Adam Smith Institute

A government-sponsored report on biofuel policy has concluded that the UK’s current biofuels policy could plunge an additional 10.7 million Indian people into poverty, in addition to hundreds of thousands of people throughout Africa. Biofuel policies drive up demand and prices for food staples, and their environmental credentials are far from pristine. Besides distorting the market for food, government-induced demand for biofuels has led to an increase in the destruction of the rainforest, potentially offsetting most of the positive environmental impacts.  In response to the report, the government plans to slow its planned expansion into biofuels, at least "until controls are in place to prevent food prices from rising."  The plan, it seems, is simply to counteract one government intervention that had unexpectedly bad consequences with another.

Placing controls to artificially keep food prices low will only further distort the market in some of the most crucial commodities for people around the world. Subsidizing farmers in one part of the world will only put others out of business, and price ceilings will only restrict the supply. At the same time, we cannot push for biofuel policies just because they sound nice and clean if the actual impact is starvation and no tangible benefits for real people. Maybe if governments stopped interfering in the market, creating demand that would not otherwise exist for the sake of policies with questionable environmental outcomes, those 10.7 billion people would be a lot better off.

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