Biofuels and trade policies to mitigate food price shocks

Extreme weather events and large-scale conflicts lead to fluctuations in global food prices, intensifying food insecurity in developing countries. Between 2014 and 2021, the population affected by moderate or severe food insecurity increased by 10 percentage points. Following Russia’s aggression against Ukraine in 2022, global prices rose by 37% for maize and 69% for wheat. External shocks that lead to food price spikes are difficult to predict and even more difficult to prevent, making poor households vulnerable to food insecurity. This paper examines how biofuels and trade policies can be used to dampen the impact of global food price swings on domestic markets, especially in developing countries. Simulations using the OECD-FAO Aglink-Cosimo model show that reducing biofuel feedstock commodities by 20% dampens the price increase from an extreme weather event by 53-67% while a 50% cut fully offsets maize and wheat price increases. Multilateral co-ordination could help biofuel systems to contribute to global food security by acting as a reserve and releasing feedstocks during periods of scarcity.