UN agency urges review of biofuel policies to ensure poor can benefit

7 October 2008

Global biofuel policies should be urgently reviewed to ensure that the world’s poor benefit by ending trade-distorting subsidies favouring developed nations while countering the rise in food prices sparked by the diversion of foodstuff to energy production, according to a new United Nations report released today.

“Biofuels present both opportunities and risks,” UN Food and Agriculture Organization (FAO) Director-General Jacques Diouf said of his agency’s annual flagship publication The State of Food and Agriculture (SOFA) 2008.

“Current policies tend to favour producers in some developed countries over producers in most developing countries. The challenge is to reduce or manage the risks while sharing the opportunities more widely.”

Biofuel production from agricultural commodities increased more than threefold from 2000 to 2007, now covering nearly 2 per cent of the world’s consumption of transport fuels.

This trend is expected to continue, and although the contribution of liquid biofuels, mostly ethanol and biodiesel, for transport energy and even more so for global energy will remain limited, demand for agricultural feedstocks such as sugar, maize and oilseeds for biofuels will continue to grow over the next decade and perhaps beyond, putting upward pressure on food prices, the study notes.

If developing countries can reap the benefits of biofuel production, and if those benefits reach the poor, higher demand for biofuels could contribute to rural development, it adds.

“Opportunities for developing countries to take advantage of biofuel demand would be greatly advanced by the removal of the agricultural and biofuel subsidies and trade barriers that create an artificial market and currently benefit producers in OECD countries [Organisation for Economic Cooperation and Development grouping major industrialized nations] at the expense of producers in developing countries,” Mr. Diouf said.

Other policy measures driving the rush to liquid biofuels, such as mandated blending of biofuels with fossil fuels, as well as tax incentives, have created an artificially rapid growth in biofuel production. These measures have high economic, social and environmental costs and should also be reviewed, according to the report.

Higher agricultural commodity prices stemming from the growing biofuels demand offer important opportunities for some developing countries, with agriculture becoming the growth engine for hunger reduction and poverty alleviation, but promoting smallholder participation in crop production requires investment in infrastructure, research, rural finance, market information and institutions and legal systems.

Among the risks, however, are soaring food prices which are already hurting developing countries that are highly dependent on imports to meet their food requirements. Particularly at risk are poor urban consumers and struggling food buyers in rural areas. Many of the world’s poor spend more than half of their incomes on food.

“Decisions about biofuels should take into consideration the food security situation but also the availability of land and water,” Mr. Diouf said. “All efforts should aim at preserving the utmost goal of freeing humanity from the scourge of hunger.”

The environment impact must also be taken into account. “Expanded use and production of biofuels will not necessarily contribute as much to reducing greenhouse gas emissions as was previously assumed,” the report finds. While some biofuel feedstocks, such as sugar, can generate significantly lower greenhouse gas emissions, this is not the case for many other feedstocks.

This impact could also be exacerbated by land-use change. “Changes in land use – for example deforestation to meet growing demand for agricultural products – are a great threat to land quality, biodiversity, and greenhouse gas emissions,” Mr. Diouf said.

Sustainability criteria based on internationally agreed standards could help to improve the environmental footprint of biofuels, the report states, but they should not create new trade barriers for developing countries.


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