Biofuels and food security: evidence from Indonesia and Mexico

In this study, we analyze the food security effects of biofuel production using the synthetic control method. This retrospective and graphical analysis focuses on Indonesia and Mexico from 2000 to 2013. Indonesia is a major biodiesel producer, while Mexico specializes in maize and ethanol. Our findings show that biodiesel production positively affects food security through an increase in daily per capita energy consumption and the food production index, whereas we observe the reverse effect for bioethanol. After the adoption of biofuels, the gap between Indonesia and its counterfactual allows us to conclude that biodiesel production does not harm food security. This could be explained by the fact that biodiesel production uses some feedstocks that do not directly compete with food crops; moreover, biodiesel exports generate revenues that can be allocated to food imports. However, the gap between Mexico and its counterfactual suggests that bioethanol production reduces food security because it uses maize, which is the staple food of many Mexicans. Furthermore, Mexican ethanol exports compete with those of the United States. Our results are robust to several falsification tests.