Report: Biofuels Policy Completely Backfires

The Guardian tells us:

Biofuels have forced global food prices up by 75% - far more than previously estimated - according to a confidential World Bank report... The figure emphatically contradicts the US government's claims that plant-derived fuels contribute less than 3% to food-price rises.

..."Political leaders seem intent on suppressing and ignoring the strong evidence that biofuels are a major factor in recent food price rises," said Robert Bailey, policy adviser at Oxfam. "It is imperative that we have the full picture. While politicians concentrate on keeping industry lobbies happy, people in poor countries cannot afford enough to eat."

Rising food prices have pushed 100m people worldwide below the poverty line, estimates the World Bank, and have sparked riots from Bangladesh to Egypt. Government ministers here have described higher food and fuel prices as "the first real economic crisis of globalisation".

President Bush has linked higher food prices to higher demand from India and China, but the leaked World Bank study disputes that: "Rapid income growth in developing countries has not led to large increases in global grain consumption and was not a major factor responsible for the large price increases."

... it argues that the EU and US drive for biofuels has had by far the biggest impact on food supply and prices. Since April, all petrol and diesel in Britain has had to include 2.5% from biofuels. The EU has been considering raising that target to 10% by 2020, but is faced with mounting evidence that that will only push food prices higher.

"Without the increase in biofuels, global wheat and maize stocks would not have declined appreciably and price increases due to other factors would have been moderate," says the report. The basket of food prices examined in the study rose by 140% between 2002 and this February. The report estimates that higher energy and fertiliser prices accounted for an increase of only 15%, while biofuels have been responsible for a 75% jump over that period.

If only we had experts to explain to politicians and the public the effects of a policy like Ethanol subsidies. Otherwise this could have been avoided and Americans, Europeans and the worlds poor would be better off. Sad, but what I will find most interesting is when and what goverments will start to reverse themselves if any.

(HT: Tyler Cowen)