By Dr. Clive Thomas
Those who expect that the recent rapid rise in food prices will be long-lasting, attribute much of this expectation on rapidly rising oil prices. The argument which I presented last week points out that empirical data support the existence of a high correlation in the trend and behaviour of oil prices with those for food. My caution that steep as have been the recent food price increases, these remain in real terms below the peak reached in the 1970s does not contradict the great concern we must have over recent food price increases. The United Nations Food and Agricul-tural Organization (FAO) estimates a nearly 40 per cent rise in its index of food prices for 2007, as compared with a far lower 9 per cent increase in the same index for 2006. Since the beginning of 2008 food prices have accelerated even more.
Partly in re-sponse to the steep rise in oil prices, governments around the world, but principally in the USA, the European Union (EU), China and India, have in turn accelerated programmes to switch from carbon-based energy supplies to biofuels. There are, however, at this point of time two main drivers of this change. One is energy security as mentioned here, and the other is the negative effect of carbon emissions (the greenhouse effect) on global warming and climate change, attendant on the use of fossil fuels (oil and coal) as the primary energy sources worldwide.
What are biofuels?
At this stage readers need to have a basic understanding of what biofuels are and why they are being promoted as a possible replacement for oil and coal as energy sources. Biofuels broadly refer to any fuel made from renewable biological resources. We in Guyana are familiar with ethanol produced from sugar cane, because of its associations with our neighbour, Brazil, and also because of our earlier failed efforts three decades ago to establish ethanol production here. In the USA, ethanol is mainly produced from maize (corn), although there is some sugar cane-based ethanol production. Grain sources and the sugar cane plant are located in what are classed as first-generation biofuels. There are, however, second–generation biofuels, which mainly consist of non-food celluosic material, such as weeds and wild grasses.
The theory behind biofuels usage in the context of global warming and climate change is that “the carbon released by the burning of these fuels will always be offset by the carbon stored by the next crop of plants.” In this sense biofuels are supposed to be a clean source of renewable energy.
This rationale be-came al-most do-gma in the fight to reduce carbon emissions arising from the insatiable use of oil. Now, it is under immense scrutiny. In a recent issue of Science, articles there argue that biofuels may in fact be very harmful to the environment ― causing even more pollution than oil! This is demonstrated when the full production cycle of biofuels is considered. In this full production cycle the increased use of carbon based fertilizers, pesticides and weedicides in grain and sugar-cane production as well as the negative environmental effects of large scale production of new agricultural crops (like weeds and wild grasses) on fragile ecosystems are considered.
Targeting and investments
This dilemma has emerged just as a wave of considerable investments in biofuels production has picked up, based on political decisions by governments to set mandatory targets for biofuels production and consumption. Take a few well-publicised examples. In the USA the target has been set for 20 per cent of oil consumption to be replaced by biofuels by 2010. Ethanol used in transport is targeted to increase from 4 billion gallons in 2006 to 7.5 billion gallons by 2017. Annual production of ethanol is targeted at 85 million gallons by 2017. These targets, if they are to be met, require subsidies.
Thus, biofuel is subsidized at 51 cents per gallon for all ethanol supplied to oil companies. The saving in carbon emissions from these targets was projected to be a whopping 60 per cent. In the European Union the target is 10 per cent of all transportation needs to be met from renewable energy sources and 5.75 per cent of motor fuel use from biofuels by 2010. At the just concluded G8 Summit in Japan (July 2008) the G8 countries set a target for 50 per cent reduction in greenhouse emissions worldwide by 2050.
Long-term targeting in-volves sustained subsidies, tax-breaks and other production incentives to, in effect, divert agricultural resources ― land, labour, and capital ― from food production to fuel production over time. As a result its negative impact on food supply will progressively get worse, as there is no new large amount of unused cultivable land available worldwide, with which to supply both unlimited global energy and food/ feed needs.
Already results are staggering. In 2008, it is projected that 30 per cent of US maize production will be used as an energy feedstock going towards ethanol rather than food or animal feed production. Worldwide, investment in renewable energy at US$150 billion in 2007 is showing signs of being much greater in 2008. Clean energy investment tripled in value in 2007 as compared with the previous year (2006).
Conclusion
One of the effects of increased biofuels’ demand is both crop and land diversion from food and feed output to energy input. This places an unprecedented demand on some key food items generating inflation generally, and specifically, rises in food prices. However, at this point in time biofuels have become suspect as a means of preventing climate change. As we shall see next week the fear is now that biofuels may pose a threat or worsen global warming while also endangering ecosystems and biodiversity.
