UN urges rethink on biofuels

By Javier Blas in London
The Financial Times
Published: August 14 2007 17:42 Last updated: August 14 2007 17:42

The world risks deeper ­poverty and greater environmental damage unless it ­fundamentally changes its bioenergy strategy, the United Nations’ top food and agriculture official has warned.
The UN Food and Agriculture Organisation is pushing for a high-level meeting next June to lay down rules for the international bioenergy market.

At present, the bioenergy industry is regulated by domestic policies rather than international agreement.

The FAO is urging the European Union and the US to lower trade barriers against ethanol imports; establish a system for bio­energy environmental standards; and provide more microcredit to farmers in developing countries to develop local biofuels.

Writing in today’s Financial Times, Jacques Diouf, FAO director general, said: “Such measures would allow developing countries – which generally have ecosystems and climates more suited to biomass production than industrialised nations and often have ample reserves of land and labour – to use their comparative advantage.”

Mr Diouf said the objective of the proposed meeting should be to ensure that bioenergy realised its potential to fuel sustainable growth and reduce hunger.

The US, Europe and Brazil last year accounted for almost 95 per cent of the world’s biofuel production. Canada, China and India produced most of the rest, according to the International Energy Agency, the industrialised countries’ energy watchdog.

Biofuel production, mostly of corn-derived ethanol in the US and rapeseed-derived biodiesel in Europe, doubled between 2000 and 2005, according to the IEA. In 2005, however, that was still just 1 per cent of global road-transport fuel.

The energy watchdog forecast that would rise to 4 per cent by 2030.

Mr Diouf said the bioenergy sector had a “huge potential to reduce hunger and poverty” if production shifted from rich to poor countries.

At the moment, rich countries’ tariffs make it uneconomic for poor countries to grow biofuel crops.

The problem for developing countries is exacerbated by food prices being pushed up by the biofuel industry’s rising consumption of crops.

Corn prices this year reached an 11-year high of $4.30 a bushel while wheat prices last week rose to $6.96 a bushel, the highest since 1996.

The US biofuel industry last year consumed about 20 per cent of the country’s corn crop, far more than in the past.

“It is clear that the current practice of relying on food crops to produce fuel will be relatively short-lived,” Mr Diouf said.

Copyright The Financial Times Limited 2007