Environmental Economics Perspective on Biofuel, Agriculture, and the Environment.

Abstract for: Symposium at the American Society of Agronomy Meeting ENVIRONMENTAL ECONOMICS PERSPECTIVE ON BIOFUEL, AGRICULTURE, AND THE ENVIRONMENT David Zilberman Professor of Agricultural and Resource Economics University of California at Berkeley Biofuel is driven by growing demand for liquid fuel resulting from economic growth in developing countries and concern about climate change. In principle, biofuels are renewable energy sources; however, they may lead to significant emission of greenhouse gases (GHG) through conversion of sugars, starch, or celluloids to liquid fuels and in the production or generation of inputs in the production of biofuel. In particular, production of agricultural chemicals and conversion of land to biofuel production may have negative environmental effect. An efficient mechanism to addressing the GHG effect of biofuel is the introduction of a global GHG emission or sequestration payment so that producers pay for any social harm or benefits that they may cause. Another side effect of biofuels is the increase in food prices they may cause. Our analysis suggests that even at the current low level of biofuel use, they reduce energy cost by about 4%, but may contribute to a 15% increase in the price of food. Thus, society is facing the challenge of enhancing productivity both in the production of biofuel as well as traditional crops, so that agriculture will be a source of both food and fuel in a way that will meet environmental and food affordability objectives. Second-generation biofuels that can convert celluloids to fuels and increase fuel production per unit of land as well as adoption of improved varieties will be crucial in introducing biofuel in a sustainable and affordable manner. Therefore, investment in second-generation biofuel that will enhance their productivity, adaptability to locations with lower quality land, and cost of production, combined with research and regulatory changes that will enhance the introduction and adoption of new crops varieties and other technologies that can increase productivity of traditional crops, are of crucial importance in meeting the challenges of providing affordable fuel and food and maintaining a safe environment.