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What are the economic drawbacks of using biofuels?

        Auto | Biofuels

Economic Ripple Effects
Ethanol production could cause the price of corn to rise, resulting in a ripple effect that ends with consumers paying more for corn.
Ethanol production could cause the price of corn to rise, resulting in a ripple effect that ends with consumers paying more for corn.
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The economics of producing biofuel can affect more than just the fuel industry. Since many popular biofuel crops are also popular food sources, expanded biofuel production has the potential to cause fluctuations in food prices.

Consider a farmer who feeds his livestock a mixture that includes corn. If an ethanol producer starts buying corn from the same distributor the farmer uses, the increased demand could cause prices to rise. The farmer, knowing that the extra cost of feed will hurt his bottom line, protects his business by passing that cost along as higher prices for his livestock. The butcher, grocer or restaurateur who purchases his chickens, cattle and pigs pays more for the meat, which ultimately translates into a higher price tag on dinner for the end consumer [source: Carey].

While one could argue that increased demand will encourage farmers to make more productive use of their land, that solution to this trickle-down problem could lead to its own problems, such as overuse of fertilizer and monoculture farming that's overly susceptible to pests and disease [source: Altieri].


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