Sep 04 2007
Renewable energy resources still have significant opportunity costs
Published by Molly Saso at 3:23 pm under
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WikipediaTo eat . . . . or to drive? - Times Online
The whole debate over global warming has just as many economic as environmental implications. A recent article in The Times illustrated how the growing investment in renewable biofuels impacts on global food markets.
Apparently as a result, Japanese snack packets now contain 10% less chips than they did a month ago, while the price of beer at the Munich Oktoberfest will be at record levels.
These, say industry insiders, are the first skirmishes of a conflict that could soon dominate geopolitics: the war for resources between the world’s 800 million cars and its six billion stomachs. In the developed world, the war will come down to price and choice; in the developing world it could come down to survival. The war centres largely on global demand for biofuels — “green†replacements for petrol, such as ethanol, that can be produced from sugar, corn and other agricultural products rather than fossil fuels.
Wheat and barley fields are being replaced by ethanol sources, such as sugar and corn, in the USA and Brazil. Reduced food supplies are leading to higher prices for snacks and beer. The article states starkly that the “war for resources†will be between cars and stomachs. Economists would not envisage such an apocalypse, because they believe that the price system will efficiently allocate resources even on such a wide scale over the globe and between such apparently disparate goods. But the intermediate scenarios should be interesting.
About the author: Molly (Mary) Saso teaches AP economics and math at the International School of the Sacred Heart in Tokyo. She has engaged in various occupations (development economist, mother, researcher & writer) since first leaving home (Britain) for Tanzania in 1974, but teaching is her favourite activity, along with reading, making timetables and skiing. 
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It’s a pretty intimidating concept, understanding that farmland as the scarce variable in this equation leaves little potential for the optimizing advances made in other industries such as computers (exponential increase in hard drive space) or residential complexes (taller apartments = more people fit into a set land area); because lets face it, even GMC crops can’t significantly increase the maximum number of crops we can fit in a square meter.
Although the limited supply of farmland “war-ed” for between organic fuel and food production is unlikely to disappear in any fashion similar to our current fossil-fuel crisis, there isn’t really much potential for it to grow either, given that serious efforts to cultivate and make arable essentially arid land has and still is returning minimal results. Additionally, with a growing population against a therefore stagnant amount of farmable land, it will strike beyond a struggle to accommodate feeding even a fraction of the cars on our roads.
Notwithstanding global warming either, which may further soon push farmland –on which we are already dependent on to supply our food- out of a growing climate for both food AND fuel.
In this case, I don’t believe that supply can rise up to the gi-proportional upcoming increase of demand, lest we grow our own crops or a mini-continent of fertile land surfaces in the mid-pacific.
Molly,
Great post, thanks for contributing! We’re having some technical difficulties accessing my blog from within Ch*na today, hopefully we’ll be able to work it out, until then, please post as often as you like, because I don’t think we’ll be able to post from within our country until we get this figured out…
It is indeed true that this is a war between cars and stomachs. The very same resource is being used to feed both. IN the end, the question lies, which is more important? The ethanol from the corn feed lifestock, and also provide a cleaner alternative source to petrol. ONe prevents starvation and the other prevents pollution. Either way, humans are worse off. As always, economists need to find the balance between the two, and try to maximize marginal utility.
I think it’s scary how cars have become such a demanding product. As they pollute our air, they require more and more of our resources and let’s face it: we are addicted to them. And now we even have to choose between food pruduction and fuel production because of the increasing number of cars. It is up to economists to do a thorough marginal analysis on producing ethanol or food. which one is it going to be? More pollution or starvation?
I think the battle between stomachs or cars is not going to end. i would say this because technology is developing and its developing fast. In order for us to be able to keep up with the newest products we have to buy them. What consumers dont realize is they are making the choice of causing more pollution vs starvation constantly.
thats crazy. my prediction for the future is that as these prices for food products begin to rise and more and more production goes to ethanol, the prices of that will begin to fall and then people will go back to food. Much like a scale, the balance between the two will shift for a bit and finally come to a rest.
It is intriguing how scarce resources are leading to a dilemma that incorporates factors from two entirely different spectrums. Who would have though that there would be a battle between stomachs and cars just a few decades ago? However, as this battle essentially comes down to the issue of “biofuels” To derail this issue from its roots, I deem the most effective solution to this dilemma is to find alternative means of resources. After that, it’s just the matter of finding the right balance, the equilibrium price.
It is indeed crazy how fast we get addicted to our new technology, since we do use it everyday at this point in life. But should we have to use the same resources for food production and fuels for cars? Alternative resources such as wind energy or solar energy could be used to solve our “car problem”. I understand that those alternative energies are still very expensive to use and control all over the world, but those resources will be the “next generation” and are unlimited. I also think that if we have to choose between food and cars, we will instinctly choose food. At this moment, the issue still hasn’t been solved and will not be for another 5 years or so. Until this point, we should try not to waste our resources and try to find the right balance between food production and fuels.