Wednesday, March 30, 2011

Food prices and the ongoing biofuel debate

People worldwide are being affected by a rise in the price of food. The causes are complex and interacting: last summer's drought in Russia, the price of oil, speculative trading in commodities, economic instability, political unrest on the Middle East, you name it. As Tamino mentions, some people sceptical of efforts to reduce greenhouse gas emissions blame the increase in food prices on those efforts, namely the cultivation of biofuels like corn ethanol. Though I think Tamino's post misses the point of this debate.

The impact of corn ethanol, or an individual drought, or any other individual factor, on the price of a global commodity is very hard to quantify. The diversion of the U.S. corn crop to ethanol production over the past decade has undoubtedly affected food prices, despite U.S. government claims to the contrary. The various factors have interacting, nonlinear effects on the price of each commodity, and the commodity prices each affect the others, so it is hard to work out, say, a coefficient for each driving variable. But that's not the problem.

The real problem with any "climate change mitigation = more corn ethanol = higher food prices" argument is the first part: the claim that producing corn ethanol is addressing climate change.

In reality, the use of ethanol from corn as a fuel might actually result in greater greenhouse gas emissions than the use of gasoline, because of the land and energy required to grow the corn, harvest the corn, and convert the corn to ethanol. As such, the primary motivation for the expansion of corn ethanol production in the US is not climate change. Ethanol production is about appeasing regional interests, maintaining of the agricultural subsidy system and reducing reliance on imported fuels, probably in that order. 

The only reason that corn ethanol gets promoted by politicians in the U.S. as a solution to climate change is that in the current political atmosphere, very few actual climate change mitigation proposals can pass, and because of some effective lobbying and the power of the Presidential primary process, expanding corn ethanol production looks like climate change mitigation to the public.

Throw out the word biofuels and people might think action is being taken to address climate change. Look at the acutal conversion efficiencies and total lifecycle greenhouse gas emissions of the current feedstocks in the U.S. and you find a different story.

There is definitely reason to be concerned about the market effects of diverting so much of the U.S. corn crop to ethanol production. The real key to the story, the one to to look for in the coming months, is the price of meat. The majority of cereals and oils, the commodities for which the price has spiked the most, are used to generate animal feed. If you look back to 2008, you’ll see that the price of meat is likely to spike next.
This dynamic demonstrates the real battle we face in the future. It’s not food vs. fuel, it is feed vs. fuel. If the world wants to keep using the most productive croplands to provide biofuel feedstocks, we had better be prepared to eat less or much more expensive meat.

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