Biofuels and the Greater Mekong Subregion: Assessing the impact on prices, production and trade

Similar to many other countries, all nations in the Greater Mekong Subregion (GMS) have planned or are planning to develop strong national biofuel programs. The overall goal of this paper is to better understand the impacts of global and regional biofuels on agriculture and the rest of the economy, with a specific focus on the GMS. Based on a modified multi-country, multi-sector computable general equilibrium model, this study reveals that global biofuel development will significantly increase agricultural prices and production and change trade in agricultural commodities in the GMS and the rest of the world. While biofuel in the GMS will have little impacts on global prices, it will have significant effects on domestic agricultural production, land use, trade, and food security. The results also show that the extent of impacts from biofuel is highly dependent on international oil prices and the degree of substitution between biofuel and gasoline. The findings of this study have important policy implications for the GMS countries and the rest of the world.