Biofuels: food for thought or fueling world food prices? Exploring the connection between rising food price and alternative fuels
In: http://hdl.handle.net/1885/13770
The steep increase in the price of oil since 2002, the growing debate over peak oil production, and unequivocal evidence that the climate is warming as a result of increased greenhouse gas emissions have led countries around the world to seek alternatives to oiL Biofuels are increasingly viewed as one alternative to oil that holds a great deal of promise. Proponents of biofuels claim that they have the potential to be clean burning, renewable sources of energy that will aid countries around the world in lessening their dependence on oil, particularly imported oil. This report seeks firstly to address the most significant problem commonly associated with the increased use of biofuels. The 'food versus fuel' debate has arisen as a major challenge to increased biofuels production. There is now clear and unequivocal evidence that biofuel production has contributed to the skyrocketing price of food around the world. It is also clear that biofuels are simply one of a number of challenges that face tl1e world in ensuring its poorest people have food security. The rising price of energy, the growth of the developing world, particularly China, and the spectre of climate change all pose long-term challenges to agricultural production. Given these monumental challenges already facing countries around the world, if biofuels are allowed to exacerbate the problem of food insecurity it must only be done with the firmest of justifications. Energy security, environmental benefits and supporting regional economies have all been used to justify continued support for biofuels production, especially in high-income countries. This report will argue that the dubious benefits that would accrue to Australia on these three grounds do not come close to outweighing the costs associated with a biofuels industry. The key tenet of this report is that food insecurity is the result of trade policies in developed and developing countries that created relatively inefficient, thin and insulated agricultural markets. This has led to a situation where the global trade in food products is less resilient to exogenous shocks and poorly suited to handling volatility in terms of trade and output. It is in this context that biofuels have had such an enormous impact. This report also contends that the protectionist manner in which biofuels are produced in high-income countries continues this trend and will only further distort food commodities markets and agricultural investment and production. The perverse nature of the biofuels industry is that by essentially binding agriculture to the volatile price of oil, biofuel production anywhere has the potential to raise food prices everywhere. So while the costs of biofuels are borne by every country, and most heavily by the poorest, any benefits accrue only to those nations producing biofuels, mostly high-income. The reason for this is that the agricultural trade barriers used to prop up domestic farmers and the biofuels industry in high-income countries severely limit the ability of poorer countries to benefit from agriculture-led growth and higher agricultural prices. One of the biggest challenges facing policy makers in making informed decisions about biofuels is the fact that all biofuels are not created equal. The impacts of increased biofuel production on greenhouse gas emissions, land, water and biodiversity vary widely across countries, biofuels, feedstocks and production practices. Similarly, the benefits of one country's biofuels industry may greatly exceed those of another country. This report concludes that the justifications for a biofuels industry have only occurred after the fact. High income countries appear to have embarked upon a program of biofuels production before determining if biofuels will help solve their problems, are the best way to help solve their problems, or even if the problems to be solved actually exist. Similarly, as time and scientific evidence demonstrate that the purported benefits, such as greenhouse gas reductions, are smaller than expected and the costs, such as higher food prices, are higher, the biofuels industry seems to increasingly point to the possible future of the biofuels industry to justify its presence. This report concludes that current government investment in biofuels in high-income countries cannot be fully distinguished from the long-running subsidies and protectionist trade policies characterise the agricultural sector.
