Where does all the biofuel go? Fuel efficiency gains and its effects on global agricultural production

Abstract

Increasing biofuel production over the last decade and biofuel policies in Brazil, the European Union, and the United States have changed the global agricultural landscape in terms of land-use, commodity prices, and trade. Increasing fuel efficiency and electrification of the vehicle stock is projected to lower gasoline, diesel, and biofuel demand in the future. In this analysis, we quantify the effects of a 30% reduction in ethanol consumption in the U.S. and the European Union triggered by higher vehicle fleet fuel efficiency on global agricultural markets. Our results show decreases in global commodity prices by 1.9%–6.6% and a slight decrease in global cropland by 0.3%. Major changes occur in trade patterns with U.S. corn exports increasing by 30.3%. Global greenhouse gas emissions are lower due to the overall reduction in cropland. Gasoline and diesel consumption of the vehicle fleet is not changing rapidly but is a long-term process because vehicles are on average in operation for 10 or more years. Consequently, there are important long-term policy implications from changes in fuel efficiency requirements or ethanol blending limits that affect commodity prices, trade, and greenhouse gas emissions.