The biofuel industry has received billions of dollars in support from governments around the world, as political leaders respond to new environmental and energy-security imperatives. However, a growing body of research highlights nontrivial costs associated with biofuel production, including environmental destruction and diminished food security, and questions the magnitude of perceived benefits. We discuss the ability of biofuels to accomplish climate change, rural development and energy-security objectives, and consider possible impacts on food production and environmental conservation. We also review methods for judging biofuels, consider how well they contribute to policy objectives, and compare policies that support biofuels.

Biofuels have been criticized for raising food prices and reducing food production. While biofuels have rightly been blamed for contributing to reduced food security at a time of record-high food prices in 2008, they have not been credited with reducing the cost of gasoline, also at a time of record-high prices. We discuss the food-versus-biofuel trade-off associated with biofuel production and model the effects of biofuel production in markets for key crops and gasoline, showing that food consumers lose from biofuels but gasoline consumers enjoy substantial benefits. We also suggest ways to address the food-versus-biofuel debate.