The Impact of Biofuel Demand on Agricultural Commodity Prices: A Systematic Review

Book chapter, 2015

© 2016 John Wiley & Sons, Ltd. All rights reserved.The impact on agricultural commodity prices is central to the debate surrounding biofuel policies and targets, that of indirect land-use changes (iLUCs) caused by increased biofuel demand and leading to emissions that offset or possibly negate the climate benefits of biofuels. These land-use changes are mediated through changes in market prices for biofuel feedstocks. This chapter systematically reviews studies that have tried to assess quantitatively the impact of increased bioenergy demand on agricultural commodity prices, and use a theoretical framework to explore the reasons for differing results. The review covers 121 studies using different methods (primarily economic equilibrium models) for exploring the relationship between bioenergy demand and agricultural commodity prices. The chapter also illustrates the 'ripple effects' increased demand for corn for ethanol production has on prices for other agricultural commodities, resulting mainly from competition for land on the supply side and substitution on the demand side.