The Role of Biotechnology in a Sustainable Biofuel Future

US fuel ethanol production quadrupled between 2001 and 2007 to reach 6.1 billion gallons. Global ethanol production also exhibited tremendous growth, reaching 13.1 billion gallons in 2007. Much of this growth was in response to high energy prices since 2004 and was made possible by policies in the United States and elsewhere that subsidized ethanol production and imposed minimum-use requirements. Biofuels have been promoted by governments around the world because they are perceived to reduce greenhouse gas emissions relative to fossil fuels, improve energy independence, and spur rural development. While existing biofuel technologies have been shown to increase farm income in theory and in practice (see, for instance, Hochman, Sexton, & Zilberman, 2008; US Department of Agriculture, Foreign Agriculture Service [USDA FAS], 2008), the extent to which they achieve other policy objectives has been questioned in the literature. Carbon emissions savings from corn ethanol relative to fossil fuels are marginal at best (Farrell et al., 2006). Corn ethanol and other first-generation biofuels (sugarcane ethanol and biodiesel from soy, canola, and palm oil) may, in fact, increase emissions over the next century if they induce land-use changes that are not properly managed (Fargione, Hill, Tilman, Polasky, Hawthorne, 2008; Searchinger et al., 2008). And while biofuel production has grown markedly in recent years, it represents only 3% of world oil consumption. Offsetting just 10% of oil imports would require the dedication of between 30% and 70% of total cropland for the United States and the EU (Rajagopal & Zilberman, 2007). Not only is there mounting evidence that current biofuels do not provide the substantial benefits they were first perceived to offer, but there is also a growing understanding that biofuel production imposes significant costs on environmental preservation and food security. As the world entered its first food crisis in more than 30 years, governments revised their biofuel policies in 2007 and 2008 to target next-generation technologies that reduce the competition between food and fuel for staple crops and land. The United States has reduced growth of conventional ethanol mandates, while accelerating mandated growth in the production of advanced biofuels and cellulosic ethanol, which make use of dedicated energy crops and agricultural residues to reduce land intensity and greenhouse gas emissions (Energy Independence and Security Act [EISA], 2007). This article provides a conceptual overview of the economics of first-generation fuel ethanol and estimates the impacts of US corn-ethanol and soy-biodiesel production on food and oil markets. We present a dynamic perspective on the causes of growing food insecurity and highlight the role of recent slowing in agricultural productivity growth. We argue that declining rates of productivity growth stem from a depletion of potential gains from the Green Revolution, regulation of traditional farm inputs, declining research and development expenditure, and overregulation and underuse of agricultural biotechnology. With demand for food expected to grow by more than half (and perhaps double) in the first half of the 21st Century, and with increasing Steven Sexton, David Zilberman, Deepak Rajagopal, and Gal Hochman University of California, Berkeley Biofuel production has increased dramatically since 2000, impacting markets for food and fuel. This article uses a partial equilibrium model to simulate biofuel impacts. We find that US biofuel production imposes costs on food consumers but benefits gasoline consumers by reducing gas prices. Current biofuels, therefore, create a trade-off between food and fuel. The demand for agriculture to provide food and fuel to a growing world population creates an imperative for improved agricultural productivity. Biotechnology and transgenic crops can be powerful drivers of productivity growth, but it demands increased investment and reduced regulation. We argue that biotechnology is essential to reduce land-use changes associated with rising biofuel demand that not only reduce biodiversity, but also release greenhouse gases into the atmosphere.