Biofuels and the Transformation of Agriculture: The case of Climate Change Policy Instruments

Biofuel expansion can create positive conditions for improving food security and environmental performance in two significant ways: (1) it would create higher commodity prices that would allow investments within the agricultural sector for poverty reduction, food security, and greater environmental performance and (2) it would accentuate the benefits of properly designed climate policy. In both circumstances, we emphasize that the policies enacted along with biofuel expansion must be designed to create positive benefits. POLYSYS, an economic model of the U.S. agricultural sector, is used to show an example of implementing correctly designed climate policy in conjunction with biofuels policy to lead to greater carbon reduction than with either policy alone.