A discussion of biofuel policies, as seen from Iowa

Biofuels have been presented as the solution to the ills of petroleum: locally produced, renewable, and sometimes cleaner. Hence they have been encouraged by many governments, but some advocates of biofuels now show some remorse. As they are produced from good used for food, biofuels may be responsible for the worldwide increase in food prices. What are then appropriate policies with respect to biofuels?

GianCarlo Moschini, Jingbo Cui and Harvey Lapan, all from Iowa and thus from a state that has been the major beneficiary of biofuel subsidies, write a survey of the Economics of biofuels. They seem to be quite worried about the limits to the expansion of biofuels. Indeed, blending ratios cannot be increased without major technological changes on both the production and user sides, which highlights that path dependence in technological choices is important, and always thinking about the individual explosion engine as a limits the horizon of possibilities. But this is more thinking about the Business of biofuels than the Economics of biofuels. The latter requires much more discussion about whether biofuel subsidies are the best option to reduce carbon emissions (they are not, and carbon taxes are much, much more efficient in this), whether there would be better ways to harness energy from the sun, and how competition with food production (which is much less subsidized, if at all) makes essential food too expensive for the poor. I am happy that even in Iowa, the Economics of biofuels can take precedence over the Business of biofuels.