The recent increase in food prices strengthened the perception that the global food system is inextricably tied to the price of oil. There is no single cause for the food price increases, but there is agreement that rising energy prices were a contributing factor. Energy and food systems are linked in two distinctive ways: the agricultural sector is an energy consumer and it is also an energy producer through bioenergy. Agriculture has become increasingly reliant on chemical fertilizers derived from fossil fuels, natural gas and diesel-powered machinery. Food storage, processing and distribution are also often energy-intensive activities. Higher energy costs, therefore, have a direct and strong impact on agricultural production costs and food prices.

Economic research on energy and food security

The economic research and policy work at FAO analyses overall economic development, poverty reduction and food security from a number of thematic perspectives, including direct and indirect impacts of energy markets. Understanding the economic implications of a shift towards energy-smart food systems at the national and global level is necessary to identify the most appropriate policy mechanisms that maximize benefits and minimize risks.

A key element of FAO’s work in this area is the OECD-FAO Agricultural Outlook, a joint collaboration between OECD and FAO that assesses the potential influence of agricultural and trade policies on agricultural markets in the medium term.

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Long-term perspectives

Historically, FAO’s long-term projections, presented in reports such as World Agriculture Towards 2050, have considered the biofuel production in a relatively limited way. However, the 2012  revision of the World Agriculture Towards 2030/50 includes a base case for biofuel production that assumes fulfillment of current policy obligations around the world with modest growth beyond those policies. Model systems under development, both partial equilibrium and general equilibrium models, will be used to examine other paths for biofuels including, but not limited to, those driven by changing oil prices.

Bioenergy economics

GBEP, with the contribution of FAO, developed a set of sustainability indicators for bioenergy under the three pillars of sustainable development (environmental, social and economic): the indicators developed under the economic pillar are intended to give guidance on the measurement of the economic impacts of bioenergy production and use.

The BEFS Analytical Framework and the associated tools address the impacts of bioenergy development on the domestic economy (e.g. GDP growth, employment effects and poverty reduction) and the identification of the vulnerable household groups.

last updated:  Tuesday, February 5, 2013