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LONDON — U.S. Department of Agriculture figures reveal that a quarter of U.S. cereals grown in 2009 went to biofuel, turning cheap food into expensive fuel. This pushes up food prices and damages the environment, yet President Barack 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 U.S. and European Union biofuel production was responsible for 70 to 75 percent of the price rises — against 3 percent admitted by the U.S. Department of Agriculture.

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 corn, sugar and palm oil have more than tripled since 2000. The U.S. is to increase ethanol blending to 57 billion liters by 2012 and 136.8 billion liters by 2022, up from 34.2 billion liters last year.

A recent report by Rice University (Texas) found that the U.S. spent $4 billion on biofuel subsidies in 2008 to replace a mere 2 percent of the U.S. gasoline supply. It estimates that this costs taxpayers about $82 per barrel, or $1.95 a gallon (3.8 liters) more than the retail price of petroleum fuel. By 2022, U.S. biofuel subsidies will have totaled $400 billion, according to environmental pressure group Friends of the Earth. The European Union is no better, giving around 3.7 billion euro ($5.2 billion) in biofuel subsidies in 2007, aiming to replace 5.75 percent of transport fuel by the end of 2010. Japan has been cautious but the government has invested in Malaysian and Indonesian bio-diesel projects using sugar cane and jatropha.

On top of wasted taxes and higher food prices, biofuels make little environmental sense: production in the U.S. and the EU can release more emissions than it avoids. Nobel-Prize-winning chemist Paul J. Crutzen estimates: “For rapeseed bio-diesel, which accounts for about 80 percent of the biofuel production in Europe, the relative warming due to nitrous oxide emissions is estimated at 1 to 1.7 times larger than the quasi-cooling effect due to saved fossil carbon-dioxide emissions. For corn bioethanol, dominant in the U.S., 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” like the one that caused the food crisis, there is no room for complacency. Food prices are taking a long time to fall (corn 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 10.9 million hectares out of the 36.4 million hectares of corn in the U.S.: from 2006 to 2008, the World Bank’s Food Price Index doubled.

If biofuel was about the environment, the U.S. 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 U.S. 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), corn-based ethanol is about the same price at the pump as normal petroleum fuels — not counting what taxpayers have already paid in subsidies.

The U.S. and the EU (and Japan) 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, but the biofuel problem is a no-brainer. Creating an artificial market with subsidies is no way to reduce emissions, save rain forests or feed the poor. Biofuel subsidies are a green handout to farm lobbies in rich countries: it’s time to end them.

Caroline Boin specializes in sustainable development and the environment at the International Policy Network in London. © 2010 International Policy Network

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