Wednesday, 2 March 2011

Biofuels are an example of what not to do (updated)

Or so says the Economist. The Economist's article makes a simple point:
Because the energy market is worth vastly more than the market for food, even relatively small targets translate into huge demand for crops. Ethanol currently accounts for just 8% of America’s fuel for vehicles, but it consumes almost 40% of America’s enormous maize crop. World ethanol production increased fivefold between 2000 and 2010 but would have to rise a lot further to meet all the targets. The FAO reckons that, if this were to happen (which seems unlikely), it would divert a tenth of the world’s cereal output from food to fuels. Alternatively, if food-crop production were to remain stable, a huge amount of extra land would be needed for the fuels, or food prices would rise by anything from 15-40%, which would have dreadful consequences.
In other words, as I have argued before, government targets which require a certain proportion of national energy to be met from renewable fuels, most of them biofuels will force up the price of food on world markets, with obvious, predicable and dreadful consequences for the third world.

The article also notes that,
All the same, one of the simplest steps to help ensure that the world has enough to eat in 2050 would be to scrap every biofuel target. If all the American maize that goes into ethanol were instead used as food, global edible maize supplies would increase by 14%.
And that sized increase in supply would result in a decrease in prices.

Update: Matt Nolan comments on the Economist's article here.

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