Examining Biofuels
Posted - November 1, 2008
Behind the Curtain of the Biofuel World
O.W.N. News Network - as printed in O.W.N. Fall 2008
For years now, governments and investors have treated biofuels as “eierlegende Wollmilchsau” – from the German, a product that tries to be everything to everybody yet ends up satisfying nobody. Biofuels aim to mitigate climate change, serve as a renewable and sustainable energy source, to create employment, therefore reducing poverty and enhance economic growth.
The paper “Biofuel boom or doom? Opportunities and Constraints for Biofuels in Developing Countries” by Manfred Zeller and Martin Grass from the University of Hohenheim, describes current biofuel production trends and analyses political arguments for supporting these fuels in developed and developing countries.
Current demand for biofuels is mainly policy, not market, driven. Governments have introduced diverse support policies, including mandatory quotas, various standards, tax exemptions and even import policies to protect and support domestic industry from low-cost competition from developing countries.
These regulations can be seen as justified in the short run but in the long term, such policies may risk creating a sector that depends on subsidies. The true driving factor for the first and second generation biofuels rise or fall in the near future, though, will be the cost of fossil energy sources.
Newer studies show that when it comes to reducing climate change, biofuels are a costly and not always sustainable strategy.To avoid one ton of CO2-equivalent due to the production of ethanol in the U.S. costs 100 times more than the maximum price paid for one ton CO2-equivalent at the Chicago Climate Exchange
Ethanol production is a CO2-intensive process by its nature, so that off-setting emissions made in the course of production is prohibitively expensive. What’s more, few studies include the effects of the land use change required to grow biofuels. The green picture of biofuels can quickly turn into a greyer one.
This paper’s authors show that even with the astonishing growth in biodiesel and bioethanol production recently, only minor parts of the world’s current fossil energy can be replaced by biofuels. Further, increased demand for cereals, oilseeds and sugars as biofuel ingredients is having a large impact on global agricultural trade. Though hardly the only factor behind increasing food prices, biofuels have recently become a welcome punching bag in this arena.
It can be argued that biofuels have beneficial employment and income effects for rural labourers in developing countries. However, large factories currently produce the major share of biofuels, in both developed and developing countries.While large-scale processing may be necessary to be cost-efficient, growing biomass ingredients could benefit poor smallholders more, if appropriate institutional arrangements were in place, such as contract farming and cooperatives.
To deal with our future food and energy needs a multidimensional strategy is certainly required. Beside the use of agricultural residues, the use of marginal land, research and development of the second generation of biofuels, the increase of agricultural production in general as well as strong efforts on energy savings and the development of other renewable energy sources like solar, hydrothermal, wind etc. have to be undertaken and guided by appropriate policies focusing on long-run sustainability of our food, agriculture and energy systems.
The University of Hohenheim is the leading agricultural university in Germany with various graduate programs e.g. organic farming, rural development and agricultural economics. The original paper will be published in the “Quarterly Journal of International Agriculture”, Volume 47 (2008) Nr. 3 or Nr. 4, DLG Verlag.
