Land use change impacts of biofuels: Near-VAR evidence from the US

The present paper studies the land use change impacts of fuels and biofuels. We test the theoretical hypothesis, which says that changes in fuel prices cause changes in land use both directly and indirectly and that, because of price inter-dependencies, biofuels reinforce the land use change impacts. We apply time-series analytical mechanisms to five major traded agricultural commodities, the cultivated area of agricultural land and crude oil price. Our data consists of yearly observations extending from 1950 to 2007 for the US. The empirical findings confirm that markets for crude oil and cultivated agricultural land are interdependent: an increase in oil price by 1 dollar/barrel increases land use between 54,000 and 68,000 ha. We also find that the increase of bioenergy sector accelerates land use change in the US, i.e. food commodities are being substituted for bioenergy crops.

► We study the direct and indirect land use change impacts of biofuels. ► We employ a structural near-Vector Autoregressive model. ► Yearly price and land use data 1950-2007 for five crops and crude oil in the US. ► We find that biofuels, crude oil and agricultural land use are interdependent. ► 1 dollar/barrel increase in oil price increases land use by 54-68 thousand hectares.