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Food for Fuel: The Effect of the U.S. Biofuel Mandate on Poverty in India

Ujjayant Chakravorty (), Marie-Hélène Hubert and Beyza Ural Marchand ()

Economics Working Paper Archive (University of Rennes 1 & University of Caen) from Center for Research in Economics and Management (CREM), University of Rennes 1, University of Caen and CNRS

Abstract: Many countries have adopted energy policies that promote biofuels as a substitute for gasoline in transportation. For instance, more than 40% of U.S. grain is now used for energy and this share is expected to rise under the current Renewable Fuels Mandate. This paper examines the distributional effects of this energy mandate on India using micro-level survey data. First, we use a model with endogenous land use to estimate the effect of the biofuel policy on the world price of selected food commodities - rice, wheat, sugar and meat and dairy, which together provide almost 70% of Indian food calories. Their world prices are predicted to increase between 5% and 11%. Uncertainty in model parameters is incorporated using Monte Carlo techniques that generate standard errors on these price predictions. The effect of these price increases on household welfare is then estimated using data on consumption and wage incomes. We estimate pass-through elasticities from time-series data then compute the negative consumption effects and positive wage impacts under perfect and imperfect pass-through from world to domestic prices. Under perfect pass-through, the mandate leads to a reduction in rural poverty by about 39 million people, and an increase in the number of urban poor by 4 million people. Under imperfect price pass-through, both rural and urban poverty increase by a total of 8 million people. Our study suggests that the US biofuel mandate may lead to modest increase in food prices, but have sizable global welfare impacts, which may differ across rural and urban households.

Keywords: Biofuels; Food Prices; HouseholdWelfare; Renewable Fuel Standards; Poverty (search for similar items in EconPapers)
JEL-codes: D31 O12 Q24 Q42 (search for similar items in EconPapers)
Date: 2015-01
New Economics Papers: this item is included in nep-agr and nep-ene
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Related works:
Journal Article: Food for fuel: The effect of the US biofuel mandate on poverty in India (2019) Downloads
Working Paper: Food for fuel: The effect of the US biofuel mandate on poverty in India (2019) Downloads
Working Paper: Food for Fuel: The Effect of the US Biofuel Mandate on Poverty in India (2018) Downloads
Working Paper: Food for fuel: The effect of the US biofuel mandate on poverty in India (2018) Downloads
Working Paper: Food for fuel: The effect of the US biofuel mandate on poverty in India (2018) Downloads
Working Paper: Food for Fuel: The Effect of the U.S. Biofuel Mandate on Poverty in India (2015) Downloads
Working Paper: Food for Fuel: The Effect of the U.S. Biofuel Mandate on Poverty in India (2015) Downloads
Working Paper: Food for Fuel: The Effect of the US Biofuel Mandate on Poverty in India (2012) Downloads
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