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Butterfly effect: Find out how US domestic biofuel policy creates millions of poor in India
Dec 06: It is called the Butterfly effect, where disturbances in one space can have an impact in another faraway space
8Take the example of the US policy to encourage the use of grains for renewable energy. More than 40% of US grain is used for energy due to the Renewable Fuel Mandate (RFS).
8Research has now shown that this purely local US policy has a global spinoff, as it keeps grain prices higher than they ordinarily would have been.
8These higher prices pass through to domestic Indian prices and then the price shock impact household welfare through consumption and wage incomes.
8It has been estimated that the US policy leads to the creation of 26 million new poor people in India: 21 million in rural and five million in the urban population.
8This is interesting data for the policy maker or the intrepid Indian economist looking at Indian bio-fuel policies.
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