LAND USE CHANGE, ETHANOL PRODUCTION EXPANSION AND FOOD SECURITY IN BRAZIL 1 Joaquim Bento de Souza Ferreira Filho 2 Mark Horridge 3 Abstract: The concurrence of major increases in ethanol production and world commodity price increases were captured by the ‘food-vs-fuel’ dilemma around 2008. Brazil is the largest producer of ethanol worldwide and still has vast tracts of natural land available. This paper uses Brazil as case study to simulate food security and environmental impacts, especially on forests, of increased biofuel production. Results show that sugarcane production is concentrated in higher productivity regions so reaching the 2022 ethanol target would require only 0.07 Mha of new land, or 0.02% additional deforestation over baseline. Second, per area production intensifies as land prices increase, indicating a non-linear relationship between land area and production. Specifically, results indicate an average indirect land use change effect of 0.083 hectares of new agricultural land for every 1.0 hectare of additional sugarcane. Current discussions of biofuel expansion miss this critical point of intensification, which results from market forces and technological change. These results are assumed to be driven solely by cost-minimizing behavior, thus leaving significant room for policy to expand agricultural research resulting in greater per unit output and subsequent environmental benefits. Finally, results support historical data that land use change due to biofuel production has little impact on food security. Introduction In 1975 Brazil engaged in a massive ethanol production program, in the aftermath of the first oil shock, through the launching of the Programa Nacional do Álcool (National Ethanol Program or Proálcool). Among the many policy measures adopted to stimulate the production and use of ethanol were: subsidized credit for investments; an increase in the at-pump ratio of ethanol to gasoline; guarantee of ethanol prices below gasoline prices; and a reduction of sales taxes on ethanol-engine cars. The production targets at that time were 3 billion litres of ethanol in 1980, and 10.7 billion litres in 1985 (BNDES, 2008). The reduction in oil prices after 1985 caused a reduction in the production and use of ethanol in Brazil that lasted throughout the nineties. Ethanol use started to recover again in 2003, led by the introduction of the flex-fuel technology for car engines, which allows the use of either gasoline or ethanol, or any blend of those two fuels. Sugarcane area increased from 4.0 Mha (about 11% of total annual crops area) in 2000 to 9.8 Mha in 2012 (15% of total annual crops area). 1 Zilberman, D; Goetz, R; Garrido, A. Handbook of Bioenergy Economics and Policy: volume II. Modeling Land Use and Greenhouse Gas Implications. Chapter 12. 2017. 2 Corresponding author. Professor, Escola Superior de Agricultura “Luiz de Queiroz”, Universidade de São Paulo. Email: jbsferre@usp.br 3 Centre of Policy Studies [CoPS], Victoria University, Melbourne, Australia. Email: mark.horridge@gmail.com