US Department of Agriculture figures reveal that a quarter of US cereals grown in 2009 went to biofuel, turning cheap food into expensive fuel. This pushes up food prices and damages the environment yet President Obama promised “continued investment in advanced biofuels in his recent State of the Union address.
A paper on the 2007-2008 food crisis by the World Bank Development Prospect Group, leaked in 2008, said US and European Union biofuel production was responsible for 70 to 75 percent of the price rises – against 3 percent admitted by the USDA.
These subsidies are about political pandering, not cutting greenhouse gases. But despite a backlash against biofuels in 2008, they have now fallen off the international agenda.
Biofuels from crops like maize, sugar and palm oil have more than tripled since 2000. The USA is to increase ethanol blending to 15 billion gallons by 2012 and 36 billion by 2022, up from nine billion last year.
A recent report by Rice University (Texas) found that the USA spent $4 billion on biofuel subsidies in 2008 to replace a mere 2 percent of the US gasoline supply. It estimates that this costs taxpayers about $82 per barrel, or $1.95 a gallon more than the retail price of petroleum fuel. By 2022, US biofuel subsidies will have totalled $400 billion, according to environmental pressure group Friends of the Earth. The EU is no better, giving around ?3.7 billion ($5.2 billion) in biofuel subsidies in 2007, aiming to replace 5.75 percent of transport fuel by the end of 2010.
On top of wasted taxes and higher food prices, biofuels make little environmental sense: production in the USA and the EU can release more emissions than it avoids. Nobel-Prize-winning chemist Paul J. Crutzen estimates: “For rapeseed biodiesel, which accounts for about 80 percent of the biofuel production in Europe, the relative warming due to N2O [nitrous oxide] emissions is estimated at 1 to 1.7 times larger than the quasi-cooling effect due to saved fossil CO2 [carbon dioxide] emissions. For corn bioethanol, dominant in the US, the figure is 0.9 to 1.5.
Although the United Nations Food and Agriculture Organization sees little chance in the near future of another “concurrence of so many factors that caused the food crisis, there is no room for complacency. Food prices are taking a long time to fall (maize is still 50 percent above its 2003-2006 average), while the number of hungry people recently topped one billion. This is a worrying trend as there has been an increase in both the absolute number and the percentage of hungry people, reversing decades of progress.
Ethanol already takes up 27 million acres out of the 90 million acres of maize in the USA: from 2006 to 2008, the World Bank’s Food Price Index doubled.
If biofuel was about the environment, the USA would not impose tariffs on environmentally-friendly ethanol from Latin America and the Caribbean. Likewise, new EU tariffs are clearly aimed at American producers who send 95 percent of their biofuel exports to Europe.
In addition, there is the fear that natural habitats will be converted to farmland to take advantage of biofuel subsidies. The diversion of existing US cropland to biofuels has shifted soya bean production to South America and Indonesia, encouraging deforestation.
Nor do biofuels save energy. Some varieties require as much to grow, transport and process as they release when you burn it.
And according to the World Business Council for Sustainable Development, at oil prices below $70 per barrel (the recent range is $70-85), maize-based ethanol is about the same price at the pump as normal petroleum fuels–not counting what taxpayers have already paid in subsidies.
The USA and the EU claim “second-generation biofuels from plant cellulose or waste will help achieve their stringent self-imposed “renewables targets but this is a nascent industry that has yet to deliver value for money. The EU said it would reconsider biofuels following the food crisis. But there is powerful pressure from farm lobbies in both places.
Agriculture faces many difficulties, from how to establish land rights to how to disseminate technology or adapt to climate change. But the biofuel problem is a no-brainer.
Creating an artificial market with subsidies is no way to reduce emissions, save rainforests or feed the poor. Biofuel subsidies are just a Green handout to farm lobbies in rich countries: it is time to end them.
Caroline Boin is a Project Director at International Policy Network, London, an independent think-tank working on economic development.