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Another Inconvenient Truth

How biofuel policies are deepening poverty and accelerating climate change

From : Oxfam

Biofuels are presented in rich countries as a solution to two crises: the climate crisis and the oil crisis. But they may not be a solution to either, and instead are contributing to a third: the current food crisis.
Meanwhile the danger is that they allow rich-country governments to avoid difficult but urgent decisions about how to reduce consumption of oil, while offering new avenues to continue expensive support to agriculture at the cost of taxpayers.
In the meantime, the most serious costs of these policies – deepening poverty and hunger, environmental degradation, and accelerating climate change – are being ‘dumped’ on developing countries.
Neither a solution to the climate crisis…
Rich countries’ biofuel policies currently offer neither a safe nor an effective means to tackle climate change. By increasing aggregate demand for agricultural land, they will drive the expansion of farming into critical carbon sinks such as forests, wetlands, and grasslands, triggering the release of carbon from soils and vegetation that will take decades and in some cases centuries of biofuel production to repay, at a time when emissions need to peak and fall within the next 10 to 15 years:
• Analysis published in the journal Science calculates that the emissions from global land-use change due to the US corn-ethanol programme will take 167 years to pay back.
• European Union (EU) biodiesel consumption is driving spiralling demand for palm oil both for use in biodiesel, but also to replace rapeseed and other edible oils diverted into the European biofuel programme. Oxfam estimates that by 2020, the emissions resulting from land-use change in the palm-oil sector may have reached between 3.1 and 4.6 billion tonnes of CO2 – 46 to 68 times the annual saving the EU hopes to be achieving by then from biofuels.
Even ignoring land-use change, biofuels are an overly expensive way of achieving emissions reductions from transport. Improving car efficiency is far more cost effective: while the costs of avoiding a tonne of CO2 through biofuels run into the hundreds of dollars, ambitious improvements in vehicle efficiency can yield profits, as reduced fuel costs exceed technology costs. Biomass can be used far more efficiently in static applications such as commercial boilers or combined heat and power.
…nor a solution to the oil crisis
Rich countries’ biofuel policies currently offer neither a safe nor an effective means to address fuel security. Consumption of oil in rich countries is so huge that for biofuels to be a significant alternative requires massive amounts of agricultural production. If the entire corn harvest of the USA was diverted to ethanol, it would only be able to replace about one gallon in every six sold in the USA. If the entire world supply of carbohydrates (starch and sugar crops) was converted to ethanol, this would only be able to replace at
2 Another Inconvenient Truth, Oxfam Briefing Paper, June 2008
most 40 per cent of global petrol consumption. Global oilseed production would be unable even to reach a 10 per cent share of diesel consumption.
Moreover, the costs of using biofuels to improve fuel security are prohibitively expensive. The European Commission’s own research body has estimated that the EU’s proposed 10 per cent biofuel target will cost about $90bn from now until 2020, and will offer enhanced fuel security worth only $12bn. Policies to reduce demand for transport fuels, such as regulation to improve vehicle efficiency, are far safer and more cost effective.
Meanwhile 30 million people are dragged into poverty
Biofuel mandates and support measures in rich countries are driving up food prices as they divert more and more food crops and agricultural land into fuel production. Meanwhile sugarcane ethanol from Brazil, production of which has a far less significant impact on global food prices, is excluded through the use of tariffs.
The World Bank estimates that the price of food has increased by 83 per cent in the last three years. For the world’s poor people, who may spend 50–80 per cent of their income on food, this is disastrous. Oxfam estimates that the livelihoods of at least 290 million people are immediately threatened by the food crisis, and the Bank estimates that 100 million people have already fallen into poverty as a result. Thirty per cent of price increases are attributable to biofuels, suggesting biofuels have endangered the livelihoods of nearly 100 million people and dragged over 30 million into poverty.
The International Food Policy Research Institute (IFPRI) notes that by forcing up food prices, rich-country support for biofuels acts as a tax on food – a regressive tax felt most by poor people for whom food purchases represent a greater share of income. Last year, it is estimated that industrialised countries spent $13–15bn ‘taxing’ food, equal to the amount of funding required to assist those immediately threatened by the food crisis. These amounts will continue to spiral as rich countries increase their consumption of biofuels.
Herein lies the true attraction of ethanol and biodiesel for rich-country governments – an avenue for continued support to agriculture.
Oxfam calls on rich countries urgently to dismantle support and incentives for biofuels in order to avoid further deepening poverty and accelerating climate change.
Specifically, rich countries should:
• introduce a freeze on the implementation of further biofuel mandates, and carry out an urgent revision of existing targets that deepen poverty and accelerate climate change;
• dismantle subsidies and tax exemptions for biofuels and reduce import tariffs;
• tackle climate change and fuel security through safe and cost-effective measures, prioritising regulation to enforce ambitious vehicle-efficiency improvements.
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An opportunity for developing countries?
For poor countries that tend to have comparative advantages in the production of feedstocks, biofuels may offer some genuine development opportunities, but the potential economic, social, and environmental costs are severe.
Oxfam recommends that developing countries move with caution and give priority to poor people in rural areas when developing their bioenergy strategies.
Specifically, developing countries should:
• prioritise bioenergy projects that provide clean renewable energy sources to poor men and women in rural areas – these are unlikely to be ethanol or biodiesel projects;
• consider the costs as well as the benefits involved in biofuel strategies: the financial costs of support, the opportunity costs of alternative agriculture and poverty reduction strategies, and social and environmental costs.
If they decide to proceed with biofuel strategies, developing-country governments should:
• carry out their obligations under international law and conventions, including obligations to protect the right to food, to ensure decent work, and to ensure that the Free, Prior and Informed Consent of affected communities is obtained before biofuel projects commence;
• give priority to feedstocks and production models which maximise opportunities for men and women small farmers.
And companies and investors operating in developing countries should:
• ensure no biofuel project takes place without the Free, Prior and Informed Consent of local communities, and that men and women workers at all stages of production in their value chains enjoy decent work;
• treat men and women smallholder farmers fairly and transparently;
• provide smallholders in their value chains sufficient freedom of choice in their farming decisions to ensure food security for them and their families.
4 Another Inconvenient Truth, Oxfam Briefing Paper, June 2008

© Oxfam International June 2008
This paper was written by Robert Bailey. Oxfam acknowledges the assistance of Sonja Vermeulen, Sophia Murphy, John Wilkinson, and Selena Herrera in its production. It is part of a series of papers written to inform public debate on development and humanitarian policy issues.
The text may be used free of charge for the purposes of advocacy, campaigning, education, and research, provided that the source is acknowledged in full. The copyright holder requests that all such use be registered with them for impact assessment purposes. For copying in any other circumstances, or for re-use in other publications, or for translation or adaptation, permission must be secured and a fee may be charged. E-mail publish@oxfam.org.uk.
For further information on the issues raised in this paper please e-mail advocacy@oxfaminternational.org.
The information in this publication is correct at the time of going to press.