National Academies Press: OpenBook

A Framework for Assessing Effects of the Food System (2015)

Chapter: ANNEX 2: U.S. Biofuels Policy

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Suggested Citation:"ANNEX 2: U.S. Biofuels Policy." Institute of Medicine and National Research Council. 2015. A Framework for Assessing Effects of the Food System. Washington, DC: The National Academies Press. doi: 10.17226/18846.
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ANNEX 2: U.S. BIOFUELS POLICY

Biofuels Policy:
A Problem That Operates in the Context of Energy Policy But Has Ripple Effects in the Food System

U.S. biofuels policy arose in response to shifting concerns about energy independence, agricultural surpluses, and climate change. Before 2005, when the Renewable Fuel Standard (a production mandate for biofuels), import tariffs, and other measures were enacted into law, little prospective analysis was conducted on how the new policies would affect the food system, much less the environment or health. The goal was to stimulate the production and use of biofuels under the assumption that its use would decrease dependence on foreign oil, result in reduced greenhouse gas emissions, and increase rural incomes (Tyner, 2008).

It did not take long after the new policies went into effect, however, for economists and others to recognize that the linkages between energy markets and the food system created by the policies had unintended consequences. These included increased costs for food producers, upward pressure on globally traded commodity prices, and a public (and a private) outlay of subsidies for ethanol production that has been significantly greater than anticipated.

As corn is a food and feed staple, biofuels policy has had unintended effects on U.S. agricultural production by altering the mix of crops planted. This also has had unintended effects on the global food system, which seeks a predictable, and increasing, supply of food. Moreover, the energy and environmental footprint of corn production calls into question its suitability as a renewable substitute for gasoline. These trade-offs weaken the justification of the current policy on the basis of U.S. energy security, particularly as reliance on imported oil has been reduced recently by increased domestic energy production.

Although some studies have suggested that perennial grasses would provide environmental and energy benefits over corn as an energy feedstock, the production of such crops and their conversion to gasoline-compatible fuel on a commercial scale remain elusive. Consequently, fuel blenders are unable to use cellulosic and other “advanced” biofuels at the levels mandated by the Renewable Fuel Standard. Moreover, the most available biofuel—corn ethanol—has reached a blending threshold that cannot be

Suggested Citation:"ANNEX 2: U.S. Biofuels Policy." Institute of Medicine and National Research Council. 2015. A Framework for Assessing Effects of the Food System. Washington, DC: The National Academies Press. doi: 10.17226/18846.
×

overcome without a greatly expanded flex-fuel vehicle fleet and widespread fueling infrastructure for E85 (85 percent ethanol).

U.S. biofuels policy has been criticized both for falling short of its intended goals and for its unintended effects on the environment and food system, but would alternative policies have fewer shortcomings? The potential for the framework to be used to analyze trade-offs and unintended effects in the pursuit of energy and environmental security is illustrated in this annex exploring how the Renewable Fuel Standard might be compared to an alternate policy of eliminating subsidies for fossil fuels. The elimination of such subsidies worldwide is a goal to which numerous international bodies and their member countries, including the United States, have committed, but not yet fulfilled. This policy alternative has potential impacts on U.S. domestic agricultural production and the global food system, but the ways in which those impacts are manifested are likely to be different from the Renewable Fuel Standard, as are its health, environmental, social, and economic implications. Such a comparison would shed light on the merits and shortcomings of different ways to pursue the same goals.

Identify the Problem

As described in the committee’s framework, the first step of an assessment is to identify the problem. For this example, the problem is how to achieve the dual goals of reducing transportation-related greenhouse gas (GHG) emissions and decreasing U.S. reliance on foreign oil while avoiding unintended health, environmental, social, and economic consequences, including those related to the food system, in the process.

Transportation is a major component of the U.S. economy and is fundamental to the mobility and livelihood of Americans, who collectively drove nearly 3 trillion miles in 2013 (DOT, 2014). However, as transportation also consumes 70 percent of imported oil (EIA, 2014) and is responsible for 28 percent of all GHG emissions in the United States (EPA, 2012), cleaner sources of transportation fuel under domestic control are needed. Biofuels produced from domestic crop feedstocks represent one such alternative fuel. Corn, soybeans, and their products have historically been a significant part of the U.S. food system, accounting for nearly half of all acreage in crops. U.S. biofuels policy grew out of mounting corn and soybean surpluses and declining supplies of fossil fuels in the late 1970s, at a time when GHG emissions were scarcely a concern. In the face of

Suggested Citation:"ANNEX 2: U.S. Biofuels Policy." Institute of Medicine and National Research Council. 2015. A Framework for Assessing Effects of the Food System. Washington, DC: The National Academies Press. doi: 10.17226/18846.
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recurring grain and oilseed surpluses, the United States saw an opportunity to improve its energy independence, and over time it developed extensive biofuels promotion policies that were built around blending mandates, subsidies, and import protections. Between 1980 and 2005, corn-based ethanol use as fuel grew steadily, aided by forgiveness of the excise tax on gasoline and little foreign competition due to a specific-rate tariff on ethyl alcohol imports of 54 cents per gallon, enacted in 1978 (Koplow, 2009). In 1988, “flex fuel” vehicles (FFVs) capable of running on 85 percent ethanol (E85) were granted credits against manufacturers’ Corporate Average Fuel Efficiency (CAFE) requirements, but fewer than 10 percent of FFVs actually used E85, undermining the intent of the credits (MacKenzie et al., 2005). The 2004 enactment of the Volumetric Ethanol Excise Tax Credit changed the gas excise tax exemption into a tax credit for ethanol producers, set initially at 51 cents per gallon (Koplow, 2009). Corn-based ethanol also got a boost from state and local financing credits and mandates and from the banning of methyl-tertiary-butyl ether, a groundwater contaminant, as an oxygenate in reformulated gasoline1 markets. Under the impetus of these incentives, corn-based ethanol usage had reached around 4 to 5 billion gallons per year by 2005 (EIA, 2012).

Food system effects from this level of usage were generally modest. The co-products of corn ethanol production, known as distillers dry grains and solubles (DDGS), became a larger portion of beef and dairy cattle rations. The overall effects on animal production economics were not large in this early period, but some employment and marketing shifts occurred locally. Net employment gains were modest and sometimes temporary, as many plants failed or operated intermittently in this period. More dramatic effects began in 2004 as oil prices started climbing and in 2005 with the passage of the Energy Policy Act (Tyner, 2008). The Act introduced mandated ethanol use under a Renewable Fuel Standard (RFS1), which was to reach 7.5 billion gallons by 2012. In December 2007, Congress passed the Energy Independence and Security Act (EISA), which doubled the corn-based ethanol mandate to 15 billion gallons by 2015 (RFS2) (NRC, 2011) (see Figure S-1 in the summary of the NRC, 2011, report) and created new, non-grain-based (“advanced”) biofuels mandates to reach a combined total of 35 billion gallons of ethanol equivalent and 1 billion gallons of biodiesel by 2022. The 2008 Farm Bill added a $1.01 per gallon subsidy for blending cellulosic biofuels (recently extended retroactively through 2014) and created the Biomass Crop Assistance Program (renewed in the 2014 Farm Bill) to incentivize biomass production for fuel. Currently, the blending of

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1 The reformulated gasoline program was mandated by Congress in the 1990 Clean Air Act amendments and the program started in 1995 with the goal of reducing smog-forming and toxic pollutants in the air.

Suggested Citation:"ANNEX 2: U.S. Biofuels Policy." Institute of Medicine and National Research Council. 2015. A Framework for Assessing Effects of the Food System. Washington, DC: The National Academies Press. doi: 10.17226/18846.
×

ethanol at 10 percent (E10) no longer accommodates the RFS2 mandate for higher total amounts of ethanol use. To circumvent this “blending wall,” the Environmental Protection Agency (EPA) approved 15 percent ethanol (E15) as a blending rate suitable for use in vehicles built since 2001. Some car manufacturers, however, have been unwilling to maintain engine warranties if E15 is used, and few E15 pumps have been installed because fueling stations would have to monitor their pumps to prevent the fuel from being used in older vehicles and in small engines, such as lawn mowers, for which the higher ethanol blend is not approved. Also, E15 cannot be used in the summer in most regions because its evaporative emissions exceed air quality thresholds. As noted earlier, E85 can be used by FFVs, but E85 has limited availability nationally.

In the meantime, EPA has reduced the advanced biofuels mandates each year. At a proposed 17 million gallons for 2014, the mandate is just 1 percent of the 1.7 billion gallons called for by 2014 in EISA 2007. Cellulosic ethanol is not yet produced in significant volumes, for technological as well as economic reasons. To achieve the currently mandated levels of 16.0 billion gallons of cellulosic ethanol (10.7 billion gasoline equivalent) by 2022 would require an investment of $50 billion in capital costs and sustained oil prices of somewhere between $111 and $190 per barrel, depending on the cellulosic material produced, to make its price competitive with gasoline (NRC, 2011).

U.S. biofuels policy operates in the context of an energy and environmental policy, but it has ripple effects on the food system because the primary feedstocks for biofuels are also a source of feed and food. In 2007-2008, a number of simultaneous circumstances affecting crop commodity markets collectively provoked a dramatic spike in food prices globally, the brunt of which was borne by countries dependent on those commodities as primary food sources. Although analyses differ about the contribution of biofuels to the price increase, the use of prime farmland to produce biofuel feedstocks has subsequently been scrutinized critically in light of mounting global food security concerns (Oladosu and Msangi, 2013). The diversion of 40 percent of the U.S. corn crop for ethanol production decreases the supply of corn and other grains on world commodity markets, stimulating grain producers internationally to increase their production. If that increase involves the conversion of pastures or forest into cropland, the GHG emissions that result undermine the environmental underpinnings of U.S. biofuels policy (Searchinger et al., 2008). The mandate has also caused U.S. farmers to shift agricultural production into intensive corn production, which relies heavily on fertilizers and pesticides that are potential sources of pollution. These unintended effects (among others discussed later in this annex) place the dual policy objectives of the Renewable Fuel Standard in conflict with each other.

Suggested Citation:"ANNEX 2: U.S. Biofuels Policy." Institute of Medicine and National Research Council. 2015. A Framework for Assessing Effects of the Food System. Washington, DC: The National Academies Press. doi: 10.17226/18846.
×

Define the Scope of the Problem

Once the problem has been identified, the next step is to frame the scope of the assessment. This is done by characterizing the boundaries, components, processes, actors, and linkages involved in evaluating the intended and unintended effects of current biofuels policies relative to an alternative policy configuration. The alternative chosen for comparison may involve additional or different actors and linkages than are associated with the Renewable Fuel Standard. Thus, a discussion about scope has to take place in conjunction with the selection of the appropriate comparator.

Identify the Scenarios

For this example, the problem is whether, in light of the cost of public incentives involved in promoting biofuels and the difficulty in meeting blending mandates, alternative policies could be implemented to achieve the goals of meeting domestic transportation energy needs, reducing GHG emissions, and improving energy security with better consequences (or fewer unintended consequences) for the food system, health, the environment, and society. Although different options for promoting fuels production have been explored, such as biofuels subsidies that embody both a natural security component (based on their energy value relative to gasoline) and an environmental component (based on their reduced GHG footprint relative to gasoline) (Chen et al., 2014; Tyner, 2008), a policy specifically targeting biofuels is not necessarily the only way to approach these goals.

One hypothetical alternative to achieving the same goals might be to eliminate existing public subsidies for domestic fossil fuel production. Fossil fuel subsidies (tax credits and other incentives) in the United States stood at approximately $6 billion in 2011 (OECD, 2012), which is small relative to the value of oil in the U.S. economy, so the impact of unilaterally eliminating subsidies might have only a tiny effect, if any, on the behavior of the fuel market. Because this policy alternative seems to fall short in producing any of the intended effects that an assessment would measure in comparison to the Renewable Fuel Standard, it might be an inappropriate alternative. If, however, such a policy were accompanied by a carbon tax (a tax on the emissions content of fuels), the cost of fossil fuels would rise significantly, creating incentives to move toward fuels with fewer emissions. Moreover, the tax would create a revenue stream that could be used, in part, to invest in energy alternatives (Palmer et al., 2012).

Another policy alternative is to eliminate fossil fuel subsidies globally. Worldwide subsidies of fossil fuel production (to incentivize exploration) and consumption (keeping prices artificially low) amounted to $550 billion in 2013, according to the International Energy Agency, which concluded

Suggested Citation:"ANNEX 2: U.S. Biofuels Policy." Institute of Medicine and National Research Council. 2015. A Framework for Assessing Effects of the Food System. Washington, DC: The National Academies Press. doi: 10.17226/18846.
×

that the subsidies contribute to wasteful consumption, reduce the competitiveness of cleaner sources of energy, and ultimately contribute to climate change. At a global level, the elimination of subsidies could have a significant effect on fuel markets.

Although it can be reasoned that it is more balanced to limit the scope of analysis to the comparison of one domestic policy to another, it can also be argued that such a limitation places an artificial constraint on the comparison. The two policy alternatives—one, a mandate for specific market outcomes, and the other, an unencumbering of market forces—already represent very different approaches to achieving the same goal. Moreover, based on the growing implications of climate change, achieving reductions in domestic fossil fuel subsidies might be more realistic in the context of international agreements for multilateral reductions in subsidies. The phase-out and elimination of fossil fuel subsidies was called for by President Obama in 2009 at a meeting of the member countries of the G20, which collectively agreed to pursue the elimination of subsidies by 2020, a goal recently reaffirmed in 2014. The phase-out of subsidies worldwide has been called for by international organizations such as the Asia-Pacific Economic Cooperation countries, the International Monetary Fund (IMF, 2013), numerous policy and economic think tanks, and environmental groups, among others.

Whichever scope is chosen for the analysis, the primary actors include fossil fuel and biofuel producers, consumers of fuels in both the transportation sector (including for food transport) and other energy-intensive economic sectors, particularly electricity generation. The analyses also must focus on agricultural producers, suppliers of energy-intensive agricultural inputs (e.g., fertilizer), food processors, and food consumers.

By definition, the removal of subsidies for fossil fuel production and consumption should initially result in higher prices for those fuels, which will set in motion a cascade of responses worldwide. As prices are affected by supply and demand, the responses of oil and gas producers globally and the reaction of energy-consuming sectors of the global economy will both influence energy prices. The outcome of economic models that predict how fossil fuel prices affect supply and demand and the feedbacks that are likely to occur also depends on the pace at which subsidies for fossil fuels would be eliminated by governments worldwide, and on policies related to climate change (e.g., a carbon tax or regulations on pollutants) and the promotion of renewable energy alternatives (electric and fuel), or increasing fuel efficiency (CAFE) standards. Like those policies, an anticipated effect of eliminating fossil fuel subsidies would be to reduce fossil fuel consumption, thus reducing fossil fuel dependence.

The strong linkage between energy costs and food production will result in feedbacks to each sector that also must be estimated in the analy-

Suggested Citation:"ANNEX 2: U.S. Biofuels Policy." Institute of Medicine and National Research Council. 2015. A Framework for Assessing Effects of the Food System. Washington, DC: The National Academies Press. doi: 10.17226/18846.
×

sis. Just as biofuels subsidies have had an influence on what crops farmers decide to grow, high fossil fuel prices could alter both crop planting and agronomic practice decisions by agricultural producers. The modeling of the agricultural responses would itself be complex and subject to feedback from energy prices. For example, biofuels made with feedstocks (e.g., perennial grasses) that are less costly to grow than are more energy-intensive crops might become more economically competitive with fossil fuels and receive expanded investment and use. Electric vehicles, a fast-growing segment of the transportation fleet, might become more or less competitive, as electricity generation responds to the removal of subsidies. Just as biofuel mandates have influenced the price of feed and food, higher fossil fuel prices also might increase costs across the value chain of the food system. Like users of energy, patterns of food demand by consumers also may change as they experience price increases in food.

Examine Effects in All Domains

To meet the requirements of the framework, the assessment must not only evaluate impacts on the use of biofuels and fossil fuels as energy sources but also account simultaneously for their direct and indirect health, environmental, social, and economic consequences. A recent review paper on the effects of biofuels found that relatively few publications used interdisciplinary approaches, integrated more than one dimension, or captured the interactions and feedbacks that exist among different effects (Ridley et al., 2012). The authors added that a dearth of research exists on human health, biodiversity, and trade topic areas. Nevertheless, many publications have focused on one or more dimensions of the impact of biofuels and biofuels policy that could be synthesized and augmented with additional studies. With respect to fossil fuels, an existing literature on economic, environmental, and public health effects (NRC, 2010; ORNL and RFF, 1992-1998; Ottinger et al., 1990) could serve as a starting point for exploring the potential effects of the elimination of subsidies for fossil fuels. It is, of course, conceivable that new effects will emerge as different energy-using sectors of the economy respond.

The sections that follow look at the most studied types of effects, which would be relevant in comparing any set of alternatives to the current policy. As will be discussed, impacts in one domain (e.g., environment) are likely to have consequences in others (e.g., health).

Environmental Effects

The comparative analysis should be mindful that environmental effects of either policy alternative might be both positive and negative, occur on

Suggested Citation:"ANNEX 2: U.S. Biofuels Policy." Institute of Medicine and National Research Council. 2015. A Framework for Assessing Effects of the Food System. Washington, DC: The National Academies Press. doi: 10.17226/18846.
×

many different scales, and take place directly and indirectly. Since 2007, when the Renewable Fuel Standard expanded mandates for blending biofuels into gasoline in the United States, numerous studies have addressed a range of actual and potential environmental effects of biofuels and, by association, policy mandates for biofuels. As policies have stimulated producers in the Midwest to place more land into corn production (Malcolm and Aillery, 2009), higher nitrate levels in the Mississippi River have been observed (Sprague et al., 2011), along with hypoxia in the Gulf of Mexico associated with nitrogen loads in its watershed (Scavia and Liu, 2009). The levels of protein in DDGs now widely fed to food animals were found to lead to greater nitrogen excretion in manure, increasing environmental risks (Stallings, 2009), although its use for animal feed also offsets GHG emissions elsewhere in the biofuels life cycle (Bremer at al., 2010).

In its first triennial report on biofuels policy to Congress in 2011, EPA found that negative effects resulting from the policy were mainly due to the environmental impacts of corn production. The agency added, however, that other feedstocks could have either negative or positive effects, depending on which feedstock is used, processing practices, and land use (EPA, 2011).

Additional studies have explored environmental effects from biofuel feedstock production (and use) on biodiversity, insects, birds, and vegetation (Fletcher et al., 2011; Landis and Werling, 2010; Meehan et al., 2012; Robertson et al., 2011); pesticide use (Schiesari and Grillitsch, 2011); air quality and emissions (EPA, 2011; Liaquat et al., 2010; Wagstrom and Hill, 2012); and water demand, water quality, and soil loss (EPA, 2011; Hill et al., 2006; Khanal et al., 2013).

The environmental effects (positive and negative) of biofuels policy scenarios also have been modeled at different scales, from subregional (Egbendewe-Mondzozo et al., 2013) and regional (EPA, 2011; Georgescu et al., 2009) to global (Frank et al., 2013; Taheripour et al., 2010). The literature around projections of GHG emissions associated with market-mediated effects of biofuels is growing. These include life cycle analyses that incorporate land-use change (Ahlgren and Di Lucia, 2014; Chen et al., 2014; Hertel et al., 2010a,b; NRC, 2011; Searchinger et al., 2008) and so-called rebound effects, in which biofuels ostensibly spur greater fossil fuel use because of their downward influence on oil prices (Smeets et al., 2014).

In contrast to the many environmental aspects that have been examined related to biofuel policy, fewer evaluations have been conducted on the full range of potential environmental impacts of reducing or eliminating fossil fuel subsidies. A review of six major studies exploring the potential environmental and other impacts of reforming fossil fuel subsidies found that reductions in GHGs and carbon dioxide (CO2) emissions were the most commonly modeled impacts. The studies (published from 1992 through

Suggested Citation:"ANNEX 2: U.S. Biofuels Policy." Institute of Medicine and National Research Council. 2015. A Framework for Assessing Effects of the Food System. Washington, DC: The National Academies Press. doi: 10.17226/18846.
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2009) predicted reductions in carbon dioxide that ranged from 1.1 percent in 2010 to 18 percent by 2050 (Ellis, 2010). More recent estimates place reductions of CO2 at 10 percent by 2050 (IEA, 2012). Undoubtedly, a range of other local and regional environmental effects of reduced production and consumption of fossil fuels would need to be calculated. Furthermore, as noted earlier, price effects may reduce consumption and influence greater investments in alternative energy sources, or they may catalyze changes in agricultural practices that would have environmental impacts.

Social and Economic Effects

Between 2000 and 2010, the number of ethanol plants in operation in the United States grew from 50 to more than 200 (RFA, 2014). A recent analysis of job growth between 2000 and 2010 in a 12-state region (comparing counties with an ethanol plant to similar counties without a plant) found that the biofuels industry was responsible for increasing employment by 0.9 percent, creating 82 new jobs on average (Brown et al., 2013). In the early 2000s, many of the plants were constructed by local cooperatives, but ownership of the plants has increasingly diversified to include absentee investors, including multinational companies. Somewhat surprisingly, a study of local reactions to ethanol plant ownership suggests that many communities have more support for absentee ownership than for local ownership, with one explanation being that the “deeper pockets” of large corporate owners would allow the plant to withstand the volatility of the ethanol market. Community expectations of the potential traffic, water, air, and other effects of an ethanol plant did not vary based on ownership (Bain et al., 2012).

Today, about 40 percent of U.S. corn production is used for biofuels (27 percent after accounting for DDGs recycled into the animal feed system). Although corn production has expanded in response to ethanol demand, corn prices have, on average, doubled since 2005, when the price hovered near $2.00 per bushel (Schnepf and Yacobucci, 2013). In the United States, biofuels’ effects on food prices are limited because the value of corn in food products is small relative to labor, processing, and retailing costs. However, corn is a major component of the cost of producing animal protein. Under some conditions, animal producers can use more forages to feed cattle to reduce the direct impact of feed prices, but others, such as producers of poultry products, are more affected by fluctuating feed costs, which are seen in higher food prices by U.S. consumers many months later. In developing countries, corn often is a staple food, so price changes directly affect household budgets. Estimates of the impact of biofuels production on food prices globally are affected by the time frame examined. Over the long term, corn prices are shaped by production costs as well as demand

Suggested Citation:"ANNEX 2: U.S. Biofuels Policy." Institute of Medicine and National Research Council. 2015. A Framework for Assessing Effects of the Food System. Washington, DC: The National Academies Press. doi: 10.17226/18846.
×

trends. For example, a 2008 review of 25 studies and reports concluded that higher commodity prices were the result of the depreciation of the U.S. dollar, increasing global demand for agricultural commodities amid sluggish agricultural productivity growth and rapid growth in the production of first generation biofuels (Abbott et al., 2008). These results tended to be associated with long-term analytical approaches, which cite factors such as rising energy costs, a weak dollar, fiscal expansion, and investment fund activity (Babcock, 2011; Babcock and Fabiosa, 2011; Baffes and Haniotis, 2010).

In contrast, research on short-term effects reached very different conclusions, finding that increased biofuels production was the chief driver of grain price spikes (like those in 2008 and 2012), accounting for up to 75 percent of the increases. These analyses (Wise, 2012) also predicted that production will continue to drive prices up as a consequence of escalating usage mandates, with no effective “relief valves,” such as the normal ability of high corn prices to reduce demand and ration short supplies across users (Koplow, 2009).

Although the diversion of land to produce biofuels instead of food is especially a concern in developing countries that are less able to absorb higher commodity prices, data from the Food and Agriculture Organization indicates that since 2006, more than 40 million hectares of land have been added to the global cropland base, most of that in developing countries. That means that higher commodity prices may have helped agricultural producers in those countries while harming urban consumers, who face higher food prices (Tyner, 2013).

The social and economic impacts of eliminating fossil fuel subsidies globally would be more far-reaching than U.S. biofuels policy, affecting all industrial sectors, including food production. Socioeconomic consequences are likely to be distributed unevenly, given differences in the types of subsidies in place worldwide. Developed countries like the United States typically use production subsidies, which tend to be direct transfers to fossil fuel producers. According to some analyses, eliminating U.S. production subsidies alone would return $41.4 billion in revenues to the federal government over the next 10 years (Aldy, 2013), with minimal impacts on prices for U.S. consumers (Allaire and Brown, 2009). By contrast, developing countries employ consumer subsidies, which keep prices for fuel artificially low with the goal of alleviating poverty, increasing access to energy, and encouraging growth in local economic sectors. Sharp price increases for essential goods have been associated with large-scale civil unrest, regardless of their specific causes, so eliminating consumption subsidies poses risks. Some studies suggest that incomes in poorer countries decrease when subsidies are removed (Coady et al., 2006), but others suggest that these effects can be mitigated by providing assistance to the poor with savings from expenditure subsidies. A review of empirical and modeling studies of economic effects of

Suggested Citation:"ANNEX 2: U.S. Biofuels Policy." Institute of Medicine and National Research Council. 2015. A Framework for Assessing Effects of the Food System. Washington, DC: The National Academies Press. doi: 10.17226/18846.
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fossil-fuel subsidy reform suggest positive overall effects, with increases of up to 0.7 percent in gross domestic product in both developed and developing countries by 2050 (Ellis, 2010).

Health Effects

Scovronick and Wilkinson (2014) identify four major pathways through which biofuels affect health: occupational hazards; water and soil pollution; air pollution (both in biofuels production and use); and food prices. The authors suggest that the biggest health impacts at the population level would be those due to improved air quality (at least in urban environments) and those due to higher food prices (among food-insecure populations). Another study estimated the combined costs of climate change and health effects associated with GHGs and air pollution from the production and use of corn ethanol relative to gasoline and cellulosic biofuels, finding the highest costs associated with corn ethanol. The predicted effects shifted geographically depending on fuel production systems (Hill et al., 2009).

A wide-ranging study monetized the negative externalities of energy production and use. It focused particularly on health damages such as premature mortality and morbidity (chronic bronchitis and asthma) due to particulate matter in air pollution, but it also looked at losses to crops, timber, and recreation. The study estimated the costs in 2005 at approximately $56 billion, with health constituting “the vast majority” of damages (NRC, 2010). The methodologies used by the National Research Council study could be useful in predicting the public health benefits of reduced fossil fuel use, if that occurred, due to subsidy reforms.

Other Issues

Resilience and energy security are two related issues that cut across the domains of health, the environment, and the economy. Resilience, “the ability to prepare and plan for, absorb, recover from, and more successfully adapt to adverse events” (The National Academies, 2012, p. 1) has been used mainly with respect to natural disaster preparedness, but it could apply to examining the risks of disruption of the food and fuel systems, particularly in the biofuel context, where climate, disease, and pests play a role in determining supply. U.S. energy security is related to resilience, as it is viewed as a potential buffer to extreme political or other shocks to international fuel markets. Energy security was a specific rationale for developing the Renewable Fuel Standard. The elimination of U.S. production subsidies would likely reduce domestic oil and gas production, but experts debate by how much (Allaire and Brown, 2009). The extent to which either policy alternative affects both energy security and food security would be

Suggested Citation:"ANNEX 2: U.S. Biofuels Policy." Institute of Medicine and National Research Council. 2015. A Framework for Assessing Effects of the Food System. Washington, DC: The National Academies Press. doi: 10.17226/18846.
×

an important feature to compare, not only in terms of quantity but also with respect to the distribution of effects.

Conduct the Analysis

In this step of an assessment, data, metrics, and tools are used to examine the likely effects associated with the alternative scenarios. An analysis of how different policy configurations perturb the nexus between the global food and energy systems would be a complex and broad undertaking. Nevertheless, assembling and synthesizing the existing literature would provide a good initial picture of the distinctions between the two policies that could be sufficient to make broad comparisons of their potential and actual effects on the dimensions of interest and provide perspective on how they might operate in combination with other policies (e.g., supporting research into alternative energy production) to meet mutually desirable social goals. A first step would be to create a map of the pathways and connections through which policy has impacts on the dimensions of interest.

Comparing trade-offs inherent in different policy approaches in the context of food production, energy use, and the environment is an active area of research (Sarica and Tyner, 2013), and models that integrate economic activity with some environmental parameters (see Box 7-5) and health (NRC, 2010) have been developed. These efforts are important building blocks for a synthesis of information across the dimensions of interest. Because empirical evidence to account for some effects is not available (e.g., see Annex 4 on Nitrogen), estimates based on surrogate measures will need to be used, and the limits of that accounting must be acknowledged. Because of the necessary reliance on models for predicting policy outcomes, the greatest challenge to interpreting the synthesis of information gathered for this analysis would be to identify and describe the assumptions used by experts in quantifying effects, particularly where experts and models disagree, and to acknowledge gaps, uncertainties, and trade-offs.

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Suggested Citation:"ANNEX 2: U.S. Biofuels Policy." Institute of Medicine and National Research Council. 2015. A Framework for Assessing Effects of the Food System. Washington, DC: The National Academies Press. doi: 10.17226/18846.
×

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How we produce and consume food has a bigger impact on Americans' well-being than any other human activity. The food industry is the largest sector of our economy; food touches everything from our health to the environment, climate change, economic inequality, and the federal budget. From the earliest developments of agriculture, a major goal has been to attain sufficient foods that provide the energy and the nutrients needed for a healthy, active life. Over time, food production, processing, marketing, and consumption have evolved and become highly complex. The challenges of improving the food system in the 21st century will require systemic approaches that take full account of social, economic, ecological, and evolutionary factors. Policy or business interventions involving a segment of the food system often have consequences beyond the original issue the intervention was meant to address.

A Framework for Assessing Effects of the Food System develops an analytical framework for assessing effects associated with the ways in which food is grown, processed, distributed, marketed, retailed, and consumed in the United States. The framework will allow users to recognize effects across the full food system, consider all domains and dimensions of effects, account for systems dynamics and complexities, and choose appropriate methods for analysis. This report provides example applications of the framework based on complex questions that are currently under debate: consumption of a healthy and safe diet, food security, animal welfare, and preserving the environment and its resources.

A Framework for Assessing Effects of the Food System describes the U.S. food system and provides a brief history of its evolution into the current system. This report identifies some of the real and potential implications of the current system in terms of its health, environmental, and socioeconomic effects along with a sense for the complexities of the system, potential metrics, and some of the data needs that are required to assess the effects. The overview of the food system and the framework described in this report will be an essential resource for decision makers, researchers, and others to examine the possible impacts of alternative policies or agricultural or food processing practices.

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