Does the Energy Transition Affect Food Prices and Agricultural Production?

Abstract

While most studies highlight the benefits of the energy transition, it is important to recognize that this process can also yield negative consequences. In this study, we delve into this aspect of the energy transition by examining its effects on food prices and agricultural production across 32 OECD countries from 2000 to 2021. Our findings reveal that the energy transition leads to increased food prices and decreased agricultural production. Causality analysis further confirms that the energy transition is responsible for these changes. To deepen our understanding, we divided the countries into two subsamples: those in an advanced stage of the energy transition and those in a delayed stage. Our results show that the impact of the energy transition varies depending on the stage of transition. Countries further along in their energy transitions experience a greater effect. This investigation underscores a collateral effect of the energy transition, placing additional pressure on vulnerable populations. To address this social challenge, governments can implement programs and policies such as income transfers to support these groups.

Keywords: Energy Transition, Food prices, Agricultural Production, China, Commodity prices