11 Nov 2013

Biofuels versus food?

MJ wrote from Brazil, asking for advice on his thesis, i.e.
I'd like to calculate the harm resulting from competition between biofuels and food commodities for water, and come up with an answer of which one of them (bioethanol & biodiesel) should take place for the next 20 years to interfere less with food crops production.
Here's my advice:
I think you will want to discuss the differences between a political and economic allocation of water among biofuels and food.

A market price for water would push water to where it's "valued" -- even as those values change over time (seasons, but even days). A political allocation -- often resulting from a careful calculation of costs and benefits that may be wrong from day one (miscalculation) and will definitely be wrong after a few months -- may result in water that's "stuck" in the wrong crop [this and this].

The tricky part is including the price of externalities -- carbon reduction from biofuels as well as local pollutions -- in those market signals. That's not easy to do, but it may be easier than using values from an academic study.

Oh, and the market price for water should reflect its scarcity, of course :)

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