels industry have largely taken a hard-line stance in refuting such assertions, blaming food price increases on the interplay of various factors not linked to biofuels. Common arguments include that the 2008 peaks were driven by speculation, as investors shifted from share markets to commodity markets, and that retail companies in the United States had failed to pass on savings after prices had begun to fall. Citing the mainstream media’s coverage of these competing theories, the United States National Corn Growers Association argued that the relationship between biofuels and commodity prices was a ‘case closed’. Politicians who had been promoting the ethanol industry also entered into the debate. Senator Charles E. Grassley, for example, wrote to the Grocery Manufacturers Association, referring to the debate as a ‘smear campaign’ and criticising the organisation for having linked price increases of grocery market food to increased ethanol production. He implied that it was in fact a strategy to “increase the bottom line of grocery manufacturers”.

The debate has also become caught up in the growing movement against the continued provision of government subsidies to first-generation biofuels. Just months before the release of Mitchell’s paper, Joachim von Braun, Director General of the International Food Policy Research Institute (IFPRI), had called on governments to revoke “biofuel subsidies and excessive blending quotas”, recommending that biofuel production should be frozen at current levels and a moratorium enacted on the use of grains and oil seeds for biofuels in order to free up commodities for use as food. The Global Subsidies Initiative was also instrumental in drawing attention to the large costs and unintended impacts of many biofuel subsidies, with a series of reports estimating their size and effects in various countries around the world.

Time has not brought about a resolution to the dispute, though extensive literature has been written on the subject and is growing rapidly. In 2010, a follow-up study by World Bank economist John Baffes and European Commission economist Tassos Haniotis argued that the role played by biofuels in the record 2006-2008 commodity-price highs was not as large as originally thought. Their findings suggested that biofuels had indeed contributed to increasing prices, but only as one of a number of factors. This was portrayed by industry representatives as a change in the World Bank’s position, though both the earlier paper by Mitchell and the subsequent one by Baffes and Haniotis were products of individual researchers and did not represent any institutional stance.

With prices spiking again in 2011, the issue has resurfaced in the mainstream media. In February, aWashington Post opinion piece by leading biofuels analyst Tim Searchinger called for an increased recognition of the role of biofuels in determining world food prices. In response to conclusions like those reached by Baffes and Haniotis, he contended that analysis to date had been based on false assumptions about world markets and that it was not possible “to segregate the precise role of biofuels from weather and other factors”, as the stress that biofuel production placed on markets would only serve to multiply the impact of other factors, such as Russia’s recent drought or flooding in Australia.

The ongoing political crises in the Middle East have also revived media interest, with Time Magazineexploring the role that biofuel-related food-commodity price rises might have played in the fall of Egypt’s political regime, as well as the implication of price rises for countries recovering from the global economic crisis. According to the article, the U.S. ethanol industry is again fighting back against suggestions that biofuels might be responsible, with Tom Buis, CEO of Growth Energy, protesting that a "highly well-funded and highly orchestrated campaign of misinformation" was overplaying the impact of biofuels on food prices. The animated on-line discussion that subsequently took place between members of the public, industry representatives and researchers is illustrative of the many divergent opinions that still exist on the relative benefits of biofuels.

As a whole, the debate has been characterized by a lack of clarity between different actors about what issues are actually important and should be considered for further discussion and analysis. There are also many examples of different groups talking past each other on important issues concerning which food commodities are really important and how much they are affected by biofuel production. For example, representatives of the U.S. biofuels industry often concentrate their focus on food prices listed on the U.S. retail food price index, despite the fact that the index is a poor indicator of changes in the price of primary commodities.

Another key issue is the technical difficulty of estimating the relative weight played by different, interlinked factors that affect world prices. The relative importance researchers place on biofuels as the cause of food price volatility continues to vary depending on the assumptions used in modeling exercises.

The stakes are also high. The biofuels industry has invested significant amounts of money in developing biofuel infrastructure and technologies which would suffer if government subsidies and mandates were reduced or stopped – the likely result of establishing a causal link between biofuel production and increasing prices for staple food products. This tension explains the lack of constructive dialogue that has taken place between the biofuel industry and other stakeholders in order to assess the scope of the problem.

What is clear is that the debate will continue to intensify as governments increase biofuel blending mandates and biofuel production levels rise: the International Energy Agency forecasts that biofuel support and production will grow significantly in the next 15 years and many European governments, such as the United Kingdom, are currently considering an increase in their mandates. An increasing global population, continued commodity market speculation, and weather-related production short-falls will also continue to contribute towards volatile global food markets and put pressure on an already-strained agricultural sector. Given that biofuel production and volatile food markets are likely to continue to co-exist, developing a better understanding of how biofuels affect food markets is of critical importance.

The “food versus fuel” debate will be discussed in a forthcoming publication by the Global Subsidies Initiative (GSI) called “The Political Economy of Biofuel Subsidies” (working title). The report will provide an analysis of the interplay between economic and political objectives affecting biofuel subsidy policies.