"Ethanol boom could hurt world's poor" - BioPact strongly disagrees

The race to boost ethanol production could one day hurt food supply for many of the world's poor, an environmental expert said on Thursday. "This is shaping up as competition between the 800 million people in the world that own automobiles and the 2 billion low- income people in the world, many of whom are already spending over half their income on food," Lester Brown, president of Washington D.C.-based environmental research group Earth Policy Institute, told reporters on a teleconference.

Together with the UN's FAO, which thoroughly analysed the stakes long ago and which concludes that bioenergy and biofuels can cut poverty, provide energy to the poor, reduces oil import costs for developing country governments, and opens a unique economic opportunity to connect millions of poor energy farmers to a global market where they can sell their biofuels at great competitive advantage -- we obviously disagree with the Earth Policy Institute. We have strong arguments to do so, we think:
ethanol :: biodiesel :: biomass :: bioenergy :: biofuels :: energy :: sustainability :: Africa :: development ::


First we wish to refer the reader to our earlier article where we have already discussed most of the following points:

Food versus fuel - new report paints grim outlook.

Let's now discuss Lester Brown's points, one for one.

Earth Policy Institute: Ethanol production is booming in Brazil and the United States amid record oil prices, a shortage in refinery capacity for production of conventional motor fuels, and increasing fuel demand. Brazil, the world's leading ethanol producer, uses sugarcane to make the fuel. Prices for sugar futures in February hit a 25-year high of nearly 20 cents per pound, on ethanol demand and as big money funds came into the market. In the United States, the world's largest corn exporter, high subsidies for making ethanol are also encouraging a rush to corn, as everyone from Bill Gates to investment banks invest in ethanol plants. Grain prices have not risen nearly as much as sugar has, but even a small lift could hurt the billions of people who depend on grains for food and the farmers in poor countries who use it for meat, milk and egg production, said Brown.

BioPact: The Brazilian example shows that a country that produces biofuels can substantially reduce its oil import bill. Developing countries have a high petroleum intensity and suffer much more under high oil prices than idustrialized economies. So when they switch to domestically produced biofuels, the effect is substantially stronger than when a developed country does so. Increased state-income means more money available for socio-economic policies. The cost of rising grain-prices is offset by the reduction of the oil import bill.

Moreover, millions of rural households in the tropics can produce biofuels much more cheaply than producers in the North (the grains cultivated for ethanol in the North, yield much less than tropical crops grown in the South). In short, farmers in the South now have an opportunity to out-compete farmers in the North. They can't do so in many sectors where the North is dominant, but they can on the biofuels market.
Given rising energy prices, the South promises to gain immensely, as it can sell its biofuels on a global market with huge profits.

The South finally has an opportunity to boost its economy, because of its biofuels potential and because of record high oil prices.

Moreover, agriculture in the South has room to expand, whereas in the North this is much more difficult. As the FAO and the OECD recently jointly reported, the South will shape the future of world agriculture.

See also:
Developing world to become main biofuels beneficiary.

FAO / OECD joint report: Developing countries shaping future of world agriculture trade.

And related to this report, Biopact: Non-tropical countries need biofuels subsidies.

Earth Policy Institute: "There could be a real scramble, not only among sectors, but also among countries for available grain supplies," he said. Brown said grain-importing nations such as Indonesia, Nigeria, Mexico and Egypt, are most vulnerable to price rises.

BioPact: Oddly enough, Indonesia, Nigeria and Mexico are (potential) biofuels exporting nations. Indonesia is investing a massive US$ 22 billion in its biofuels industry, so that it can reduce its very costly oil import bill and eventually export its tropical biofuels, which fetch record prices on the world market.
For countries like Indonesia and Nigeria, it makes sense to import grains from the North, and to export biofuels. The trade balance would be very positive, because of the competitive advantage of producing biofuels in the South, where oil and sugar crops yield much more than in the North. Grain crops in the South and the North yield approximately the same.
So for developing countries, it makes sense to import grain from the North, and to export biofuels - the final balance shows they win.
The exchange relation means that through biofuels, these countries can either can boost their trade income, or reduce their oil import bill or do both at the same time. The balance between rising food prices and high biofuels prices is definitely tilting towards the biofuels side - meaning developing countries become the winners and make profits.

Earth Policy Institute: A spokesman for U.S. corn growers said the crop can meet demand in both food and fuel markets because farmers are becoming more efficient and boosting crop yields from each acre they harvest. "What gets lost in this debate is the fact that supply is rising at a near parallel rate with demand," Geoff Cooper, spokesman for the National Corn Growers Association, said in an e-mail. Cooper agreed that expected ethanol demand has helped boost corn prices, but said that today's prices were comparable to those seen in the 1970s, the late 1980s and early 1990s. He also said that as grain prices rise, it spurs corn farmers to grow more.
Brown said instead of making more conventional ethanol, vehicle fuel consumption should be boosted, through higher vehicle mileage and the manufacturing of gasoline-electric hybrid cars.
An emerging high-tech fuel called cellulosic ethanol made from tough woody plants, such as switchgrass and poplar, that grow on land unfit for farming, could also be part of the solution, said Brown.

BioPact: again, for the production of biofuels, tropical countries have a huge competitive advantage over countries with more temperate agro-ecological climates. As it happens, demand for biofuels is high in these Northern markets, and so the South can export biofuels, making massive profits that no farmer in the North can make. Obviously this requires access to those markets. Concretely, the US and the EU should abandon their agricultural subsidies, and lift trade barriers.
Moreover, an additional source of income for countries from the South comes from the system of carbon credits, that will soon become universal under the Kyoto Protocol. And on this front too, the potential is much higher in the South, than in the North, given the South's limited existing fossil fuel infrastructure, making it possible to at once implement green energy strategies for which they get carbon credits that fetch high prices on the market.

More information: Biofuels can cut poverty, provide energy and mitigate climate change – UN

And the Stockholm Environment Institute and Partners4Africa's "Policy Debate on Global Biofuels Development", focusing on the issue of food versus fuel:
Renewable Energy Partnerships for Poverty Eradication and Sustainable Development[*.pdf], June 2005:
Comment & Analysis: Fuel for nought: The adoption of biofuels would be a humanitarian
and environmental disaster, by George Monbiot
:: Response 1 Food for thought - world trade in biofuels offers sustainable food supply and much more - by Dr. Peter Read
:: Response 2 Reflection about food, feed, fibre and fuel, by Sergio C. Trindade
:: Response 3 Agreeing and disagreeing, by Prof. José R. Moreira
:: Response 4 Arguments for bioenergy development, by Dr. Jeremy Woods and Dr. Peter Read
:: Response 5 Comparative advantage in the production of biofuels, by Francis X. Johnson and Prof. Francis Yamba