Biofuels: More heat than light?

The term 'Biofuels' might sound like a catchy green buzzword, but these alternatives to petroleum-based staples have been around for a long time. The original Ford Model T was configured to run on ethanol rather than gasoline, and Rudolf Diesel ran his first demo-engine on peanut oil.

Biofuels were revived temporarily at least - in the US, by the 1970s oil embargo imposed by OPEC - with shortages and high prices contributing to western economic stagnation. Alternative energy sources were looked at, but economic revival and lower oil prices from the 1980s onward put these revived non-petroleum fuel sources on the back burner.

Biofuels reemerged in the late 1990s and more so after 9/11, as the US sought to diversify its energy sourcing away from reliance on foreign oil imported from unstable and/or hostile states such as Venezuela, Saudi Arabia and Nigeria.

Even though subsidies for biofuels made ethanol competitive, the US government continues to fund corn farmers and ethanol producers - to the tune of US$8.9 billion in 2005. At least until the ongoing Wall Street crisis and potential run on banks around the world, hedge funds had been making huge bets on corn and the ethanol bull market, at least partly motivated by the government support for biofuels and the multi-level earmarking for subsidies that the industry has attracted.

Both the US and EU play dice with politically hostile and increasingly aggressive energy suppliers. As Barack Obama and John McCain trade blows over offshore drilling and relations with Russia and the Middle East, Eastern European states are railing against Brussels and western EU states over energy policy. 

European energy policies cannot be understood apart from relations with Russia. According to EU statistics, Russia in 2006 supplied 33 percent of EU oil imports and 28 percent of consumption. On the gas side, Russia supplied 42 percent of imports and 27 percent of consumption.

20/20 vision?

Eighteen months ago, at its March 2007 summit, the EU promised to save the world from global warming. The EU's "leading role" on climate change might be hard-pressed now, given changing economic circumstances. Meanwhile, coal-burning countries such as Poland fear being guilt-tripped into ditching coal for Russian gas, a frightening prospect after Moscow's war on Georgia, and after the EU accommodation with Russia after the Georgia invasion.

EU countries continue to sign deals with Russia that undermine the Nabucco alternative pipeline, which would link southern Europe to gas in Central Asia, bypassing Russia. Germany still backs the Nord Stream gas pipeline, a joint project with Russia's Gazprom, for which former German prime minister Gerhard Schroder is a board member.

Even as Green party members in Germany lectured Poland on its need to give up coal, Europe failed to use any real leverage with Russia in post-war negotiations over Georgia - despite the fact that Europe depends on Russia for energy imports. Russia needs Europe to sell its gas, as it has no alternative market based on current infrastructure.

The EU has trumpeted biofuels, notably biodiesel, as crucial to its 20/20/20 energy strategy, where 20 percent of European energy would come from renewable sources such as sun, wind and biofuels by 2020. The EU sees the 20/20/20 strategy as part of its campaign to combat global warming, even though its member states are lagging on meeting commitments on carbon emissions agreed under the Kyoto Protocol.

But even as the EU and its member states simultaneously lecture on the need to combat global warming, while failing to live up to their own rhetoric in terms of tangible cutbacks, studies released throughout 2008 show that no warming has taken place since 1998, with natural factors - notably oceanic cooling - proving more influential on climate trends than human carbon emissions. A report in the journal Nature suggests that this will continue until at least 2015, making it likely that no warming will have taken place for almost two decades, by that stage.

Food for thought

While such counter-alarmist science has not yet made any apparent impact on climate policy thinking, the idea of using crop replacements for conventional petroleum fuels has run into controversy, with environmental lobby groups that once promoted biofuels as a cleaner-carbon alternative, now demanding a rethink.

A recent World Bank report cites biofuels as causing 75 percent of the rise in world food prices. A spike saw riots on dozens of countries during the spring of 2008.

Al Troner CEO of APEC, told ISN Security Watch that the World Bank was "almost 75 percent wrong in its report," while  Dr Siwa Msangi, a Research Fellow at the International Food Policy Research Institute added that "75 percent is on the high side of most estimates I've seen - including our own, and that of OECD/FAO." 

Troner pointed to the example of palm oil, reminding that prices for Palmolve and Unilever products, that are palm-oil based, had not shot up in recent years, even as palm oil was diverted to fuel production.

However, biofuels have, by almost all accounts, had some impact on the dramatic and in places devastating rise in food prices, with people in poor countries worst-hit, given that a majority of their income is spent on food. The global price of wheat has risen by 130 percent in the past year, and dairy prices have doubled since 2005. A combination of factors is making basic food and fuel too expensive for people in poorer countries - even as projected world cereal production for 2008 is a record 2,164 million tonnes, up almost 3 percent from last year.

In a May/June 2007 Foreign Affairs article, C Ford Range and Benjamin Senauer, wrote:

"The enormous volume of corn required by the ethanol industry is sending shock waves through the food system. (The United States accounts for some 40 percent of the world's total corn production and over half of all corn exports.) In March 2007, corn futures rose to over $4.38 a bushel, the highest level in ten years. Wheat and rice prices have also surged to decade highs, because even as those grains are increasingly being used as substitutes for corn, farmers are planting more acres with corn and fewer acres with other crops."

The article went on to state: "Filling the 25-gallon tank of an SUV with pure ethanol requires over 450 pounds of corn - which contains enough calories to feed one person for a year."

Natasha Scripture, spokesperson for the United Nation's World Food Programme, told ISN Security Watch: "Some basic food commodities have decreased [since the spring riots]. While this is good news, the impact of the global food crisis on millions of hungry people continues because the prices of staple food commodities are still higher than in previous years, and because supplies remain limited."

Follow my lead

So far, the US, Brazil, and to a lesser extent, various European countries have been the leaders in the field, with Europeans focusing on biodiesel, rather than the corn and sugar-case based biogasoline promoted by the US and Brazil, respectively.

But others are getting in the act: Rising oil prices and potential western R&D investment has prompted a number of developing countries - such as Tanzania, Ethiopia, Indonesia, Senegal - to commission biofuel projects, even as some of these countries struggle to feed their own people.

However, to quantify the biofuel-food production relationship is difficult, even using stark developing-world examples. What can be said with more certainty is that biofuels aside, the world does not maximize its agricultural or food production potential, and more blatantly, some governments evade their food-production responsibilities and neglect their own people, save when a profitable commercial venture is presented.

Zimbabwe and Burma (Myanmar) are two almost-legendary examples of food-exporters turned-basketcases, with tyrannical regimes destroying what were once called "the breadbaskets of Africa and Asia." Both countries are now food importers and food-aid dependent.

As David King, secretary-general of the International Federation of Agricultural Producers told ISN Security Watch at the height of the food price riots last April, "for example, only one-quarter of the irrigation potential along the Niger river valley is being exploited" and that "yields in Africa are very low compared with other regions, but there is massive potential for improvement."

Sudan is leasing huge plots of land to Gulf investors, as oil-rich desert states seek to invest in overseas food production to meet domestic needs. Sudan, which is a massive recipient of overseas food aid, particularly to Darfur, is simultaneously selling its own food-production potential for multibillion dollar profit. 

Speaking to the LA Times, Idriss Ashmaig, manager of the Sudan office of Hadco, a Saudi agri-business leasing 25,000 hectares north of Khartoum said: "Here there is water, land and climate. All they need is capital. Only 10 percent of Sudan's farmland is irrigated, and only 20 percent of its arable land cultivated."

While Ethiopia has not taken the commercial agriculture route to the same extent, a country where around 12 million people "are affected by a drought in southern, central, western and northeastern regions" - according to the WFP - is embarking on a biofuels project of its own. The government in Addis Ababa says it will plant these crops in land that is not suitable for food production, which according to Dr Msangi "raise concerns about prioritization over their other goals of food security."

He told ISN Security Watch: "Even if the jatropha in Ethiopia is not grown on food producing land, there could be other indirect, secondary effects that might still affect other land uses [for both food and non-food activities] that should be taken into effect. Drawing resources away from the agricultural sector, in the form of labor, capital or equipment, could have this kind of effect."

Good and bad?

Even still, there may be 'good' biofuels and 'bad' biofuels.

The WFP does not have an official position on the subject, but Natasha Scripture, a WFP spokesperson, told ISN Security Watch that "we recognize biofuels as having potential benefits but also costs."

Al Troner told ISN Security Watch that much of the policymaker thinking around biofuels was shoddy, reminding that "the idea that biofuels merely 'replace' gasoline or diesel is wrong, it more complex, it is not just about replace X amount of A with Y amount of B."

Along similar lines, Troner says that one of the newer developments in biofuels - cellolosic conversion - "will make green criticism redundant." These 'second generation' biofuels are  promoted as not having any apparent impact on cropland or food supply, with the likes of jatropha and various grasses grown on land unsuitable for food production - as per Ethiopia's claim for its own potential biofuels industry.

And elaborating on the biofuels-food crop relationship, Dr Msangi told ISN that "if biofuels can somehow attract new investments to the agricultural sector, and promote the use of technologies that might have spillovers to other crops, then there could actually be some benefit."

The production of cellulosic ethanol in the US is supported by the Energy Independence and Security Act of 2007, which mandates 21 billion gallons of biofuels by 2022, of which 16 billion gallons must come from cellulosic ethanol. Cellulosic ethanol is a described as a renewable fuel source produced from biomass-derived products such as sugarcane waste, switchgrass, rice straw and wood chips.

Here's to the future

British Petroleum is betting on a biofuels boom. A BP spokesman told ISN Security Watch that
"On sustainability, we are clear that our biofuels production needs to have minimal disruption to food supplies to be acceptable, eg ethically, socially, environmentally and economically. One way to address the fuel-food balance is to develop new forms of biofuel, not just leading on from traditional agriculture. That's why BP is now investing US$500m in the EBI."

The Energy Biosciences Institute is a joint initiative with the University of California, Berkeley, the Lawrence Berkeley National Laboratory and the University of Illinois and is aiming to develop new forms of biofuels, while a slew of US-based biotech companies are partnering with fuel crop growers to explore various research possibilities.

However, it remains to be seen how effective second-generation biofuels will be on a commercial scale. And across the Atlantic, the EU 2020 policy mandates only 4 percent of the renewable energy target of 20 percent as coming from these 2G biofuels, whose potential - if one takes the growing numbers of biotech companies getting on the biofuels act as any barometer - may be best realized by the sort of genetic-modification (GM) that the EU has opposed when it comes to food.

Biofuels is a growth industry -it attracts R&D as well as wild hedge fund speculation and biotech companies looking to tweak potential fuel crops to make them grow faster and in more inhospitable conditions. However, the future viability of biofuels, for now at least, may depend on a continuation of the subsidies and government investments that have part-prompted the biofuel boom. And with credit crunched, banks failing and governments under pressure to provide massive bailouts and guarantees, it remains to be seen whether state investment will continue for the immediate term.

France has bucked the EC green direction, with its government stating that it will phase out tax breaks for biofuels by 2012, and linking biofuels with the rise in global energy and food prices: "The cost price of biofuels is no longer structurally disconnected from those of standard fuels. Tensions affecting agricultural raw materials have reached levels that no longer justify tax exemptions on the grounds of helping to provide outlets for farm production."

So, even with biofuels not quite the bete-noire that they have been portrayed, they are not yet, it seems, a sure bet for future energy supplies.