PRESS SELECTIONS Sample coverage of the Global Subsidies ... · A spoonful of sugar ... The United States have been criticised for diverting corn production to the manufacture of

PRESS SELECTIONS

Sample coverage of theGlobal Subsidies Initiative

OCTOBER 2008

Prepared by :Fernando Cabrera, Researcher

Prepared for :The Global Subsidies Initiative (GSI)of the International Institute for Sustainable Development (IISD)Geneva, Switzerland

TABLE OF CONTENTS

FOREWORD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4

Financial Times Deutschland : Was der Partner nicht weiß . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5

Mail & Guardian : A spoonful of sugar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6

Göteborgs-Posten : USA och EU kan lösa matkrisen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8

The West Australian : Subsidies for biofuels ‘inefficient’ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10

Financial Times : Biofuels : a tale of special interests and subsidies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11

The Economist : The Drive for Low Emissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13

Nature : Kill king corn . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16

DN.se : Stöd till biobränslen döms ut . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18

Smithsonian : Who’s Fueling Whom? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19

Forbes : Farm Paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22

Die Wochenzeitung : Support für Säufer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24

Bioenergy Business : Biofuels : a tale of special interests and subsidies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26

Financial Times : 2007 : Big debate over benefits and costs of biofuels . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27

Rolling Stone : The Ethanol Scam : One of America’s Biggest Political Boondoggles . . . . . . . . . . . . . . . . . . . .29

El País : Las subvenciones también juegan su papel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32

The Globe and Mail : With commodity prices on fire it’s time to wean farmers off freebies . . . . . . . . . . . . .33

The Economist : Tilting at windmills . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35

National Business Review : Fears of US biofuels ‘splash and dash’ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .38

Valor Econômico : Entre altos e baixos, energia limpa vira fibre de investidores . . . . . . . . . . . . . . . . . . . . . . .40

Infochange : The truth about subsidies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .44

The Gazette : Field of schemes; Ethanol empire is built on subsidies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47

Inter Press Service : EnergíaEEUU : Biocombustibles, promesa sobrevalorada . . . . . . . . . . . . . . . . . . . . . . . .49

GSI INSTITUTIONAL COLLABORATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .51

Financial Times : OECD slams biofuels subsidies for sparking food price inflation . . . . . . . . . . . . . . . . . . . .52

The Globe and Mail : Biofuels push damaging, disruptive, OECD says . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .53

Neue Zürcher Zeitung : Ungünstige Bilanzen für Biotreibstoffe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .54

La Tribune : Les subventions sur les agrocarburants à l’index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .55

Reuters : Biofuels offer cure worse than the disease OECD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .56

Le Monde : Un rapport de l’OCDE souligne les risques des agrocarburants . . . . . . . . . . . . . . . . . . . . . . . . . .57

INDEX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .58

4

FOREWORD

In today’s increasingly complex, rapidly changing, globalized world, it takes an elaborate set of mutually-reinforcing strategies to achieve truly significant change. For the International Institute for Sustainable Development (IISD), the notion of “reform” has, from the outset, meant measurable changes in policies and practices that will ultimately deliver a sustainable future. However, in the politically-charged, economically-outsized field of subsidies – valued according to some estimates at well over US$ 1 trillion per year – the IISD’s commitment to reform takes on an entirely new dimension.

The architects of the Global Subsidies Initiative (GSI), one of the IISD’s youngest and most ambitious brainchildren, acknowledged that sound and thorough research, though essential, is in itself insufficient to effect real progress; they judged that drawing attention to perverse subsidies through the international media, though key to fostering public debate, is not enough to provoke a marked change in direction; they surmised, finally, that reaching out to decision makers with hard evidence of the perverse impacts certain subsidies are having on the environment, social justice and economic fairplay, however convincing, would not tip the balance in favour of necessary and urgent policy reforms .

Instead, the GSI integrates all three strategies – the quest for scrupulous and detailed research, the instiga-tion of high-quality and widespread media coverage, and targeted outreach to policy-makers. Together they constitute the GSI’s so-called ‘Three Pillars’ of action. The GSI is thus a concerted and cooperative effort to help reform those subsidies that represent a real obstacle to addressing the devastating realities of climate change, poverty and biodiversity loss .

During the first three years since its inception, the GSI has focused on investigating and publishing the scale of government support to biofuels across a range of rich and poor countries. The outcome – the GSI’s research series entitled “Biofuels : At What Cost?” – has had unprecedented impact : it has contributed, with-in just two years, to shift widespread public perception from an unquestioning belief in what appeared to be a promising, renewable and sustainable energy source, to healthy skepticism about the impacts of biofuels subsidies on greenhouse gas reduction, the use of land for fuel versus food, the frenzied rush of investors in this “green bullet” that, coincidentally, also reconciles vested interests in the agro-business sector.

This selection from numerous articles and broadcasts traced between 2006 and 2008, referring in the inter-national media to the GSI’s work in the field of subsidies, has been compiled as an indication of progress made in the area of media outreach, the “Second Pillar” of the GSI’s mandate.

The partnerships developed, strategies implemented and media outreach achieved during the first 3-year phase of the Global Subsidies Initiative’s work provide an effective basis on which to engage in the next round of the GSI’s work: including that of investigating the need for reforms in the area of subsidies to fossil fuels . Javed Ahmad Director of Communications The Global Subsidies Initiative

5

Von Monika Dunkel, Financial Times Deutschland

Die Bundesregierung ver-schweigt der WTO das wahre Ausmaß der deutschen Subventionen – und ver-stößt damit gegen inter-nationale Verträge

An seinen Sonntagsreden gemes-sen, gehört Wirtschaftsminister Michael Glos (CSU) zu den größten Fans der Welthandelsorganisation WTO. Vehement tritt der beken-nende Ordnungspolitiker für die Ziele der Genfer Institution ein – und plädiert für „offene Märkte und eine Handelsliberal-isierung auf Grundlage multilateral abgestimmter Regeln“ .

Im Alltag allerdings nimmt es das Wirtschaftsministerium mit dem Regelwerk der WTO weit weniger genau . Zu diesem Ergebnis kommt eine Untersuchung des Finanzwis-senschaftlichen Forschungsinstituts der Uni Köln (Fifo) . Darin stellen die Ökonoment Michael Thöne und Stephan Dobroschke fest, dass Deutschland seine Pflich-ten gegenüber der WTO „mas-siv verletzt“ . Eigentlich hat sich

die Bundesregierung vertraglich verpflichtet, sogenannte spezifisch-eSubventionen der EUKommission zu melden – diese leitet die Daten dann weiter nach Genf . Tatsächlich unterschlagen die Deutschen das wahre Ausmaß der gezahlten Zuschüsse jedoch .

Bei der WTO sind gerade mal Mittel in Höhe von 1,25 Mrd. € vermerkt – in Wirklichkeit müsste die Regierung Subventionen von mindestens 10,8 Mrd. € anmelden, schreiben die Kölner Wissen-schaftler. Der Fifo Studie zufolge gehören die Deutschen damit zu den größten Schummlern unter den Industrienationen. „Man könnte von einem Bruch internationaler Verträge sprechen“, sagt Thöne .

In der Auflistung des Wirtschaftsministeriums fehlen zum Beispiel Zuschüsse an Airbus für den Absatz von zivilen Flug-zeugen (4,5 Mio. €), Exporthilfen für Energietechnologie (8,8 Mio. €) und Mittel für die Förderung des Absatzes ostdeutscher Produkte (1,7 Mio. €) – alles Subventionen, die nach den WTORegeln verboten sind . Der

Genfer Organisation sind die Hände gebunden, sie hat keine Sanktionsmöglichkeiten . Klagen könnten allenfalls die Handelspart-ner . Doch die wiederum können nur gegen Exporthilfen vorgehen, die ihnen auch bekannt sind . Verschwiegen bei der Anmeldung wurden auch die Steinkohlesub-ventionen von 2,3 Mrd. € und die Hilfen für erneuerbare Energien von 1,35 Mrd. €. Diese Zuschüsse sind zwar erlaubt, könnten die Handelspartner aber verstimmen und zur Verhängung höherer Zölle veranlassen .

Bei ihren Nachforschungen haben die Wissenschaftler schlicht die Subventionsberichte und Länderhaushalte mit den Meldun-gen an die WTO abgeglichen . Im Wirtschaftsministerium, dem die FifoStudie vorliegt, gab es gestern keine rechte Erklärung für die Lücke . Man habe der Anfrage der EU entsprochen und sämtliche Res-sorts und Bundesländer abgefragt . Die USA übrigens haben bereits ihre Lehren gezogen . Sie verlassen sich nicht mehr auf die WTODaten – sondern informieren sich lieber direkt bei ihren Handelspartnern .

WTO Subsidy Notifications

May 7, 2008

Assessing German subsidies under the GSI notification template proposed for the WTO (April 2008)

Was der Partner nicht weiß

6

By Lynley Donnelly, The Mail & Guardian

The role of biofuels in soaring food prices is not straight-forward and needs closer examination when it comes to the role they can play in South Africa, say experts.

While countries like the United States have been heavily criticised for diverting corn production towards the manufacture of ethanol, pro-ponents of biofuel argue that the industry has resulted in developing countries gett ing more equitable prices for their produce because of the boom in alternative energy .

"Previous low food prices have harmed developing regions that have massive agricultural production potential," the Central Energy Fund (CEF) spokesperson Mandla Tyala told the Mail & Guardian .

"These low world prices were largely due to First World massive agricultural subsidies . Higher prices for agricultural commodities can be positive for Africa overall, as Africa has by far the world's greatest under-utilised agricultural capability ."

The massive subsidisation of the industry in the US, however, resulting in its use of land meant to cultivate food, for growing biofuel feedstocks is regularly held up as an example of bad biofuels .

Last year the Global Subsidies Initiative, based in Geneva, reported US government support for biofuels reached about $6,3-billion to $7,7-billion in 2006, the majority of which was directed to ethanol .

"Total support is projected to reach about $13billion this year and almost $16-billion by 2014. Under existing policies, the industry will, in aggre-gate, obtain subsidies worth more than $92-billion over the 2006-2012 time frame," said the report .

The contribution of biofuels to the increase in food prices was hotly debated at the United Nations confer-ence on world food security, held in Rome earlier this month . Figures on the contribution of biofuels to food infl ation vary widely, from a reported 3% to as much as 30%.

Brazil, a biofuel success story produces about 40% of the country's fuel needs through ethanol produced from sugar cane . The US policy of biofuels being made from maize rather than sugar is controversial, however, as maize yields less energy than sugar and requires more energy to convert starch into ethanol .

For a country like South Africa, however, biofuels have the potential to stimulate development in under-developed areas .

Biofuels have been identifi ed as a priority sector under the accelerated and shared growth initiative of South Africa (AsgiSA). But no large-scale biofuel production plants are under way .

Late last year the biofuels indus-trial strategy for South Africa was released . It outlines an initial phase, which will see a 2% penetration of biofuels into the liquid fuel market. This is down from 4,5% initially out-lined in the draft document.

"The decrease was primarily intro-duced to reduce risk of competing with food supply," Tyala said .

The CEF puts our country's lack of production down to the priorities of the strategy .

"Supply is focused on expanding South African agricultural supply by using new, currently underused agri-cultural lands, primarily being in the former homelands," Tyala said, "This takes longer than diverting surpluses from existing commercial lands ."

He said : "Investment in major biofuels plants requires clarity on investment incentives . This is not yet fi nalised in South Africa."

Biofuels – At What Cost?

June 18, 2008

Government Support for Ethanol and Biodiesel in the US – 2007 Update (October 2007)

A spoonful of sugar ...

The United States have been criticised for diverting corn production to the manufacture of ethanol. (Photo : AP)

was directed to ethanol .

about $13billion this year and almost $16-billion by 2014. Under existing policies, the industry will, in aggre-gate, obtain subsidies worth more than $92-billion over the 2006-2012 time frame," said the report .

increase in food prices was hotly debated at the United Nations confer-ence on world food security, held in Rome earlier this month . Figures on the contribution of biofuels to food infl ation vary widely, from a reported 3% to as much as 30%.

" Last year the Global Subsidies Initiative, based in Geneva, reported US government support for biofuels reached about $6,3-billion to $7,7-billion in 2006, the majority of which was directed to etha-nol."

7

maize as a feedstock for biofuels, The Southern African Biofuels Associa-tion (Saba) says that biofuels are not the cause of increased food prices .

"The opposite is the case," says Erhard Seiler, chief executive at Saba .

Biofuel products interact quite intensively with food production, he argues . "With present technolo-gies about 60% to 70% of the volume stream related to biofuels ends up in food production, adding to the food volume produced ."

Saba believes South Africa can achieve more than the 2% outlined in our industrial policy and argues that this would allow for increased private participation in the industry . 'Saba always proposed 5% biodie-sel and 10 % bioethanol mix," says Seiler . "These ratios are possible and beneficial for South Africa, [they] allow private sector participation and [promote] sustainable food produc-tion and job creation in rural areas" . Seiler believes that given current demand and production rates, maize is a viable and sustainable feedstock for biofuels . As a result of increased demand on maize its production will increase this year, without the additional pull of biofuel production in South Africa, he says .

Seiler says South Africa uses about eight million tons of maize annually, of which only 45% is for staple food consumption .

"The harvest forecast is about 11 million tons for 2008. I believe that shows everybody the true story and the real potential for the country," he argues .

The CEF agrees with Saba : "As long as the supply for the biofuels plants comes from land that would not have been planted (in the absence of the biofuels plants) and there are no major crop failures, then the Saba view is probably correct ."

The environmental impacts on the area are also minimal he argues . The entire region, covering both proposed projects is rainfed, and would require no irrigation .

Given practices in cane farming, one employee is required for every four hectares of cane . Between the two projects, they could easily employ 6 000 people for each, along with 100 people working in each plant .

But, argues Collins, J&J has no wish to create indentured labour . The proj-ect would ideally mechanise harvest-ing, "to get the most value from the land" . Since the communities own the land increased profitability in opera-tions would mean more money in their pockets at the end of the day .

Depite all these accolades, feasibil-ity will only be decided on towards the end of the year and, should all go well, production will only begin in about 2012.

In addition to this Collins says the project will not solve South Africa's fuel problem .

With both plants on line, it would only contribute 1% to South Africa's target of a 2 % biofuel mix.

"But it could stimulate great social investment," he argues .

Collins says South Africa simply does not have the right amount of arable land and not nearly enough water to source all its fuel needs from ethanol . He acknowledges that bio-fuels have contributed to the increase of food prices, but says that debate around their value is far "more com-plex than it appears" .

"Because of Brazil using cane for biofuels, the sugar price has increased," he says "But in many developing countries producers were losing money growing sugar cane . But now they are receiving a fair price ."

To protect local food security the Industrial Strategy has ruled out

But the longer the roll out takes, the further off the benefits of biofuels will be for South Africa .

J&J Bio-energy is looking at the feasibility of two biofuel projects, the first in the Umgazana area in the former Transkei and the second in neighbouring KwaZulu-Natal.

Both projects would encompass a minimum of 20 000ha of land for growing cane, along with the estab-lishment of a bioethanol plant .

One plant can produce about 100-million liters of ethanol, says Steven Collins at J&J Bio-energy, and will take about R1-billion to build.

The projects will achieve a number of things should they go ahead, says Collins . Both target underused, but arable land, and meet broad-based black economic empowerment stan-dards as the communities will have a stake in the plant, as well as retain ownership of the land . The factories will also buy the cut cane from locals, and "pay a fair price" for it further adding to the their income streams, says Collins .

As both plants will be located in the heart of the growing regions, the cost of transporting the cane to the factory will be greatly reduced .

Under the former Transkei govern-ment, about 10 000ha of cane were being grown . This dropped to current levels of 4 000ha, says Collins, mainly because of transport cost increases .

The situation is much the same in KwaZuluNatal, he says . In the Umz-imkulu region it costs farmers R90/ton to transport cane to the closest mill. The mill pays R200/ton for the cane . As a result, farmers are switch-ing from cane to other crops .

"In a place like Umgazana [East-ern Cape] there is nothing at the moment," he says " A factory would kick start development ."

It could produce power for sale to the national grid or, failing that, to power local homes and businesses .

8

Protektionism och sub-ventioner är de två enskilt största skälen till ske-nande matpriser. Det vilar ett stort ansvar på EU och USA som hittills blockerat möjligheterna att lösa prob-lemen. Den svenska regerin-gen måste agera starkt och snabbt för att hjälpa till att slutföra världshandelsrundan – en förhandling som risk-erar att hamna i ett dödläge, skriver Mats Hellström.

Priserna på livsviktig mat har fördubblats på något år i många utvecklingsländer . Matpriskravaller och politisk oro i ett trettiotal nationer, regeringar på fallrepet och krismöten i internationella organ, risker för ny svält i en tid då fattigdomen i världen äntligen börjat minska .

Det finns många faktorer bakom denna snabbt uppseglande globala kris – minst lika allvarlig som den pågående internationella finan-skrisen .

Några omständigheter är inte möjliga att påverka på kort sikt. Två års dåliga skördar anses bero på klimateffekter. En ny och stor medelklass i Asien tar till sig västerländska, expansiva matvanor . Oljeprishöjningarna och andra energikostnadsökningar är förvisso påverkbara, men med betydande


May 28, 2008

Government Support for Ethanol and Biodiesel in the European Union (October 2007)

USA och EU kan lösa matkrisenknappast uppfattas som marginellt. Dessutom – detta är ju bara tänkt att vara början!

Tullar och subventioner av etanol på matjord kan tas bort genom rim-ligt möjliga politiska beslut – även om kapitalintressena är starka . Dessutom är de förhållandevis nya . Det borde kunna leda till en saklig debatt om möjligheter och kostnad-er för alternativa bränslen till oljan .

En grundläggande bakgrund till dagens kris är att jordbruket under lång tid utvecklats dåligt i många utvecklingsländer . Därför kan en plötslig brist, som nu, slå till med extrema prishöjningar . En bak-grund har varit – och är – de rika ländernas handelspolitik . Framför allt EU :s exportsubventioner men också USA :s subventioner till bönderna håller nere produktion och investeringar i utvecklingslän-der .

Ett klassiskt exempel : För att fördyra köttpriserna till Europas konsumenter slumpar EG/EU bort ett ”överskott” med subventionerad export till Argentina, där biffarna då blir så billiga att den normalt konkurrenskraftiga och produk-tiva grannen, Brasilien, inte har en chans att konkurrera.

Pervers jordbrukspolitk Detta är inte något extremt exem-pel utan en integrerad del av EG/EU :s system. Denna perversa jordbrukspolitik med starka inslag av en Bresjnevsk planhushålln-ing har under decenniernas lopp lett till randen av handelskrig och hindrat uppgörelser för frihan-del på många andra områden .

trögheter och genom inte helt genomskinliga maktkonstellationer .

Två viktiga orsaker till mat-prischocken går emellertid att göra något åt, här och nu . Allt mer av matjord undanträngs av de sub-ventionerade biobränslena . ”Jord-bruksbränslen” vore för övrigt ett mer rättvisande begrepp än det litet förföriska bioprefixet.

I USA går nu en tredjedel av majsskörden till bränsleproduk-tion som etanol . Subventioner och tullmurar skyddar och ger bönder-na incitament till produktion av bränsle i stället för mat i såväl USA som EU .

Bidrar till höga matpriser Det blir en dålig advokatyr när den svenska regeringen hävdar att biobränslen endast marginellt påverkar matprishöjningarna . Till och med den amerikanska bon-delobbyn uppskattar biobränsle-nas bidrag till den senaste tidens matprishöjningar till omkring 15 procent . Oberoende internationella organisationer bedömer effekterna till mellan 20 och 30 procent.

Även om man skulle gå på bon-deintressets egen mer försiktiga uppskattning – så kan 15 procent

JORDBRUKSBRÄNSLE. I USA går nu entredjedel av majsskörden till bränsleproduktionsom etanol, skriver Mats Hellström

Mats Hellströmtidigare utrikeshandelsoch jordbruksminister

(s), medlem av den internationella gruppenGlobal Subsidies Initiative

9

av detta år. Mycket förhandlingsun-derlag är förberett. En del har börjat komma loss mellan förhandlarna under denna vår .

Men åtaganden för att bryta upp jordbruksprotektionismen är helt nödvändiga. Om uttrycket ” window of opportunity” någonsin haft en mening, så är det nu! Den svenska regeringen har en mycket kompetent grupp av handels-förhandlare . Använd maximalt denna internationellt starka resurs och agera snabbt såväl inom som utanför EU!

en del områden, framför allt under 1990talet. Men grundstrukturen är kvar och skapar tillsammans med USA :s jordbrukssubventioner en blockering av den världshan-delsrunda, Doha rundan, som nu – borde – vara inne i ett slutskede.

”Tyst tsunami” I ljuset av den svåra matpriskris och hotande svält som nu brutalt slår till mot fattiga människor i stora delar av världen – man talar om en ”tyst tsunami” så borde trycket på EU och USA kunna vara starkt nog. Många intressen finns för att avsluta Doharundan i slutet

Desto mer tragiskt är att den franske jordbruksministern nu rek-ommenderar motsvarande typ av regional protektionistisk politik för utvecklingsländerna – bocken som trädgårdsmästare; detta dessutom i en tid då även franska bönder börjat få upp ögonen för att EU :s jordbruksstöd i stort går dem förbi och i stället gynnar livsmedelsin-dustrin och ett fåtal storgodsägare.

EU :s jordbrukspolitik har emel-lertid – under yttre tryck i handels-förhandlingarna – förbättrats på

10

By Jodie Thomson, The West Australian

A global research institute has urged the Federal Government to rethink its support for the biofuels industry, claiming spending $95 million a year to back the fl edging industry was a costly way to reduce greenhouse gas emissions .

The International Institute for Sustainable Development said State and Federal government assistance could reach several hundred mil-lion dollars if planned new ethanol and biodiesel plants came into pro-duction over the next two years .

A report released yesterday by the institute’s Global Studies Initiative criticised development measures for Australia’s biofuels industry as ad hoc and warned of “unintended consequences” in cre-ating competition with food crops for land .

It called for a review by the Fed-eral Government into the cost-eff ec-tiveness of support policies and for a long term viability assessment of the industry .

Biofuels contribute to less than 0.5 per cent of Australia’s transport fuel needs, which includes 19 billion liters of petrol and 17 billion liters of diesel each year. The Govern-ment has set a voluntary target of 350 megaliters by 2010 with sup-port through an excise tax rebate, due to be phased out from 2011 onwards, and production grants .

“The production of biofuels is expanding rapidly around the world, as governments strive to lower CO2 emissions and bolster their energy security,” the institute said yesterday .

It said that in Australia, the fund-ing required to achieve a one-tonne reduction of CO2 through bio-fuel subsidies could have bought between fi ve and 30 tonnes of CO2 equivalent off sets on the US or European carbon markets .

But Pingelly farmer and Bio-Works Australia franchisee John Hassell said the Government needed to support fi nding alterna-tives to the world’s diminishing oil supplies .

BioWorks Australia is expected to produce up to three million liters of biodiesel a year at full capac-ity using canola, mustard, tallow and used cooking oil. The com-pany is targeting Indian mustard as a source crop, which acts as a “break-crop” between cereal crop plantings to manage weeds and soil disease, in a bid to help overcome the “fuel versus food” debate .


April 15, 2008

Government Support for Ethanol and Biodiesel in Aus-tralia (April 2008)

Subsidies for biofuels ‘ineffi cient’

"The International-Institute for Sustain-able Development said State and Fed-eral government assistance could reach several hun-dred million dollars if planned new etha-nol and biodiesel plants came into production over the next two years."

to biofuels is oft en greater than the cost of the fossil fuel equivalent. Not surprisingly, the production costs of subsidised biofuels are also generally much higher (see charts)

Does this costly shift to biofuels at least deliver reductions in net emissions of greenhouse gases? Not by as much as one might suppose, is the answer . The net greenhouse gas emissions of expensive Euro-pean rapeseed oil-based diesel are a mere 13 per cent less than those of conventional diesel . Similarly, net emissions from US corn-based ethanol are only 18 per cent less than conventional petrol .

This highly subsidised source of demand is also having a big impact

fuel-effi ciency standards. Because the fuel-economy credit is big-gest for the least energy-effi cient models, manufacturers concentrate on sport utility vehicles and light trucks . Yet almost all the drivers of these vehicles use ordinary petrol . The result is greater consumption of petrol, not less .

The cost of support per liter of ethanol varies between $0.29 and $0.36 per liter in the US and $1 in the EU (see chart) .

Support for biodiesel varies between $0.2 per liter in Canada and $1 in Switzerland. But the cost of petrol, in terms of equiva-lent energy units, is $0.34 and of diesel is $0.41. Thus, the subsidy

By Martin Wolf, Financial Times

Energy security and climate change are two of the most signifi cant challenges confronting humanity . What we see, in response, is the familiar capture of policymaking by well-organised special interests. A superb example is the fl ood of subsidies for biofuels . These are farm programmes masqueading as answers to energy insecurity and climate change . Not surprisingly, they have the depressing charac-teristics of such programmes : high protection, open-ended support to producers, and indiff erence to economic rationality .

Already the support in members of the Organisation for Economic Cooperation and Development costs about $13bn to $15bn a year. But this sum generates much less than 3 per cent of the overall sup-ply of liquid transport fuel. To bring the biofuel share to 30 per cent, as some propose, would cost at least $150bn a year and probably more, as marginal costs rose .

Someone needed to take a close look at the rationality of all these supports . An excellent report from the Global Subsidies Initiative of the International Institute for Sustainable Development does just that*. It does not tell a prett y story.

Policy is extraordinarily complex . It can also be highly irrational . Brazil is, for example, the Most effi cient supplier of bioethanol, but confronts tariff s of at least 25 per cent in the US and 50 per cent in the European Union . A smaller example is the advantage given to production of “fl exible-fuel vehicles” in US corporate average

11


October 30, 2007


Biofuels : a tale of special interests and subsidies

" Someone needed to take a close look at the rationality of all these supports. An excellent report-from the Global Subsidies Initiative of the International Institute for Sustain-able Development does just that*. "

12

of biofuels, since these shift all the risk of fluctuations in demand and supply of foodstuffs on to their use as food; discipline the stacking of subsidies on one another; and eliminate all open-ended supports for production before these become impossible to reverse .

Here, also, are some positive ideas : define the objectives and instruments of policy precisely, in terms of the overall goals of energy security and reductions in emis-sions of greenhouse gases; create a single global price of carbon that governs all activities; make produc-ers compete for any support that is offered; let the markets decide on sale of flexible-fuel vehicles (and indeed the energy efficiency of vehicles); and, above all, move to free trade in biofuels .

We should at least try to learn from painful experience with a century of farm policies . I know that is naive . But is it impossible to respond to the big challenges of energy policy and climate change by applying a little intelligence, for a change? *Biofuels – At What Cost? Global Subsidies Initiative, www .globalsubsidies .org

technologies, complements to, rath-er than substitutes for, fossil fuels and are also vulnerable to their own risks of weather and disease .

Rationalisation four : subsidis-ing biofuel is an efficient way to reduce greenhouse gas emissions . According to the report, the cost of eliminating a tonne of carbon dioxide equivalent through biofuels varies from a low of about $150 to as much as $10,000. Even the lower of these figures exceeds almost all estimates of the marginal benefit of reducing a tonne of emissions . It certainly much exceeds the cost of many alternative ways of doing so .

Rationalisation five : subsidies are only needed to establish the infrastructure . But if biofuels are to be competitive, it will be unneces-sary to subsidise the infrastructure . Investors can do that for them-selves .

This then is a classic farm pro-gramme : a costly system of transfers looking for a rationale . Or, as the report puts it : “The bewildering array of incentives that have been created for biofu-els in response to multiple (and sometimes contradictory) policy objectives bear all the hallmarks of a popular bandwagon aided and abetted by sectional vested inter-ests .”

So what should be done? Here are some simple negative sugges-tions : eliminate increasingly popu-lar (because apparently costless) mandates to use specific quantities

on demand for foodstuffs. In 2007, for example, the increase in US demand for corn-based ethanol will account for more than half of the global increase in demand . Much the same is true for US and EU use of soyabeans and rapeseed in biodiesel . The rising price of food is good for producers . It is dreadful, however, for consumers, particular-ly for those in poor food-importing countries . Increased production of biofuels also adds stress on existing land and water supplies .

Is it possible to justify this cor-nucopia of complex and expensive subsidies, mandates and protec-tionist measures? No. But that does not stop people from trying . Indeed, they point to a host of dif-ferent (and often changing) justifi-cations, as is too familiar from the history of farm policies . Here are just five of them.

Rationalisation one : biofuel subsidies reduce farm support payments . But, in fact, US evidence strongly suggests that these sub-sidies are being piled on top of existing farm subsidies, not replac-ing them .

Rationalisation two : mandating biofuels will lower petrol prices . But it is obviously mad to try to lower the price of a commodity by subsidising the production of more expensive alternatives .

Rationalisation three : subsidis-ing biofuel is an efficient way to reduce reliance on risky fossil fuels . But biofuels are, under current

13


May 31, 2007

Government Support for Ethanol and Biodiesel in the US (September 2006)

The Drive for Low Emissionsin the carbon emissions that a fuel emits over its life cycle . That has implications for “unconventional oil”—petrol made from oil shale and tar sands. Although CO2 emis-sions from the resulting fuel are the same as those from conventional sources, producing it is a filthy business, so such rules will dis-courage its use . Europe is planning to follow California . That is not necessarily a coincidence . There is a lot of traffic between Brussels and Sacramento on green issues .

Tighter regulation will not hit all companies equally (see chart 9). German car firms are particularly vulnerable, which was why they made the most fuss about the commission turning the volun-tary target into a mandatory one . The French and the Italians were smugly silent .

A corny idea “This industry is 98% dependent on petroleum . GM has concluded that that's not sustainable,” says Larry Burns, GM's vice-president of R&D and strategic planning . “It's all about displacing petroleum .” The Prius's success—390,000 Americans own one—is a testament to Toyota's vision and marketing . But it is not clear how much poten-tial there is in the hybrid market . Bill Ford announced in 2005 that his company would be building 250,000 hybrids by 2010, but it no longer seems to be aiming for that . Anyway, hybrids are not a solution to global warming . Their somewhat greater fuel efficiency will soon be offset by the increase in global car ownership . More radical techno-logical changes are needed .

measures that have been proposed around the world to cut vehicle emissions . California is trying to impose greenhouse-gas emis-sions standards on cars, though the motor manufacturers have taken the state to court on the ground that this is federal govern-ment business . In his most recent state-of-the-union address, George Bush's big concession to the greens was to propose a 4% a year tighten-ing in fuel-efficiency rules.

The EU has had a longstanding voluntary deal with the carmakers under which they would aim to reduce the average CO2 emissions of their fleets to 120g/km by 2012. But thanks to consumers' grow-ing enthusiasm for high-power, high-emissions cars, that seemed unlikely to happen, so this year the European Commission decided to impose a mandatory standard . There was a big row, but the com-mission got most of what it wanted .

And now governments are taking aim at fuel companies too . In Janu-ary California announced that by 2020 it will require a 10% reduction

The Economist, Print edition

Car and fuel companies investing in clean transport

KEN LIVINGSTONE, the mayor of London, last year caused a mild panic among drivers who cruise the city's narrow streets in “Chelsea tractors” (SUVs to the rest of the world) . He announced that he was planning to charge cars emitting more than 225g of CO2 per kilome-ter £25 a day to go into the centre of London rather than the standard £8. “Red Ken” has always enjoyed stirring it among the rich, so he was probably quite happy at the stink he caused .

Worldwide car ownership is growing around 5% a year, so if emissions from cars are to be cut, engines will have to become dra-matically more efficient, or there will have to be a technological breakthrough to replace petrol with a clean fuel . Now that governments seem to be getting serious about emissions, car and fuel companies are getting serious about finding less polluting alternatives .

Fuel-efficiency regulations of varying kinds already exist in all the countries that matter, but in America, where they were fairly tough during the oil crises of the 1970s and 1980s, they have lost their bite . Improvements in engine efficiency have been used not to reduce fuel consumption but to weigh cars down with gizmos . And car companies have carried the burden of those regulations .

Fuel companies, so far, have got off scot-free. That seems to be changing . Mr Livingstone's ini-tiative is only 3one of many new

14

car—not the hybrid car that uses electricity for pott ering about in the city and switches to its combustion engine at speed, but the fully elec-tric sort that uses either a hydrogen fuel cell to produce electricity or a batt ery to store it.

Hydrogen is an att ractive way of powering a vehicle because it can be made from all the sources that electricity can . But hydrogen fuel cells have been just around the corner for a long time . GM has been working on them since the 1960s, and reckons that so far it has spent $1 billion. The technol-ogy's appeal is obvious, for it could revolutionise not only the car : if the hydrogen fuel cell can produce electricity to power a vehicle, why not a house as well?

There was a bubble of excitement about fuel cells in the late 1990s, and shares in companies such as Ballard Power Systems rocketed . But hopes that a fuelcell car would be on the market early this decade were disappointed . The fuel cell, says Shell's Duncan Macleod, was “overpriced and overpromised at the front end” .

Still, fuel-cell vehicles are gett ing onto the roads . London ran three buses for a three-year trial and is now planning to buy ten . There are around 6080 hydrogen buses and 200 cars on the road world-wide, and a few fi lling stations. Shell, which is taking hydrogen seriously, is about to open its fi rst fi lling station in California. It has one already, in Washington, DC, to service ten cars, and another in Ice-land, for three buses. It is an expen-sive business. London's three-year, three-bus trial cost £4.5m. Hydro-gen cars cost around $1m each to build, according to Mr Macleod . At the pump the hydrogen costs $5 a kilo—about the same, in terms of mileage, as current petrol prices . How much does it cost Shell to make? “A lot more than $5,” says Mr Macleod, laughing . GM is also working on batt ery technology. At this year's Detroit motor show it unveiled the Chevrolet Volt, which has both a batt ery and a combus-tion engine . The technology got

with gasoline; but according to the International Institute for Sus-tainable Development, America's subsidy costs taxpayers somewhere between $5.5 billion and $7.3 billion a year. And high tariff s keep out imports of cheap Brazilian ethanol made from sugar cane .

Third, corn ethanol is not very green . Some people think that corn ethanol is responsible for more emissions than it saves, because so much energy is used in grow-ing the corn . Dan Kammen and Alex Farrell of the University of California at Berkeley reviewed six studies on the issue and concluded that, gallon for gallon, ethanol is probably 1015% bett er than petrol for emissions of greenhouse gases . That is a help, but no panacea .

A bett er bet may be cellulosic ethanol—ethanol that can be made out of straw, switchgrass, wood chips—prett y much anything with cellulose in it . Mr Bush, keen on a technological quick fi x for global warming, has off ered $385m in government subsidies to bring cel-lulosic ethanol to market .

A lot of people are trying . Vinod Khosla's company, Range Fuels, is planning to build a commercial-scale ethanol plant in Georgia . Using woodchips as a feedstock, it employs heat and chemicals to break down the tough bonds in cellulose molecules. Up to $76m of subsidy will help it on its way . Many companies are working on suitable enzymes to break down those bonds . One such is Iogen, in which Goldman Sachs and Shell have taken stakes. It will be gett ing up to $80m from the government.

One further problem with ethanol is that it is less energy-intensive than petrol, so you get fewer miles per gallon . That is one reason why BP is putt ing its money into a dif-ferent fuel, biobutanol, which is more energy-intensive than etha-nol . BP is developing it in a joint venture with DuPont, for which biobutanol off ers a possible way into the fuel business .

And then there is the electric

Ethanol is one possibility, because although burning it emits CO2, growing the crops needed to pro-duce it absorbs the stuff , at least in theory . The farming lobby has been pushing it as a new source of revenue . The car industry is keen on it : if the fuel changes, then the cars don't have to . GM has been running a “live green, go yellow” campaign to promote it .

Ethanol currently accounts for only 3.5% of American fuel con-sumption, but thanks to heavy sub-sidies its use is growing by 25% a year, says Matt Drinkwater of New Energy Finance . When oil prices were at their peak, the payback period on an ethanol plant was 11 months. Not surprisingly, they have sprung up all over the Mid-west . Soaring demand for maize for ethanol caused the sharp rise in the corn price which led to “tortilla riots” in Mexico .

There are three problems with corn ethanol . First, the market is limited . At present, any car can take E10 fuel (10% ethanol) but only 6m out of America's 237m cars and trucks are “fl ex-fuel” vehicles that can take E85 (85% ethanol). Converting a car costs only around $200, but invalidates the guarantee. Detroit has promised that half of its output will be “fl ex-fuel” by 2012.

Second, corn ethanol is expen-sive . At the pump it is competitive

Ethanol is one possibility, because

" According to the International Insti-tute for Sustain-able Development, America's subsidy costs taxpayers somewhere between $5.5 billion and $7.3 billion a year. And high tariffs keep out imports of cheap Brazilian ethanol made from sugar cane.

Tesla can do it in four seconds .”

It has a few disadvantages . The first is cost. Mr Musk has pres-old the first 350—the first 120 of those for $100,000 apiece. “The average net worth of the first 120 customers is over $1 billion,” he says. Howev-er, he plans to start work on a bud-get version next year . The second is range. The Tesla's maximum is 250 miles . If there are other downsides, they may become clear in August or September this year, when the first production models should slip silently off the production lines and onto America's roads .

Clean-energy entrepreneurs may find the transport business harder to crack than power generation, because the existing infrastructure of pipelines and service stations is dedicated to petrol . Yet Brazil, where sugar ethanol now accounts for 40% of fuel used by cars, shows that it can be done . Now that gov-ernments are beginning to lean on big oil as well as on the car com-panies, the drive towards cleaner transport is likely to pick up speed .

15

generally good reviews, but GM has not said when it will start pro-ducing the car commercially .

Meanwhile, rushing up on the inside lane are those disruptive people from Silicon Valley . Last year Elon Musk, a South-African-born entrepreneur who started PayPal, an online payments sys-tem, unveiled the Tesla, an electric sports car . It plugs into the wall and stores the energy in a lithium-ion battery—the sort used in laptop computers, only with 6,831 cells. And it's a pretty, and nippy, little car . “A Porsche can accelerate from 060 in 4.7 seconds,” says Mr Musk with understandable pride . “The

16


October 11, 2007


Kill king cornamount of their income on food . According to World Bank studies, for the poorest people in the world a 1% increase in the price of staple food leads to a 0.5% drop in caloric consumption .

This sorry state of aff airs has the small benefi t of providing a stark, contrasting background against which to sketch out what a success-ful and sustainable biofuels indus-try might look like . It will be based not on digestible starch from staple crops such as corn or cassava, but for the most part on indigestible cellulose, with some room for biod-iesels that, because they grow on marginal land, do not compete with food production .

In the medium to long term, it will not seek to produce ethanol — a poor fuel — but a range of more complex fuels delivered by care-fully designed microbes .

A rosy biofuels future will enjoy the benefi ts of free trade, allowing the countries and peoples of the tropics to ship some of their abun-dant sunlight north in the form of fuel. It will also require serious amounts of agronomic research — as we report on page 652, one of the most signifi cant problems with jatropha is that, as yet, remarkably litt le is known about how best to grow and improve it . One focus of such research must be in the devel-opment of plants, such as jatropha, that make do on litt le water, and those that require low inputs of nitrogen . This is inherently more feasible in the case of fuels, where all that needs to be taken out of the system are carbon and hydrogen, than in the case of food, where there is a need to export nitrogen in

ethanol at more than $500 a tonne of carbon dioxide . What's more, the heavy use of nitrogen fertilizer in growing corn leads to signifi cant emissions of nitrous oxide, an even more potent greenhouse gas .

Despite this, the generous tax allowance of 51 cents a gallon given to ethanol blenders in the United States has made corn peculiarly profi table (provided that tariff s continue to keep out far more effi ciently produced ethanol from the sugar plantations of Brazil) . In a recent article in Foreign Aff airs, C. Ford Runge and Benjamin Senauer of the University of Minnesota in Minneapolis point to estimates that this artifi cial pricehike will drive world corn prices up by 20% by 2010. This has a knock-on eff ect on other staple crops — more land for corn means less for wheat, for example .

Higher prices are good news for farmers, including some of those in developed countries . But they can be bad news for the very poor, who spend a disproportionate

Nature Magazine, Vol. 449, Issue No. 637

Biofuels need new technol-ogy, new agronomy and new politics if they are not to do more harm than good

Zea mays has become the very emblem of plenty, with rich golden cobs of corn (maize) overspilling from some of the most eff ectively farmed arable lands on the planet . Jatropha curcas, on the other hand, is an unprepossessing and indeed toxic plant, bett er suited to scru-bland and hedges . Yet in the world of biofuels, ugly-duckling jatropha has the potential to be, if not a hero, then at least one of the good guys, and a harbinger of bett er things to come . The golden headed siren corn, on the other hand, is inspir-ing a wrongheaded gold-rush — to a dead end of development that is polluting the modest aspirations the world might have for biofuels in general .

The common complaints about biofuels — and they seem to become more common by the day — are that they are expensive and ineff ective at reducing fossil-fuel consumption, that they intensify farming needlessly, that they dress up discredited farm subsidies in new green clothes, and that they push up the price of food . All these things are true to some extent of corn-based ethanol, America's biofuel of choice, and many are also true of Europe's favoured biodiesel plans .

As far as the greenhouse goes, fi gures from the International Insti-tute for Sustainable Development's Global Subsidies Initiative put the cost of averting carbon dioxide emissions by using corn-based

amount of their income on food . According to World Bank studies, for the poorest people in the world a 1% increase in the price of staple food leads to a 0.5% drop in caloric consumption .

small benefi t of providing a stark, contrasting background against which to sketch out what a success-ful and sustainable biofuels indus-try might look like . It will be based not on digestible starch from staple crops such as corn or cassava, but for the most part on indigestible cellulose, with some room for biod-iesels that, because they grow on marginal land, do not compete with ethanol at more than $500 a tonne

" ... figures from the International InstI-tute for Sustainable Development's Global Subsidies Initiative put the cost of avert-ing carbon dioxide emissions by using corn-based ethanol at more than $500 a tonne of carbon diox-ide. just that. "

17

the form of protein as well . Another focus will be on systems that actively store carbon in the soil, improving it for future agricultural use and at the same time doing a little bit more to take the edge off the carbon/climate crisis.

Biofuels are unlikely ever to be more than bit-players in the great task of weaning civilization from Earth's coal-mine and oil-well teats. But they may yet have valuable niches — including some that allow them to serve some of the world's poor, both as fuels for their own use and as exports . Provided, that is, that someone kills king corn .

18


October 8, 2007


Stöd till biobränslen döms utFör etanol från sockerbetor ligger

priset på upp till 8 000 kronor per ton koldioxidekvivalent . Det är mer än 20 gånger så högt som högsta priset hitt ills på koldioxidbörsen, skriver GSI .

– Så länge den industriella produktionen av etanol och biod-iesel inom EU är så här dyr bör vi fundera noggrant över satsningar och politiska mål. Skatt epengar som grävs ner i understöd för dyr production med liten klimateff ekt kan skapa större utsläppsreduk-tioner på annat håll, säger Anders Wĳ kman.

lägger in en brasklapp för att siff ran sannolikt är i underkant eft ersom vissa subventioner är svåra att beräkna .

DET STÖRSTA BIDRAGET kom-mer från skatt elätt nader och från tullar på importerad etanol, fram-för allt från Brasilien. Dett a mots-varar ungefär 10 kronor per liter för etanol och 5 kronor per liter för biodiesel .

Visserligen ersätt er en liter etanol eller biodiesel i tanken mots-varande mängd fossil bensin eller diesel,men räknar man in den ener-gi som krävs för framställningen av biobränslet blir ersätt ningskvoten desto mindre – till ett mycket högt pris dessutom .

GSI räknar med att det kostar mellan cirka 17 och 50 kronor för att ersätt a en liter bensin med en liter etanol räknat på energiin-nehåll . Spannet beror på råvara och produktionsteknik . För biodiesel är intervallet 6 till 12 kronor.

Till på köpet blir nett omin-skningen av koldioxid – som är huvudsyft et med satsningen – liten. Det är lätt are och mycket billigare att handla på Europas koldioxid börs för att få motsvarande utsläppsreduktion i en annan sek-tor .

Lasse Swärd, Dagens Nyheter

EU :s skattebetalare får alldeles för lite för pengarna när de öser mångmiljard-belopp i stöd över etanol och andra biobränslen. Det hävdas i en ny EU-fi nan-sierad rapport, som hellre ser att stödet går till andra miljövänliga insatser.

Den tankeväckande rapporten lades fram i Europaparlamentet i veckan under värdskap av den kristdemokratiske Europaparla-mentarikern Anders Wĳ kman.

Rapporten är gjord av GSI, Global Subsidies Initiative, och går igenom marknaden för biobränslen inom EU, hur den utvecklats och hur den bärs upp av omfatt ande skatt esub-ventioner .

GSI räknar med att stöden uppgår till 35 miljarder kronor per år, men

" GSI räknar med att stöden uppgår till 35 miljarder kronor per år, men lägger in en brasklapp för att siffran sannolikt är i underkant eftersom vissa subventioner är svåra att beräK-na. "

19


November 2007


Who’s Fueling Whom?

Ethanol producers in this country receive a tax credit of 51 cents a gal-lon, on top of billions of dollars in direct corn subsidies. (In 2005, the most recent year for which figures are available, it was $9 billion.) In Europe biodiesel subsidies can approach $2 a gallon.

Some biofuel entrepreneurs are coining energy, and profits, from stuff we now pay to get rid of : methane from municipal dumps, wood chips piling up around sawmills, manure from livestock facilities, and papermill sludge that now usually ends up being trucked to a landfill.

With a little planning, proponents say, biofuels could give us not just energy but wildlife too . Switch-grass and potential feedstocks provide good habitat for birds and other animals between harvests .

All this, and in the minds of people like Pete Bethune, we get to keep our muscle boats too .

So what's the hitch? Partly it's that bit about doing a little planning. The move to biofuels thus far looks

have acquired an almost magical appeal for environmentalists and investors alike . This new energy source (actually as old as the first woodfueled campfire) promises to relieve global warming and win back America's energy indepen-dence : instead of burning fossil fuels such as coal or oil, which fill the atmosphere with the carbon packed away during thousands of years of plant and animal growth, the idea is to extract energy only from recent harvests . Where we now pay larcenous prices to OPEC, we'd pay our own farmers and foresters instead .

Of course, biofuels also pro-duce carbon dioxide, which is the major cause of global warming . But unlike fossil which don't grow back, corn, soybeans, palm oil, grasses, trees which don't grow back, corn, soybeans, palm oil, feedstocks can recapture, through photosynthesis, the massive quan-tities of carbon dioxide they release . This makes biofuels seem like a good way to start bringing the car-bon ledger back into balance . Other factors have made the promise of biofuels even more tantalizing .

By Richard Conniff, Smithsonian Magazine

Why the biofuels move-ment could run out of gas

I first started to think that the biofuels movement might be slip-ping into lala land when I spotted a news item early this year about a 78-foot powerboat named Earth-race . In the photographs, the boat looked like a cross between How-ard Hughes' " Spruce Goose " and a Las Vegas showgirl . Skipper Pete Bethune, a former oil industry engi-neer from New Zealand, was trying to set a round-the-world speed record running his 540-horsepower engine solely on biodiesel .

Along the way, he spread the word that, as one report put it, "it's easy to be environmentally friendly, even in the ostentatious world of powerboating ."

Well, it depends on what you mean by "easy ." Bethune's biodiesel came mostly from soybeans . But "one of the great things about biod-iesel," he declared, is that "it can be made from so many different sources ." To prove it, his suppliers had concocted a dollop of the fuel for " Earthrace " from human fat, including some liposuctioned from the intrepid skipper's own back-side .

Given the global obesity epi-demic, that probably seemed like a sustainable resource . You could almost imagine NASCAR fans lin-ing up for a chance to personally power Dale Earnhardt Jr .'s Chevy Monte Carlo into the tunnel turn at Pocono . But biofuel skeptics were seeing warning flags everywhere.

Over the past few years, biofuels

20

The next morning, C . Ford Runge, who studies food and agriculture policy at the University of Min-nesota, calculated that this would require 108 percent of the cur-rent crop if it all came from corn . Switching to corn ethanol also risks making us dependent on a crop that's vulnerable to drought and disease . When the weather turned dry in the Southeast this summer, for instance, some farmers lost up to 80 percent of their corn.

In a recent Foreign Aff airs article, "How Biofuels Could Starve the Poor," Runge and coauthor Benja-min Senauer noted that growing corn requires large amounts of nitrogen fertilizer, pesticides and fuel . It contributes to massive soil erosion, and it is the main source, via runoff in the Mississippi River, of a vast "dead zone" in the Gulf of Mexico . (This year the dead zone, expanding with the corn crop, was the third-largest on record.)

The article made the switch to corn ethanol sound about as smart as switching from heroin to cys-tal meth . Biofuel subsidies might make sense, other critics say, if they favored "cellulosic" ethanol instead—fuel that comes from breaking down the cellulose in the fi brous parts of the plant, such as the corn stalk instead of the kernel . That wouldn't put direct pressure on food prices, and might even reduce them by providing a market for agricultural waste products . Cellulosic technology is also the key to exploiting such nonfood plants as switchgrass, and it prom-ises an improvement of more than 80 percent in greenhouse gas emis-sions compared with conventional gasoline. But while an experimen-tal cellulosic ethanol plant is now operating in Canada, and several others are being built in this coun-try, most experts say it will take years for the technology to become economically competitive . There are also political realities . "Corn and soybean interests haven't spent 30 years paying campaign bills" for national politicians, says Runge, "to give the game away to grass ."

conventional gasoline . For instance, corn ethanol on average produces about 13 percent less greenhouse gas emissions than gasoline, according to Daniel Kammen, a public policy professor at the University of California at Berkeley . But when ethanol refi neries burn coal to provide heat for fermenta-tion, emissions are up to 20 percent worse for the environment than gasoline . Yet that ethanol still earns the full subsidy .

In the United States, state and federal biofuel subsidies cost about $500 for every metric ton of green-house gas emissions they avoid, according to a study by the Global Subsidies Initiative, an environ-mentally oriented nonprofi t. We could pay somebody else to reduce their greenhouse gas emissions, via the European carbon emissions trading market, for about $28 a ton.

But don't biofuel subsidies buy us energy independence? Presi-dent Bush, a former oil execu-tive, declared last year that we are "addicted to oil ." In this year's State of the Union speech, he set a national goal of producing 35 bil-lion gallons of alternative fuels by 2017.

more like a stampede than a con-sidered program to wean ourselves from fossil fuels . Critics in the fi nancial community have used words like "gold rush" and even the dreaded "bubble," frett ing that "biofool" investors are putt ing too much money into new refi neries, which could go bust as markets and subsidies shift or as technolo-gies and feedstocks become obso-lete .

Bett ing the farm on biofuels has become commonplace : this year alone American farmers planted an additional 15 million acres in corn, and they were expecting one of the largest harvests in history . The share of the corn crop going into ethanol is also increasing pell-mell, from about 5 percent ten years ago to 20 percent in 2006, with the like-lihood that it could go to 40 percent in the next few years .

Not surprisingly, the price of corn doubled over the last two years . This past January, angry consumers took to the streets in Mexico City to protest the resulting surge in the price of tortillas, a staple food . In China, rising feed costs boosted pork prices 29 percent, prompting the government to back off its plan to produce more biofuels . Even titans of agribusiness worried out loud that we might be putt ing fuel for our cars ahead of food for our bellies .

The chief executive at Tyson Foods said the poultry producer was spending an extra $300 million on feed this year and warned of food-price shocks rippling through the market . Cargill's chief predicted that reallocation of farmland due to biofuel incentives could combine with bad weather to cause food shortages around the world. Catt le ranchers and environmentalists, unlikely bedfellows, both called for rethinking those incentives .

Not that anybody seems to have given them much thought in the fi rst place. One problem with current subsidies is that they act as if all biofuels were created equal—while some may actually be worse for the environment than

who studies food and agriculture policy at the University of Min-nesota, calculated that this would require 108 percent of the cur-rent crop if it all came from corn . Switching to corn ethanol also risks making us dependent on a crop that's vulnerable to drought and disease . When the weather turned dry in the Southeast this summer, for instance, some farmers lost up to 80 percent of their corn.

"How Biofuels Could Starve the Poor," Runge and coauthor Benja-min Senauer noted that growing corn requires large amounts of nitrogen fertilizer, pesticides and fuel . It contributes to massive soil erosion, and it is the main source, via runoff in the Mississippi River, of a vast "dead zone" in the Gulf of Mexico . (This year the dead zone, expanding with the corn crop, was the third-largest on record.)

conventional gasoline . For instance,

" In the United States, state and bio-fuel subsidies cost about $500 for every metric ton of green-house gas emissions they avoid, accord-ing to a study by the Global Subsidies Initiative, an envi-ronmentally oriented nonprofit. We could pay somebody else to reduce their green-house gas emissions, via the European car-bon emissions trad-ing market, for about $28 a ton. "

21

Oh, and one final irony. The Christian Science Monitor recently reported that because of the way U.S. biofuel laws are written, foreign tankers loaded with Indo-nesian biodiesel can stop briefly at an American port, blend in a splash of regular petroleum diesel and qualify for a U.S. subsidy on every gallon . It's called "splash and dash," because the tankers generally push on to Europe to collect additional subsidies there . All in the name of greener fuels .

None of this means we should give up on biofuels . But we need to stop being dazzled by the word and start looking closely at the realities before blind enthusiasm leads us into economic and envi-ronmental catastrophes . We also should not let biofuels distract us from other remedies . Conservation and efficiency improvements may not sound as sexy as biofuels . But they are typically cheaper, faster and better at dealing with the com-bined problems of global warming and uncertain energy supply . They also call on what used to be the defining American traits of thrift and ingenuity .

And what about Pete Bethune, gallivanting around the planet in his powerboat and telling us it's easy to be environmentally friendly in this newfangled world? I think he must be kidding . Our brief infat-uation with biofuels has already taught us, with every high-priced tortilla, that there is no such thing as a free lunch .

Richard Conniff, a longtime con-tributor to the magazine, is a 2007 Guggenheim Fellow .

One other problem with the rush to "greener" fuels is that, despite the biodiversity happy talk, wild-life is already prominent among biofuel victims . Last year, for instance, farmers were protecting about 36 million acres through the U .S . Department of Agriculture's Conservation Reserve Program (CRP), which works to restore degraded lands, reduce soil erosion and maintain wildlife habitat . CRP land is what biofuel proponents often have their eyes on when they talk about producing biofuels and biodiversity by growing switch-grass . But farmers look at the bot-tom line, sizing up the $21 per acre they net with the CRP payment (to take a representative example from southwest Minnesota) against the $174 they can now earn growing corn . And they have begun pulling land out of CRP and putting it back into production .

Other countries are also rapidly surrendering habitat to biofuel . In Indonesia and Malaysia, companies are bulldozing millions of acres of rain forest to produce biodiesel from oil palm, an imported species . The United

Nations recently predicted that 98 percent of Indonesia's forests will be destroyed within the next 15 years, partly to grow palm oil . Many of the new plantations will be on the island of Borneo, a mother lode of biological diversity .

Apart from the effect on wildlife, critics say Indonesia's forests are one of the worst places to grow biofuels, because they stand on the world's richest concentration of peat, another nonrenewable fuel . When peat dries out or is burned to make way for a planta-tion, it releases huge quantities of carbon dioxide . Indonesia, despite its undeveloped economy, already ranks as the world's third-largest source of greenhouse gas emis-sions, after China and the United States . When you add the peat effect into the equation, according to the conservation group Wetlands International, Indonesian palm oil biodiesel is up to eight times worse for the environment than gasoline .

Even if cellulosic ethanol becomes practical, biofuels will provide at best only part of the solution to the problems of global warming and energy supply . That's because biofuels will never match the one thing fossil fuels do brilliantly : concentrating solar energy . A gallon of gasoline represents the power of the sun gathered up and locked away by about 196,000 pounds of plants and animals . To produce all the petroleum, coal and natural gas on earth, it took an entire planet's worth of plants and animals grow-ing and dying over about 700 mil-lion years .

Switching to biofuels means get-ting our energy only from what we can grow in the present day, and that's not much . In the course of a year, an acre of corn yields only as little as 60 gallons of ethanol, after you subtract the fossil fuels used to cultivate, harvest and refine the crop .

So let's flash forward five years. Twice a month you swing by the biofuels station to fill the 25-gallon tank in your sporty flex-fuel econo-car . (Pretend you've kissed the SUV goodbye .) Even this modest level of energy consumption will require a ten-acre farm to keep you on the highway for a year .

That might not sound too bad . But there are more than 200 million cars and light trucks on American roads, meaning they would require two billion acres' worth of corn a year (if they actually used only 50 gallons a month). The country has only about 800 million acres of potential farmland .

What if we managed to break out of the corn ethanol trap and instead set aside 100 million acres for high-yielding cellulosic ethanol crops? That's an attractive option to almost everyone outside the corn indus-try, including such environmental groups as the Natural Resources Defense Council . But it would still produce only about an eighth of the nation's projected energy consump-tion in 2025, according to a Univer-sity of Tennessee study .

22


November 15, 2007


Farm Paidglobal total . According to projections, Uncle Sam will shell out $13 billion next year and $16 billion a year by 2014. In all, the government is on track to spend a total of $92 billion on ethanol subsidies by 2012.

A new report from the International Institute of Sustainable Develop-ment, a pro-free trade group based in Geneva, makes a case that the American taxpayer is paying more in subsidies to produce each and every gallon of corn-based ethanol than it would cost to buy oil that produced the equivalent amount of energy. That's just nuts .

Are Americans at least gett ing reductions in net emissions of green-house gases for their money? Yes, but nothing like those elsewhere. Brazil-ians use sugarcane to make ethanol and Europeans wheat and sugar beet . Of the four crops, corn has the least impact on emission levels-spewing only 18% less pollution than conven-tional gasoline .

That is a benefi t, but not a compel-lingly cost-effi cient one. The Institute of Sustainable Development reck-ons that eliminating a ton of carbon dioxide through biofuels could cost anywhere between $150 and $10,000. But even if it costs just $150, that is still far more expensive that many other ways of reducing carbon emis-sions, such as making vehicles more effi cient. The open market values a ton of carbon dioxide emissions at far less that $150. For that price you can buy credits to off set 40 tons of carbon dioxide on the Chicago Climate Exchange .

Yes, there are social reasons, legitimately chosen, that explain why countries subsidize their farmers,

corn. The U.S. government’s renew-able fuels standard, which went into eff ect on Sept. 1, calls for 7.5 billion gallons of corn ethanol to be blended into gasoline by 2012. Follow-up legislation now wending its way through Congress raises that number to 15 billion gallons by 2022.

Fift een billion gallons is about 10%

of America’s current annual gasoline consumption . An acre of corn yields barely 300 gallons of ethanol. To make that much ethanol a full 40% of American cropland would need to be dedicated to corn, sending food prices through the roof .

Scads of tax dollars are being thrown at agri-businesses to achieve this insanity. Total government sup-port for biofuels in the U.S. was $7 billion accounting for about half the

Paul Maidment, Forbes.com

Farm subsidies are the ultimate cash crop . Farmers in rich countries get $1 billion per day in govern-ment handouts. To be fair, that fi gure rounds up the numbers, counts agri-businesses and small farmers, and defi nes subsidies broadly to include tariff s, export credits and other supports . But, give a million or two a day, the order of magnitude is right . By that measure, agriculture is far and away the world's the most protected industry .

What do taxpayers get in return for this unparalleled generosity? A deeply distorted global food trade, with subsidies making nonsense of market prices . Farm subsides are the single biggest reason that the current round of World Trade Organization talks have dragged on since Novem-ber 2001.

There is no bett er example of this craziness than the subsidies being off ered in the U.S. to growers of corn that will be turned into ethanol . It's one of two biofuels the other is biod-iesel which are being hyped to the skies as an alternative to fossil fuels, mainly oil .

Ethanol mania is one of the primary reasons that the price of corn has doubled over the past 15 months, in turn driving up prices for basic foods from milk to bread. (Skyrocket-ing demand for feedstock grain to raise meat for India, China and Latin America's burgeoning middle-class is the other major underlying cause .)

This year, 93 million acres of corn were planted in the U .S, the most since 1944 and 20% more than in 2006. Rising prices mean even more cropland is likely to be turned over to

" A new report from the International Institute of Sustain-able Development, a pro-free trade group based in Geneva, makes a case that the American tax-payer is paying more each and every gal-lon of corn-based ethanol than it would cost to buy oil that produced the equivalent amount of energy. That's just nuts. "

23

in poor nations . The sooner we stop this madness, the better off we all will be .

80% of farm subsides go to massive agri-businesses like Archer Daniels Midland, General Mills and Cargill . Biofuel subsidies give politicians the rare opportunity feed the maw of the agribusiness lobby while at the same time painting themselves "green" for the environmentally concerned voter . Perversely, biofuel subsidies harm both the environment and the hungry

ranging from food security to a desire to protect traditional rural ways of life . To their defenders in Japan, no more so than those in America or France, farm subsidies are as much about national identity as economics .

But biofuel subsidies aren't really about the largely mythical Mid-western family farm . In the U .S .,

24

Von Marcel Hänggi, Die Wochenzeitung

Das Auto des CVPPräsi-denten Christophe Darbellay kostet die Schweizer Steuer-zahlerInnen 4000 Franken pro Jahr. Dank der Förderung von Biotreibstoffen.

Nationalrat und Parteichef Christophe Darbellay fährt, wie der «Blick» wusste, einen schweren BMW X3. Laut Hersteller ver-braucht dieser 9,3 Liter Diesel auf hundert Kilometer oder 3700 Liter auf den 40 000

Kilometern, die Darbellay jährlich zurücklegt . Halb so schlimm, meinte der Walliser gegen über dem «Blick» : «Ich tanke nur CO2neu-tralen Rapsdiesel .»

Eine Studie der Global Subsidies Initiative (GSI) zeigt nun : Darbel-lays gutes Gewissen kostet die SteuerzahlerInnen über 4000 Fran-ken jährlich .

Die GSI ist eine internationale regierungsunabhängige Organisa-tion, die unerwünschte Nebeneff ek-te von Subventionen untersucht . Im Herbst 2006 erschien eine Studie, die aufzeigte, mit wie viel Geld die USA Treibstoff e aus Biomasse unterstützen; nun hat die GSI die Schweiz unter die Lupe genom-men. Resultat : In absoluten Zahlen gemessen sind die Subventionen hierzulande gering letztes Jahr betrugen sie 11 Millionen Fran-ken für «Bio»Diesel und 800 000 Franken für Ethanol, gegenüber 5 bis 7 Milliarden Dollar (mit gros-sen Wachstumsraten) in den USA . Doch pro Liter Treibstoff subven-tioniert die Schweiz deutlich mehr als die USA mit ihrer noch stärk-eren Agrar und Automobillobby .

Ein Liter Ethanol, hergestellt aus Holzabfällen, kostet die Schweizer SteuerzahlerInnen zwischen 73 Rappen und 1.10 Franken; Diesel aus pfl anzlichen Abfallölen kostet 80 Rappen und Diesel aus Raps 1.11 Franken pro Liter.

Schlechte InvestitionIst das Geld wenigstens gut inves-tiert? Nein, sagt die Studie. Treib-stoff e aus Biomasse sollen ja das Klima weniger belasten . Rechnet man die Subventionen auf die Menge CO2 um, das vermieden werden kann, so kostet die Tonne (vermiedenes) CO2 im Falle des Rapsdiesels zwischen 750 und 925 Franken; bei Diesel und Ethanol aus biologischen Abfällen sind es zwischen 305 und 475 Franken. Zum Vergleich : Bei MyClimate kostet die Vermeidung einer Tonne CO2 im Inland 120 Franken. Das CO2Gesetz erlaubt eine Abgabe von maximal 210 Franken.

Wie kommen die Zahlen zustande? Einerseits sind Treibst-off e aus Biomasse, die in kleinen Pilotanlagen hergestellt werden, von der Mineralölsteuer ausgenom-men. Die Menge Treibstoff e, die von dieser Steuererleichterung profi tieren, ist auf zwanzig Mil-lionen Liter jährlich begrenzt . Auf

nicht ganz zwei Millionen Fran-ken schätzt der Bericht zudem die Flächenzahlungen an Rapspro-duzentInnen also eine Agrarsub-vention, die im Tank landet . Wenn vor aussichtlich im Januar 2008 das neue Mineralölsteuergesetz in Kraft tritt , können Treibstoff e aus Biomasse von der Steuer befreit werden, ohne dass sie dazu wie heute aus Pilotanlagen stam-men müssen . Damit fällt auch die Obergrenze von zwanzig Millionen Litern. Bedingung für die Steuerbe-freiung sind eine «positive ökolo-gische Gesamtbilanz» sowie «sozial annehmbare Produktionsbedingun-gen» .

Teure StrategieWelche Treibstoff e diese Bedin-gungen erfüllen, entscheidet der Bundesrat . Eine im Mai erschienene Studie der Forschungsanstalt Empa hat gezeigt, dass fast nur Treibstoff e aus Abfallstoff en eine ökologische Gesamtbilanz aufweisen, die besser ist als diejenige fossiler Treibstoff e. Wie die GSIStudie nun zeigt, sind selbst bei den Treibstoff en aus Abfällen die Kosten provermie-dene Tonne CO2 für den Fiskus absurd hoch, wenn sie steuerbefreit werden .

Für Lukas Gutzwiller vom Bundesamt für Energie (BFE) waren die Ergebnisse der GSIStudie keine Überraschung : Dass die Förderung von Treibstoff en aus Biomasse in Europa eine eher teure Strategie zur CO2Vermeidung sei, sei ihm zuvor schon klar gewesen . Den Agrartreibstoff en kann er aus entwicklungspolitischer Sicht Gutes abgewinnen : «Ich sehe das als Argument für die Agrarmarkt-liberalisierung, die beispielsweise in Südamerika, wo zusätzliche


August 23, 2007

Government Support for Ethanol and Biodiesel in Switzerland (First Draft July 2007)

Support für Säufer

" Eine Studie der Global Subsidies Initiative (GSI) zeigt nun : Darbellays gutes Gewissen kostet die Steuer-zahlerInnen über 4000 Frank jährlich. "

25

Industrie, selbst in die Ethanol-herstellung einzusteigen, sagt CVPNationalrat Philipp Stähe-lin, Verwaltungsratspräsident der Zuckerfabriken Aarberg und Frauenfeld, gegenüber der WOZ .

Allerdings müssten dazu «die Rahmenbedingungen stimmen» : Das heutige AlcosuisseMonopol müsse angepasst werden, und Ethanol müsse von der Miner-alölsteuer ausgenommen werden . Auf die zweifelhafte Ökobilanz des Ethanols angesprochen, sagt Stähelin : «Wir prüfen das. Wir wol-len nichts tun, das ökologisch nicht sinnvoll ist .»

die Bundesverwaltung macht da mit : So will die Alcosuisse, das Profitcenter der eidgenössischen Alkoholverwaltung, die Menge Ethanol, die sie als Treibstoffe produziert, von heute 3,2 Millionen Liter pro Jahr mindestens verdrei-fachen .

Angesprochen auf die schlechte Ökobilanz von Ethanol als Energi-eträger, sagte AlcosuisseDirektor Pierre Schaller dem «TagesAn-zeiger», man wolle nicht, dass Zuckerrüben eigens für Treibstoffe angebaut würden, sondern werde Ethanol aus Melasse herstellen, einem Abfallprodukt der Zucker-herstellung, das zur Herstellung von Tierfutter verwendet wird. Um sich sogleich zu widersprechen, wenn er weiter sagt, damit könne für die darbende Zuckerindustrie der Schweiz ein neuer Absatzmarkt entstehen .

Unterdessen prüfe diese

Flächen für den Anbau von Ener-giepflanzen vorhanden sind, neue Arbeitsplätze schaffen kann.»

Miese Ökobilanz Allerdings, sagt Gutzwiller, müsse man sich bewusst sein, dass die Treibstoffe aus Biomasse nur einen kleinen Beitrag zum Klimaschutz leisten könnten . Für das BFE habe denn auch die Energieeffizienz klar Priorität . Auf die Frage, ob das Experiment «Bio treibstoffe» in der Schweiz nicht beendet werden sollte, sagt Gutzwiller : «Das wäre für Treibstoffe aus Abfällen wie Biogas schade, aber sonst nicht dra-matisch, da es bessere energiepoli-tische In s trumente gibt . Dennoch gehen die politischen Bestrebungen in allen Ländern dahin, diese Treib-stoffe zu unterstützen.»

Gleichzeitig zeichnen die Protagonist Innen der «Bio» Treib-stoffe weiterhin das Bild vom umweltfreundlichen Auto . Auch

26


October 16, 2007


Biofuels : a tale of special interests and subsidies

"This is probably a gross under-estimate of the total amount of sup-port provided, as many subsidies are under-reported," said the study. With the EU planning for biofuel use to increase fivefold by 2020 to 10% of transportation fuels, "EU support to biofuels could treble if the current rates of subsidisation are not modified".

Excise tax exemptions, which are linked to production and consumption, account for most EU support and totalled nearly €3bn in 2006. The reduction in CO2 emis-sions in the EU is costing €575–800/t in subsidies.

"Governments could achieve far more reduction for the same amount of public funds by simply purchasing the reductions in the marketplace," said the GSI .

EU tarif barriers against biofuel imports cost an estimated €240m last year, it added .

that subsidies therefore risked "crowding out investment in other technologies that may be much more sustainable, both commer-cially and environmentally" .

The GSI concluded : "The many layers of government policies sup-porting biofuels, the incoherence between some of them and their inevitable unintended consequenc-es provide compelling grounds for a moratorium on new initiatives and a fundamental policy rethink ."

It said that the bewildering array of incentives, based often on contradictory policy objectives, "bear all the hallmarks of a popular bandwagon aided and abetted by sectional vested interests" .

The GSI reinforced its concerns in a second study, which found that the European Union (EU) member states are subsidising biofuels at about €3.7bn a year, made up of €1.3bn on ethanol (or €0.74/litre) and €2.4bn on biodiesel (€0.50/litre) .

Bio-energy Business

Rich nations’ huge biofuel sub-sidies distort carbon market, says study

There is little rationale for the huge subsidies given for the pro-duction and use of biofuels and the subsidies are not a cost effective way of cutting fossil fuel use to reduce greenhouse gas emissions, according to new studies .

Organisation for Economic Coop-eration and Development (OECD) countries are likely to provide $13–15bn of subsidies for biofuels this year and the total could rocket to meet new biofuel targets, said the Global Subsidies Initiative (GSI) of the International Institute for Sustainable Development (IISD) .

It said that the carbon dioxide (CO2) emission reductions through use of biofuels in OECD countries was costing $150–1,500/t of CO2. In comparison, CO2 is currently €22/t in the European Union's Emissions Trading Scheme . The GSI warned

27


November 9, 2007


2007 : Big debate over benefi ts and costs of biofuels

behind higher food prices and environmental despoilation, and a Trojan horse for fatt er subsidies for farmers in rich countries .

The biofuels industry will, in aggregate, benefi t from support worth more than $92bn between 2006 and 2012, according to a report published in October by the Global Subsidies Initiative, a project that aims to spotlight subsidies' "corrosive eff ects". Environmental groups have warned of the carbon dioxide emissions generated dur-ing the processing and shipment of ethanol and biodiesel, and about the strains biofuel crops can put on food production and forests .

Analysts have also cited biofuel production along with China's and India's growing appetite for more and bett er food as a factor driving up the prices of foodstuff s for the world's urban poor, from bread to tortillas .

considering changes in standards for petrol that would require 10 per cent ethanol content at pumps, with a similar 10 per cent biodiesel content required for diesel.

While Europeans worry about transport's contribution to the greenhouse-gas emissions cuts they pledged under the Kyoto accords, in the US overreliance on imported crude oil is more of a concern . However, the boost for biofuels is similar : President George W Bush has called for America to reduce its petrol consumption by 20 per cent over the next decade, largely by using more biofuels .

Carmakers are beginning to cash in on the changes, but the evolv-ing rules pose some technical challenges . Most of their current vehicles can run on petrol or diesel containing up to 5 per cent ethanol or biodiesel, but the 10 per cent blend now on the drawing board in Europe would risk damaging the engines and particulate fi lters of most cars .

Carmakers also worry about infrastructure issues arising from the availability of alternative fuels that can infl uence their ability to produce them in suffi cient num-bers to make a profi t. However, some European countries eager to promote biofuels are stepping in with pump-priming incentives for the sector .

But as production of biofuels and the vehicles capable of running on them expand, the debate over their true environmental benefi ts and costs is becoming louder . The biofuels industry has been att acked by critics on the pro-green left and free-market right alike as a factor

By John Reed, Financial Times

If money talks, then a terse deal announcement by Daimler and Volkswagen in October spoke eloquently about the car indus-try's growing interest in biofuels . Europe's two largest auto-makers said they would take a minority stake in Choren Industries, a Ger-man biofuel company building a biomass-to-liquids plant in partner-ship with Shell .

Carmakers, under pressure from regulators on both sides of the Atlantic and in Asia to improve their vehicles' fuel economy and cut carbon emissions, are investing heavily in cars that run on alterna-tive fuels or electric power .

Hydrogen is seen as one of the most promising low-emission vehi-cle technologies, but even accord-ing to executives at BMW - which last year launched a prototype Hydrogen 7 car - the technology is at least a decade away from becom-ing commercially viable on a large scale .

In the meantime, vehicles pow-ered by biofuels are already on the road and the fuels are increasingly being blended into ordinary petrol and diesel . Production of biofuels and "fl exi-fuel" vehicles are get-ting a big boost from lawmakers, whose decisions in turn are being infl uenced heavily by agricultural interests .

The European Union, which has already asked member states to increase the use of biofuels in trans-port to 5.75 per cent of the total by 2010, now wants their share to be increased to 10 per cent by 2020. The European Parliament is also

behind higher food prices and

" The biofuels industry will, in aggregate, benefit from support worth more than $92bn between 2006 and 2012, according to a report published in October by the Global SubsidiesInitiative, a project that aims to spot-light subsidies' "corrosive effects". "

28

spokeswoman on energy, points out that the higher food prices caused by the supposed crowd-ing out of food crops by biofuel feedstock could actually end up benefiting farmers in poor coun-tries . "There is space and capacity for biofuels to play a useful role, but it has to be done with a degree of caution and a strong element of sustainability," she says .

on Brazilian ethanol, and show no signs of easing the barrier .

Farm lobbies are playing a big role in driving the industry's devel-opment on both continents . How-ever, some European politicians support a regulatory regime that will favour imports from develop-ing countries .

Fiona Hall, an English MEP who serves as the Liberal Democrats'

Brazilian ethanol, made from sug-arcane, is widely seen as both more environment friendly and economi-cally viable than the Midwestern corn that produces most of the US's ethanol, or the wheat, maize and sugar beets that go into France's . Sugarcane uses less fertiliser than corn or wheat and produces a high-er yield . The ethanol is produced from the fibre cast off as waste dur-ing processing . However, the US and Europe levy high import tariffs

29


July 24, 2006

Government Support for Ethanol and Biodsel in the US(September 2006)

The Ethanol Scam : One of America’s Biggest Political Boondoggles

tropical forests that help to cool the planet and stave off global warm-ing .

So why bother? Because the whole point of corn ethanol is not to solve America's energy crisis, but to generate one of the great political boondoggles of our time .

Corn is already the most sub-sidized crop in America, raking in a total of $51 billion in federal handouts between 1995 and 2005 -- twice as much as wheat subsi-dies and four times as much as soybeans . Ethanol itself is propped up by heft y subsidies, including a fi ft y-one-cent-per-gallon tax

recently, "Everything aboutethanol is good, good, good ."

This is not just hype -- it's danger-ous, delusional bullshit . Ethanol doesn't burn cleaner than gaso-line, nor is it cheaper . Our current ethanol production represents only 3.5 percent of our gasoline con-sumption -- yet it consumes twenty percent of the entire U .S . corn crop, causing the price of corn to double in the last two years and raising the threat of hunger in the Third World . And the increasing acreage devoted to corn for ethanol means less land for other staple crops, giving farmers in South America an incentive to carve fi elds out of

Jeff Goodell, Issue 1032 The Rolling Stone

The great danger of confronting peak oil and global warming isn't that we will sit on our collective asses and do nothing while civili-zation collapses, but that we will plunge aft er "solutions" that will make our problems even worse . Like believing we can replace gaso-line with ethanol, the much hyped biofuel that we make from corn .

Ethanol, of course, is nothing new. American refi ners will pro-duce nearly 6 billion gallons of corn ethanol this year, mostly for use as a gasoline additive to make engines burn cleaner . But in June, the Senate all but announced that America's future is going to be powered by biofuels, mandating the production of 36 billion gallons of ethanol by 2022. According to ethanol boosters, this is the begin-ning of a much larger revolution that could entirely replace our 21 million barrels a day oil addiction . Midwest farmers will get rich, the air will be cleaner, the planet will be cooler, and, best of all, we can tell those greedy sheiks to fuck off . As the king of ethanol hype, Sen . Chuck Grassley of Iowa, put it

" ... a study by the International Insti-tute for Sustainable Development found that ethanol subsi-dies amount to as much as $1.38 per gallon -- about half of ethanol's whole-salemarket price. "

Politicians are high on turning corn into fuel - but ethanol not only hurts the environment, it 's also one of America's biggest political boondoggles. Illustration by Victor Juhasz

30

more than 1 billion gallons of the fuel additive last year . Ethanol is propped up by more than 200 tax breaks and subsidies worth at least $5.5 billion a year. And ADM continues to give back : Since 2000, the company has contributed $3.7 million to state and federal politi-cians .

The Iraq War has also been a boon for ADM and other ethanol produc-ers. The Energy Policy Act of 2005, which was pushed by Corn Belt politicians, mandated the consump-tion of 7.5 billion gallons of biofuels by 2012.

After Democrats took over Con-gress last year, they too vowed to "do something" about America's addiction to foreign oil . By the time Sen. Jeff Bingaman, chair of the Committee on Energy and Natural Resources, proposed new energy legislation this spring, the only real question was how big the ethanol mandate would be . According to one lobbyist, 36 billion gallons became "the Goldilocks number not too big to be impractical, not too small to satisfy corn growers ."

Under the Senate bill, only 15 billion gallons of ethanol will come from corn, in part because even corn growers admit that turning more grain into fuel would disrupt global food supplies . The remain-ing 21 billion gallons will have to come from advanced biofuels, most of which are currently brewed only in small-scale lab experiments. "It's like trying to solve a traffic problem by mandating hovercraft," says Dave Juday, an independent com-modities consultant . "Except we don't have hovercraft."

The most seductive myth about ethanol is that it will free us from our dependence on foreign oil . But even if ethanol producers man-age to hit the mandate of 36 billion gallons of ethanol by 2022, that will replace a paltry 1.5 million barrels of oil per day only seven percent of current oil needs . Even if the entire U .S . corn crop were used to make ethanol, the fuel would replace only twelve percent of current gasoline use .

But as a gasoline substitute, etha-nol has big problems : Its energy density is one-third less than gaso-line, which means you have to burn more of it to get the same amount of power . It also has a nasty ten-dency to absorb water, so it can't be transported in existing pipelines and must be distributed by truck or rail, which is tremendously inef-ficient.

Nor is all ethanol created equal. In Brazil, ethanol made from sugar cane has an energy balance of 8to1 that is, when you add up the fossil fuels used to irrigate, fertilize, grow, transport and refine sugar cane into ethanol, the energy output is eight times higher than the energy inputs. That's a better deal than gasoline, which has an energy balance of 5to1. In contrast, the energy balance of corn ethanol is only 1.3to1 making it practically worthless as an energy source . "Corn ethanol is essentially a way of recycling natural gas," says Rob-ert Rapier, an oil-industry engineer who runs the RSquared Energy Blog .

The ethanol boondoggle is largely a tribute to the political muscle of a single company : agribusiness giant Archer Daniels Midland . In the 1970s, looking for new ways to profit from corn, ADM began pushing ethanol as a fuel addi-tive. By the early 1980s, ADM was producing 175 million gallons of ethanol a year. The company's then-chairman, Dwayne Andreas, struck up a close relationship with Sen . Bob Dole of Kansas, aka "Senator Ethanol." During the 1992 election, ADM gave $1 million to Dole and his friends in the GOP (compared with $455,000 to the Democrats). In return, Dole helped the company secure billions of dollars in sub-sidies and tax breaks. In 1995, the conservative Cato Institute, esti-mating that nearly half of ADM's profits came from products either subsidized or protected by the fed-eral government, called the com-pany "the most prominent recipient of corporate welfare in recent U .S . history ."

Today, ADM is the leading producer of ethanol, supplying

allowance for refiners. And a study by the International Institute for Sustainable Development found that ethanol subsidies amount to as much as $1.38 per gallon -- about half of ethanol's wholesale market price .

Three factors are driving the etha-nol hype. The first is panic : Many energy experts believe that the world's oil supplies have already peaked or will peak within the next decade. The second is election-year politics. With the first vote to be held in Iowa, the largest corn- producing state in the nation, former skeptics like Sens . Hillary Clinton and John McCain now pay tribute to the wonders of etha-nol . Earlier this year, Sen . Barack Obama pleased his agricultural backers in Illinois by coauthor-ing legislation to raise production of biofuels to 60 billion gallons by 2030. A few weeks later, rival Democrat John Edwards, who is staking his campaign on a victory in the Iowa caucus, upped the ante to 65 billion gallons by 2025.

The third factor stoking the etha-nol frenzy is the war in Iraq, which has made energy independence a universal political slogan . Unlike coal, another heavily subsidized energy source, ethanol has the added political benefit of elevating the American farmer to national hero . As former CIA director James Woolsey, an outspoken ethanol evangelist, puts it, "American farm-ers, by making the commitment to grow more corn for ethanol, are at the top of the spear on the war against terrorism ." If you love America, how can you not love ethanol?

Ethanol is nothing more than 180proof grain alcohol. To avoid the prospect of drunks sucking on gas pumps, fuel ethanol is "dena-tured" with chemical additives (if you drink it, you'll end up dead or, at best, in the hospital) . It can be distilled from a variety of plants, including sugar cane and switch grass . Most vehicles can't run on pure ethanol, but E85, a mix of eighty-five percent ethanol and fif-teen percent gasoline, requires only slight engine modifications.

31

Maybe. But oil-industry engineer Robert Rapier, who has spent years studying cellulosic ethanol, says that the difference between ethanol from corn and ethanol from cellu-lose is "like the difference between traveling to

the moon and traveling to Mars ." And even if the engineering hur-dles can be overcome, there's still the problem of land use : According to Rapier, replacing fifty percent of our current gasoline consumption with cellulosic ethanol would con-sume thirteen percent of the land in the United States about seven times the land currently utilized for corn production .

Increasing the production of cellulosic ethanol will also require solving huge logistical problems, including delivering vast quanti-ties of feedstock to production plants . According to one plant manager in the Mid-west, fueling an ethanol plant with switchgrass would require delivering a semi-truckload of the grass every six minutes, twenty-four hours a day. Finally, there is the challenge of wrestling the future away from Big Corn. "It's pretty clear to me that the corn guys will use all their lob-bying muscle and political power to stall, thwart and sidetrack this revolution," says economist C . Ford Runge .

In the end, the ethanol boom is another manifestation of America's blind faith that technology will solve all our problems . Thirty years ago, nuclear power was the answer . Then it was hydrogen . Biofuels may work out better, especially if mandates are coupled with tough caps on green-house-gas emissions. Still, biofuels are, at best, a huge gamble . They may help cushion the fall when cheap oil vanishes, but if we rely on ethanol to save the day, we could soon find ourselves forced to make a choice between feeding our SUVs and feeding chil-dren in the Third World . And we all know how that decision will go .

platform, the first step in a much larger transition we are undergo-ing from a hydrocarbon-based economy to a carbohydrate-based economy," says Vinod Khosla, a pioneering venture capitalist in Silicon Valley . Next generation corn ethanol plants, he argues, will be much more efficient and envi-ronmentally friendly . He points to a company called E3 BioFuels that just opened an ethanol plant in Mead, Nebraska . The facility runs largely on bio-gas made from cow manure, and feeds leftover grain back to the cows, making it a "closed-loop system" -- one that requires very few fossil fuels to cre-ate ethanol .

Khosla is even higher on the pros-pects for cellulosic ethanol, a bio-fuel that can be made from almost any plant matter, including wood waste and perennial grasses like miscanthus and switchgrass . Like other hightech ethanol evangelists, Khosla imagines a future in which such socalled "energy crops" are fed into giant refineries that use geneti-cally engineered enzymes to break down the cellulose in plants and create fuel for a fraction of the cost of today's gasoline . Among other virtues, cellulosic ethanol would not cut into the global food supply (nobody eats miscanthus or switch-grass), and it could significantly cut global warming pollution .

Even more important, it could provide a gateway to a much larger biotech revolution, including syn-thetic microbes that could one day be engineered to gobble up carbon dioxide or other pollutants .

Unfortunately, no commercial scale cellulosic ethanol plants exist today . In one venture backed by Khosla, a $225 million plant in central Georgia is currently being built to make ethanol out of wood chips . Mitch

Mandich, a former Apple Com-puter executive who is now the CEO of the operation, calls it "the beginning of a real transformation in the way we think about energy in America ."

Another misconception is that ethanol is green . In fact, corn pro-duction depends on huge amounts of fossil fuel not just the diesel needed to plow fields and transport crops, but also the vast quantities of natural gas used to produce fertil-izers. Runoff from industrial-scale cornfields also silts up the Missis-sippi River and creates a vast dead zone in the Gulf of Mexico every summer . What's more, when corn ethanol is burned in vehicles, it is as dirty as conventional gasoline and does little to solve global warming : E85 reduces carbon dioxide emis-sions by a modest fifteen percent at best, while fueling the destruction of tropical forests .

But the biggest problem with ethanol is that it steals vast swaths of land that might be better used for growing food . In a recent article in Foreign Affairs titled "How Bio-fuels Could Starve the Poor," Uni-versity of Minnesota economists C . Ford Runge and Benjamin Senauer point out that filling the gas tank of an SUV with pure ethanol requires more than 450 pounds of corn roughly enough calories to feed one person for a year .

Thanks in large part to the etha-nol craze, the price of beef, poultry and pork in the United States rose more than three percent during the first five months of this year. In some parts of the country, hog farmers now find it cheaper to fatten their animals on trail mix, french fries and chocolate bars . And since America provides two-thirds of all global corn exports, the impact is being felt around the world . In Mexico, tortilla prices have jumped sixty percent, lead-ing to food riots. In Europe, butter prices have spiked forty percent, and pork prices in China are up twenty percent. By 2025, according to Runge and Senauer, rising food prices caused by the demand for ethanol and other biofuels could cause as many as 600 million more people to go hungry worldwide .

Despite the serious drawbacks of ethanol, some technological vision-aries believe that the fuel can be done right . "Corn ethanol is just a

32


November 1, 2007


Las subvenciones también juegan su papel

importar productos cuyo cultivo y transformación genere tanto dióxido de carbono que convierta al remedio en peor que la enfer-medad. Y no quieren tampoco que las importaciones sean fruto de la destrucción de la selva tropical .

desde 2004, la superfi cie dedicada a estos cultivos ha pasado de 0,31 millones de hectáreas a 2,84 mil-lones en toda la UE, superando el tope presupuestario de Bruselas, obligada ahora a reducir las ayudas a 45 euros por hectárea.

A pesar del crecimiento de los cultivos para energía en la UE, la Comisión reconoce que para cum-plir el objetivo del 10% de biocom-bustibles [hoy ronda el 1%] tendrá que importar grandes cantidades de biocombustible . "Es evidente que no disponemos de sufi cientes terrenos en Europa para responder a la demanda de cultivos energé-ticos. Una parte de nuestras necesi-dades debe proceder por tanto de las importaciones", escribía esta misma semana en un artículo la comisaria europea de Agricultura, Mariann Fischer Boel .

Bruselas se ha comprometido a que estas importaciones sean sostenibles desde un punto de vista ambiental, porque no tiene sentido

El País, Edición Impresa

Algunas instituciones denun-cian que gran parte de la subida en los precios de productos como el maíz no se debe al incremento de la demanda, sino que se trata de un alza artifi cial y responde a las ayudas que reciben los agricultores de los países ricos . "El apoyo de la Administración estadounidense a la producción de biocarburantes en 2006 se situó en 5.325 millones de euros . Con las políticas actuales, la industria obtendrá en forma de subsidios más de 63.623 millones en el periodo comprendido entre 2006 y 2012", según el informe Bio-carburantes, ¿a qué precio?, elabo-rado por el Instituto Internacional para el Desarrollo Sostenible . Con estas ayudas, no es de extrañar que en EE UU se haya plantado este año la mayor cosecha desde la II Guerra Mundial .

En el caso europeo, Bruselas tam-bién subvenciona generosamente los cultivos que acabarán converti-dos en carburantes. Tanto, que

" Con las políticas actuales, la indus-tria obtendrá en forma de subsidios más de 63.623 mil-lones en el periodo comprendido entre 2006 y 2012", según el informe Biocar-burantes, ¿a qué pre-cio?, elaborado por el Instituto Interna-cional para el Desar-rollo Sostenible. "

33


December 7, 2007


With commodity prices on fi re it’s time to wean farmers off freebies

while wheat climbed 43 per cent. Palm oil rose 64 per cent, and rape-seed oil 23 per cent.

The United Nations Food and Agriculture Organization last summer said dairy prices had risen 46 per cent since November, 2006. Agricultural prices tracked by Toronto-Dominion Bank (in U.S. dollars) jumped by almost 40 per cent in the year to November . “Agriculture, and in particular crops, has entered a new era of high prices, supported by rising food consumption from emerg-ing markets and the prospects of competing demand for crops as a source of [biofuels],” TD economist Derek Burleton said in a report on the end of Canadian agriculture's dark era .

Everywhere, food price infl ation exceeds headline infl ation. Ital-ians in the autumn held a one-day pasta strike to protest against rising pasta prices . Things suddenly look prett y good down on the farm, and there is no reason to believe food prices will collapse any time soon . Every year, the equivalent of two Canadas are added to the world's population . Biofuel production mandates in many countries will keep upward pressure on food prices. France wants 7 per cent of all its fuel to come from biofuel by the end of the decade .

There was a time when farmers were in real trouble. In 1985, Neil Young, Willie Nelson and others started the Farm Aid concerts in the U .S . Midwest to help farmers who were about to lose their land to surly creditors (the concerts are still held) . In Europe, farmers seem to have had second careers as

drop of a mere 2 per cent over the previous year . Of that amount, a bit more than half – $156billion – went to the European Union .

In the EU, farmers receive 32 per cent of their revenues from subsi-dies, triple the U .S . rate (though less than South Korean and Japa-nese farmers) . The subsidies in some European countries are outrageous . Go to Norway if you want to get into the farm business; there, 66 per cent of farm revenues comes from subsidies . The ratio in Switzerland, where to be a cow is to live like a king, is almost as high . In New Zealand, about as far away from world markets as you can get, the ratio is only 1 per cent.

What is doubly remarkable about the endless trough-loads of freebies is that they're arriving when food prices are taking off . The combo – high subsidies and high product prices – amounts to a golden age for farmers .

Never mind that it's a fraud on the taxpayer .

The Economist Intelligence Unit's price index for food, feedstuff s (food for domestic livestock) and beverages rose by 16 per cent in 2006, partly because of the soaring production of biofuels such as corn-based ethanol .

Drought in some countries was another factor. The Economist fore-casts that grain prices will rise 23 per cent in 2007. The International Institute for Sustainable Develop-ment's Global Subsidies Initiative says agricultural commodity prices are on fi re. Between 2005 and 2007, maize prices jumped 64 per cent,

By Eric Reguly, The Globe and Mail

ROME Five years ago Western Europe's farmers were on the verge of grabbing pitchforks and storming the offi ces of the then agriculture commissioner . Franz Fischler had just announced an end to “blank cheque” subsidies to farmers . The men and women in coveralls would eventually have to fend for themselves in a market where supply and demand, not taxpayer-funded freebies, would determine what got grown where at what price .

Mr. Fischler survived. So, remark-ably, did the farmers . That's because the subsidies did not go away . Euros notes were bundled up like hay and delivered by the truckload to every farm in the land . Recently, the Organization for Economic Cooperation and Devel-opment (OECD) said the group's 36 members received $303billion (U.S.) in agricultural subsidies in 2006, a

for farmers .

the taxpayer .

price index for food, feedstuff s (food for domestic livestock) and beverages rose by 16 per cent in 2006, partly because of the soaring production of biofuels such as corn-based ethanol .

another factor. The Economist fore-casts that grain prices will rise 23 per cent in 2007. The International Institute for Sustainable Develop-ment's Global Subsidies Initiative says agricultural commodity prices are on fi re. Between 2005 and 2007, maize prices jumped 64 per cent,

" The International Institute for Sustain-able Development's Global Subsidies Initiative says agri-cultural commodity prices are on fire. Between 2005 and 2007, maize prices jumped 64 per cent, while wheat climbed 43 per cent. Palm oil rose 64 per cent, and rapeseed oil 23 per cent. "

34

protesters . Americans, Canadians and Europeans grew fat on cheap food .

Today, with prices moving up at double-digit rates across the board, it makes no more sense to subsidize farmers than it does to subsidize oil producers . On both sides of the Atlantic, agriculture reform has been more myth than reality . Yes, farm subsidies as a percentage of farm income has come down by a small amount . But the drop has been offset many times by the rise in prices . If there were any time to get serious about weaning the farmer off the taxpayer teat, it's now .

35


November 16, 2006


Tilting at windmillsgushed, “may be the biggest job and wealth-creation opportunity of the 21st century.”

At a similar event devoted to solar power at San Jose, in the heart of Silicon Valley, registra-tions almost quintupled this year, to over 6,500 attendees. Arnold Schwarzenegger, California's green-minded governor, made a cameo appearance in the midst of his re-election campaign. “I feel the energy,” he bellowed to an elated audience, “I feel the electricity . Clean energy is the future .”

Such hyperbole might seem reminiscent of the dotcom bubble . But clean-energy advocates insist growth is sustainable because of the likes of Mr Schwarzenegger . The Gubernator is a hero in green circles because of his enthusiasm for environmental regulation . He easily won reelection partly because he seized on global warm-ing as a concern and signed into law America's first wide-ranging scheme to cap greenhouse-gas emissions .

California also boasts America's most ambitious initiative to pro-mote solar power, dubbed “One Million Solar Roofs” . The state will

Clean-energy fever is being fuelled by three things : high oil prices, fears over energy secu-rity and a growing concern about global warming . The provision of energy, the industry's cheerleaders say, will change radically over the coming decades . Polluting coal and gas-fired power stations will give way to cleaner alternatives such as solar and wind; fuels derived from plants and waste will supplant petrol and diesel; and small, local forms of electricity generation will replace mammoth power stations feeding far-flung grids. Eventu-ally, it is hoped, fuel cells running on hydrogen will take the place of the ubiquitous internal combus-tion engine . It is a bold vision, but if it happens very slowly, or only to a limited extent, boosters argue that it will still prompt stupendous growth for firms in the business.

Analysts confidently predict the clean-energy business will grow by 20-30% a year for a decade. Jefferies, an investment bank that organised a recent conference on the industry in London, asked participants how soon solar power would become competitive with old-fashioned generation technolo-gies : in 2010, 2015 or 2020. More distant dates—let alone never—were not even discussed . About three-quarters of those present, one visitor gleefully observed, were “cheque-writers”. This “mega-trend”, the keynote speaker

The Economist, print edition

The clean-energy business is turn-ing into the next big investment boom, in which risks are lightly brushed aside .

AP UNTIL recently, recalls Charlie Gay, a 30-year veteran of the solar-power business, venture capitalists were far too busy cater-ing to captains of the information-technology industry to waste time on “hippy-dippy tree-huggers” like himself. But now the tree-huggers are in the ascendant and the IT barons are busy investing in clean-energy technology .

Among them is Vinod Khosla, a celebrated Silicon Valley financier. He is touting ethanol as the next big thing . Applied Materials, where Mr Gay works, has branched out from flat screens and computer chips into solar cells . Sun Power, the solar subsidiary of Cypress Semiconductor, is now worth almost as much as its chipmaking parent company .

Investors are falling over them-selves to finance startups in clean technology, especially in energy . Venture Business Research reck-ons that investment in the field by venture capitalists and private-equity firms has quadrupled in the past two years, from some $500m in 2004 to almost $2 billion so far this year . The share of venture capital going into clean energy is rising rapidly (see chart 1). New invest-ment of all sorts in the Energy Finance, another research firm, reckons that business will reach $63 billion this year, compared with just $30 billion in 2004. The lure of big money is leading investment banks to ramp up their analysis of the latest boom industry .

36

out the cost of generating solar power falls steadily over time . The fi rst cells, in satellites, cost about $200 per watt of generating power. By last year the price had fallen to about $2.70 per watt . That equates to a price decrease of about 18% every time production doubles, he calculates . Price decreases come inexorably with volume, he argues, so subsidies simply help to speed the process up by stimulating extra sales .

Eventually, the proponents of clean technology maintain, renew-able energy will become com-petitive with fossil fuels, allowing governments to end subsidies . Mr Gay thinks solar power will be as cheap as that from big coal-fi red power stations within a decade . Something of the sort has already taken place in Japan, where last year subsidies for solar were phased out. When these were intro-duced in 1994, says Chris O'Brien of Sharp, the world's biggest maker of solar cells, a system typically cost some $16,000 per kilowatt , of which the government paid half .

About 500 systems were installed in the fi rst year. A decade later, the cost had dropped to $6,000 per kilo-watt and 60,000 systems were fi tt ed. Nowadays, he says, Japan is the fi rst market “where customers have continued to buy solar systems without subsidy” .

However, all this is somewhat misleading . Retail electricity prices in Japan are among the highest in the world, making it much easier for solar to compete . In most places, concedes Michael Liebreich, of New Energy Finance, renew-able power and fuels will be more expensive than the dirtier sort for the “foreseeable future” .

That leaves the clean-energy busi-ness largely dependent on govern-ment handouts . Shares in the sector rose aft er George Bush's state-of-the-union address in January, when he swore to wean America off dependence on foreign oil. They also rallied on hopes that the newly Democratic Congress would spend more money on greenery .

pressure group, estimated that all this will cost American taxpayers at least $5 billion this year.

America's incentives for clean energy, however, are relatively modest compared with Europe's . The European Union, for example, wants 5.75% of all transport fuel to come from non-fossil sources by 2010. Big refi ners say the measure guarantees them a market for as much biodiesel as they can pro-duce .

The EU also has a target for power from renewable sources of 18% by 2010. Analysts at Goldman Sachs, an investment bank, calcu-late that solar output would have to grow by over 30% a year to meet it. By their count, 49 countries have policies on renewables in place that will foster rapid growth at clean-energy fi rms, including big emerg-ing markets such as Brazil, China and India .

Germany is perhaps the most generous. It has fi xed the price of renewable power for the next 20 years on a sliding scale that will decline over time . Certain solar projects will receive as much as €0.57 (73 cents) for each kilowatt -hour of electricity generated, com-pared with the going rate for dirtier power of around €0.05. In normal circumstances, Germany would be a terrible place to install solar pan-els : it is not very sunny and has a good distribution grid, which solar does not require. But thanks to its “feed-in tariff ”, it is the biggest solar market in the world .

Around the world governments like Germany's have pledged bil-lions, or in some cases unlimited sums, to advance the clean-energy cause . In the process, enthusiasts claim, they have “pre-booked” growth . Supporters argue that these subsidies are reasonable, since they encourage a worthwhile cause—the fi ght against global warming—that markets do not seem to prize highly enough .

What is more, the subsidies are not supposed to be permanent . Applied Materials' Mr Gay points

pay $2.9 billion in rebates over ten years to households and businesses that install solar panels . The federal government also chips in with a tax credit of 30% of the cost of instal-lation . All manner of businesses in the state, from FedEx to wineries in Napa Valley, are rushing to install subsidised solar panels (see article) .

Renewable statesBy 2010, California aims to generate 20% of its power from renewable sources. No fewer than 21 of Amer-ica's 50 states have such “renewable portfolio standards”, which local utilities are obliged to meet within a set period . Voters in Washington approved one in the recent elec-tions. Maine has the highest stan-dard, of 30%, although its utilities already meet it thanks to the state's many hydroelectric dams . Among the most ambitious is New Jersey's, which will require 22.5% of energy to come from renewables by 2021. It has already become the second biggest solar market in America, aft er California.

Other government policies ensure that making ethanol from corn is a lucrative business, despite linger-ing concerns that the manufactur-ing process consumes almost as much energy as the resulting fuel provides, so that the eff ort does no good for the environment or the cause of energy independence . Farmers receive subsidies for growing corn, refi neries for mix-ing it into fuels, service stations for installing pumps to sell it and consumers for buying it . Moreover, several states have laws requiring that a certain amount of ethanol is mixed into petrol, helping to bolster demand . A recent study by the Global Subsidies Initiative, a

pay $2.9 billion in rebates over ten

" A recent study by the Global Subsidies Initiative, a pressure group, estimated that all this will cost American taxpayers at least $5 billion this year. "

37

the necessary silicon . Goldman Sachs expects output to double by 2010—raising fears of an eventual crash in prices . In the meantime, solar firms seeking financing are trying to distinguish themselves, either through contracts that assure their future supplies of silicon or through technology that reduces their consumption of it .

The potential for growth, most analysts argue, is clear. But bottle-necks and political setbacks, not to mention technological glitches, will create many bumps in the road ahead . Indeed, fears that the most euphoric investors were overlook-ing such obstacles seem to have contributed to a sharp fall in clean-energy stocks earlier this year—although they have since recovered much of the lost ground . Such jitters caused several greenenergy firms to cancel planned flotations.

“There's legitimate debate about a couple of segments,” says Keith Raab, boss of Cleantech Venture Network . In some instances, valu-ations accorded to firms with no profits—and little chance of making any soon—were reminiscent of the excesses of the dotcom bubble . As Douglas Lloyd, of Venture Busi-ness Research, puts it, “There's too much money chasing too few opportunities . How is it possible that this many solar companies are going to succeed? They're not.”

governments to tighten purses-trings, since subsidies become rela-tively more expensive . Developing new, carbonfree technologies will seem less urgent if there is plenty of cheap oil about . When oil prices fell in the 1980s, governments quietly dropped many of the grand plans for energy independence devel-oped during the oil shocks of the 1970s.

In Mr Liebreich's view, oilprices below $50 a barrel would under-mine the momentum of clean energy . Mr Khosla, the venture capitalist, warned delegates at the conference in San Jose that they needed technologies that are “unconditionally cheaper” than fossil fuels : “If it ain't cheaper, it doesn't scale .”

For the time being, however, keeping pace with demand is more of a worry . Most manufacturers of wind turbines have full order books for the next few years . Executives at Neste, a big Finnish refiner, doubt Europe's output of biofuels can expand fast enough to meet the EU's target . The EU has also had to reduce its target for renewable power, since the industry could not grow fast enough to meet it .

The growth of solar firms has outpaced the supply of highgrade silicon needed to make their panels . Investors are now rush-ing to finance factories to produce

Several of those elected, after all, tried to burnish their environmen-tal credentials by running uplift-ing advertisements of themselves roaming the countryside amid majestic wind turbines .

But what one politician can man-date, another can terminate—and therein lies one of the biggest risks for clean energy . American politi-cians have periodically allowed a tax break for wind generation to expire, for example . This caused the industry to falter several times, before the credit was renewed again (see chart 2). It is due to expire once more next year . In simi-lar fashion, the shares of European clean-energy firms fell this sum-mer, along with the price of permits to emit carbon dioxide within the EU . The price of permits had fallen because European governments had handed out too many of them to polluters, thus flooding the market .

Voters, too, sometimes lose heart . In the recent elections, Califor-nians, normally a reliably green lot, voted against a proposal to tax oil production to fund research into renewables. Yet clean-energy investors are gambling, essentially, that governments and the taxpay-ers who fund them will continue to spend lavishly on the industry .

A dramatic fall in the oil price will almost certainly prompt

38


November 27, 2007

Government Support for Ethanol and Biodiesel in the US — 2007 Update (October 2007)

Fears of US biofuels ‘splash and dash’greenhouse gas reductions and at worst resulted in taxpayers paying for increased greenhouse gases .

Subsidised US biodiesel has made a splash in Europe with the Euro-pean Biodiesel Board threatening to lay WTO complaints about dump-ing of US biodiesels .

The Global Subsidies Initiative report estimated US to Europe exports grew from 30 million gal-lons in 2006 to 150 million gallons in 2007.

US subsidies see producers receive 1c for every percentage of biodiesel in a gallon of diesel .

This has helped production of B99 (99% biodiesel mix) so produc-ers can claim the highest subsidies . This amounted to nearly $US300 a tonne of biodiesel, Mr Posnett estimated .

Another loophole has seen pro-ducers from other countries ship their biofuel to the US to blend and claim subsidies before freighting on to other markets referred to as the "splash and dash" phenomenon .

Bioethanol producers can also claim volume tax credits worth 50Usc a gallon.

B99 would have to be blended down for mainstream use but the same situation could unfold here, Mr Posnett said.

Other countries also have similar regimes .

"It's not a one-off problem," Mr Posnett said.

Just as the industry was forming, "it's crazy to have them cut off at the knees," he said .

Ethanol and diesels will get a fuel tax exemption here .

Argent Energy's Mr Posnett said other refi nements should be made to proposed sustainability rules so that a biofuel's environmen-tal impact should be taken into account . The UK has done work on similar goals .

This could be phased in so that it didn't limit too many options for fuel companies, he said .

"There seems litt le point in using biofuel that only has a small eff ect, if any, on reducing greenhouse gases," he said .

This might make the subsidy issue go away, but it should be done even if it didn't, he argued .

A report by the Global Subsi-dies Initiative found US subsi-dies at best resulted in expensive

By Fiona Robertson, the National Business Review

Biofuel companies say it would make more sense for them to build plants in subsidised US cornfi elds than in New Zealand to meet new biofuel sales quotas.

They're pressing for protection from US-made competitors who they say could crowd out the mar-ket, as petrol and diesel prices soar .

"It would make more sense for me to build a biodiesel plant in the US and ship it over," Argent Energy New Zealand managing director Dickon Posnett said.

Solid Energy subsidiary Biodie-sel NZ has said it could produce about half the fuel volume needed to meet the 3.4% sales target set for 2012.

The company plans to press for a blunt safeguard of its position when the biofuel law is worked on next year .

General manager renewable ener-gy Andy Matheson argued pro-posed laws already had the "intent" to encourage use of local biofuels . Solid Energy would submit the law should be clarifi ed to make sure this was the case, he said .

Asked whether this would raise the cost of biofuel, Mr Matheson said local production could com-pete internationally when subsidies were taken out of the equation.

But he said he could not estimate the costs of restricting supply it would depend on the price of bio-ethanol and biodiesel that would otherwise land in New Zealand .

Ethanol and diesels will get a fuel

" A report by the Global Subsidies Initiative found US subsidies at best resulted in expen-sive greenhouse gas reductions and at worst resulted in taxpayers paying for increased green-house gases. "

39

He said that factor meant con-sumers might not notice the cheaper price of US biodiesel at the pump .

Though subsidised producers would have a significant wholesale advantage, when blended down savings at the pump could be as small as half a cent, he estimated .

Mr Matheson said Biodiesel NZ was currently selling fuel directly to customers at a slight premium to diesel pump prices. A 2006 Covec report for the Ministry of Transport on Biofuel Economics found that at average tallow costs, biodiesel would cost less to produce than conventional diesel at oil prices of $US52/barrel or above. The trigger point for ethanol was higher .

Its Gull Force 10, a wheyderived bioethanolpetrol blend, was selling at $1.76 yesterday morning at Gull Botany Downs .

Standard petrol at the same sta-tion was $1.67.

Biodiesel pump prices should be similar to ordinary diesel, accord-ing to Dickon Posnett, because biodiesel typically only makes up a 510% additive in fuel blends. At less than 5% blends it doesn't need to be labelled a biodiesel .

So the price of diesel itself is still a significant driver of biodiesel pump prices .

Mr Posnett said pure biodiesel might vary by four or five cents a litre compared to crude oil prices depending on feedstock prices .

"I'm not saying the oil companies wouldn't buy a bit [of locally made biofuel] here and a bit there," he said . "But the biofuel industry will take an absolute hammering ."

Mr Posnett said the company has put on hold investment plans for a $70 million biodiesel plant because "the environment isn't right at the moment to make a decision ."

"We're simply wanting to have a level playing field," he said.

Although Argent Energy UK has "just" been able to compete in Europe because of cheap tallow feedstock, here tallow was more expensive and emerging market demand was smaller, he said .

Biofuel at the pump Gull was the first mainstream pet-rol station to offer biofuel.

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ano durante uma década. O Jeff er-ies, um banco de investimentos que organizou em Londres um recente seminário sobre o setor, indagou aos participantes dentro de quanto tempo, acreditavam eles, a energia


November 20, 2006


Entre altos e baixos, energia limpa vira fi bre de investidores

capital de risco injetado em ener-gia limpa está crescendo rapida-mente (ver gráfi co). A New Energy Finance, outra empresa de pesqui-sas, estima que investimentos de todo tipo no setor chegarão a US$ 63 bilhões neste ano, em compara-ção com apenas US$ 30 bilhões em 2004. A sedução de grandes lucros potenciais leva os bancos de inves-timentos a focar suas análises cada vez mais sobre o setor .

A febre da energia limpa está sendo alimentada por três fatores : petróleo caro, temores em relação à segurança energética e crescente preocupação com o aquecimento global . O suprimento de energia, dizem os entusiastas do setor, vai se alterar radicalmente ao longo das próximas décadas . Usinas de eletricidade poluidoras alimenta-das a carvão e gás darão lugar a alternativas mais limpas, como as energias de origem solar e eólica; combustíveis obtidos de plantas e rejeitos substituirão a gasolina e o diesel; e modalidades pequenas e locais de geração de eletricidade substituirão usinas de eletricidade gigantescas que alimentam redes de distribuição distantes . Com o tempo, células de combustível ali-mentadas a hidrogênio tomarão o lugar dos onipresentes motores de combustão interna .

É uma visão ousada, mas, mesmo que ela ocorra muito lentamente ou apenas em amplitude limitada, os otimistas afi rmam que mesmo assim a revolução desencadeará um crescimento espetacular para as empresas envolvidas .

Os analistas prevêem confi ante-mente que os negócios com energia limpa crescerão entre 20% e 30% ao

Valor Economico

O setor empresarial dedicado à produção de energia limpa está se transformando no cenário do próximo grande boom de investi-mentos, onde os riscos estão sendo levianamente ignorados .

Até recentemente, recorda Char-lie Gay, um veterano com 30 anos no setor de energia solar, os capi-talistas de risco estavam ocupados demais dando atenção aos capitães do setor de tecnologia da informa-ção (TI) para perder tempo com "hippies amantes da natureza", como o próprio Charlie . Mas agora os "abraçadores de árvores" estão em alta e os barões do setor de TI estão investindo em tecnologias para energia limpa .

Entre eles está Vinod Khosla, um celebrado fi nancista do vale do Silí-cio. Khosla diz que o etanol será o próximo grande estouro. A empre-sa Applied Materials, onde Charlie trabalha, começou produzindo telas planas e chips para computadores, e hoje fabrica células solares . A Sun Power, subsidiária da Cypress Semiconductor no setor de energia solar, vale atualmente quase tanto quanto sua empresa controladora fabricante de chips .

Os investidores estão disputando oportunidades para fi nanciar jovens empresas no setor de tecnologia limpa, especialmente envolvendo geração de energia . A Venture Business Research avalia que os investimentos nessa área feitos por capitalistas de risco e fundos de investimento em partici-pações quadruplicou nos últimos dois anos, indo de cerca de US$ 500 milhões em 2004 para quase US$ 2 bilhões neste ano. A participação do

" Subsídios são concedidos aos agri-cultores para que cultivem milho, às refinarias para que misturem o etanol a seus combus-tíveis, aos postos de abastecimento para que instalem bombas para vender o produto e aos consumidores para que o comprem. Além disso, diver-sos Estados têm leis exigindo que uma determinada quanti-dade de etanol seja misturada à gaso-lina, o que ajuda a ampliar a demanda. Um estudo do grupo lobista Global Sub-sidies Initiative estimou que tudo isso custará aos contribuintes ameri-canos US$ 5 bilhões neste ano. "

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Para 2010, a União Européia (UE) tem uma meta de 18% para o uso de eletricidade obtido de fontes renováveis . Analistas do banco de investimentos Goldman Sachs estimam que a produção de energia solar teria de crescer mais de 30% ao ano para atingir a meta da UE . Segundo o Goldman, em 49 países há políticas para energia renovável que estimularão um crescimento rápido de companhias geradoras de energia limpa, inclusive em grandes mercados emergentes, como o Brasil, a China e a Índia .

A Alemanha é talvez o país mais generoso. Os alemães fixaram o preço da energia renovável para os próximos 20 anos segundo uma escala móvel que diminuirá ao lon-go tempo . Certos projetos de ener-gia solar receberão até 0,57 euros (US$ 0,73 para cada kilowatthora gerado de eletricidade, em compa-ração com a atual taxa em torno de 0,05 euros para energias mais sujas. Em circunstâncias normais, a Ale-manha seria um lugar péssimo para instalar painéis solares : não é um país muito ensolarado e tem uma boa rede distribuição, que não é necessária para a opção solar . Mas, graças a seu esquema tarifário, os alemães criaram o maior mercado do mundo para aproveitamento da energia solar .

Em todo o mundo, governos como o da Alemanha têm compro-metido bilhões ou, em alguns casos, verbas ilimitadas para desfraldar a bandeira da energia limpa . Nesse processo, afirmam os entusiastas, esses países "asseguraram pre-ventivamente" o crescimento de tecnologias limpas . Os defensores dessas iniciativas argumentam que os subsídios são razoáveis, pois incentivam uma causa meritória o combate ao aquecimento global que os mercados não parecem valorizar suficientemente.

E, além disso, os subsídios não são são permanentes . Gay, da Applied Materials salienta que o custo da geração de energia de fonte solar vem caindo continu-amente ao longo tempo . As primei-ras células, instaladas em satélites, custaram cerca de US$ 200 por watt gerado . No ano passado o preço

menos do que 21 dos 50 Estados americanos têm em vigor esse tipo de "padrão de programa renovável", que as companhias de eletricidade locais são obrigadas a cumprir em um prazo préestabele-cido . Os eleitores em Washington aprovaram um desses padrões em recentes eleições. O Maine tem a meta mais exigente, de 30%, embora suas companhias de eletricidade já estejam adequadas à exigência, graças às barragens hidrelétricas no Estado . Entre os mais ambiciosos está Nova Jersey, cuja exigência será de que 22,5% da energia venha de fontes renováveis em 2021. O Estado já é o segundo maior mercado de tecnologia solar no país, atrás da Califórnia .

Outras políticas governamen-tais asseguram que a produção de etanol do milho seja uma atividade comercial lucrativa, apesar das persistentes preocupações com que o processo produtivo con-suma quase tanta energia quanto a disponibilizada pelo combustível resultante, de modo que o esforço não beneficia o meio ambiente nem proporciona independência ener-gética . Subsídios são concedidos aos agricultores para que cultivem milho, às refinarias para que mis-turem o etanol a seus combustíveis, aos postos de abastecimento para que instalem bombas para vender o produto e aos consumidores para que o comprem. Além disso, diversos Estados têm leis exigindo que uma determinada quantidade de etanol seja misturada à gasolina, o que ajuda a ampliar a demanda. Um estudo do grupo lobista Global Subsidies Initiative estimou que tudo isso custará aos contribuintes americanos US$ 5 bilhões neste ano .

Nos EUA, porém, as motivações econômicas para o uso de energia limpa são relativamente pequenas, em comparação com a Europa . A União Européia (UE), por exem-plo, deseja que 5,75% de todo o combustível para os transportes venham de fontes não fósseis até 2010. As grandes refinarias dizem que os incentivos lhes asseguram um mercado para tanto biodiesel quanto produzirem.

solar deverá tornarse competitiva com as tecnologias clássicas de ger-ação : em 2010, 2015 ou 2020? Datas mais distantes que dirá nunca sequer foram discutidas. Cerca de três quartos dos presentes, comen-tou satisfeito um participante, eram investidores . Essa "megatendência", pronunciou o palestrante principal, "poderá ser a maior oportunidade para criação de emprego e riqueza no Século XXI" .

Por ocasião de um evento similar dedicado à energia solar em San José, no coração do vale do Silício, o número de participantes quase quintuplicou, neste ano, para mais de 6,5 mil presentes. Arnold Schwarzenegger, o "governador verde" da Califórnia, deu o ar da graça em meio à sua campanha de reeleição . "Posso sentir a energia", disse a uma audiência eletrizada . "Energia limpa é o futuro ."

Tais hipérboles podem parecer lembrar a bolha de investimentos no setor de internet . Mas os defen-sores de energia limpa insistem em que o crescimento é sustentável devido a gente como Schwarzeneg-ger . O governador é um herói, em círculos ecológicos, devido a seu entusiasmo por regulamenta-ção ambiental . Ele foi facilmente reeleito, em parte, porque abraçou a luta contra o aquecimento global e sancionou a lei regulamentando a primeira iniciativa abrangente americana para limitar emissões de gases estufa .

É também da Califórnia a mais ambiciosa iniciativa americana de fomento ao uso de energia solar, denominada "Um Milhão de Tetos com Painéis Solares" . O Estado pagará US$ 2,9 bilhões em resti-tuições no curso de dez anos para famílias e empresas que instalem painéis solares . O governo federal também está contribuindo com um crédito tributário de 30% do custo de instalação . Todos os tipos de empresas no Estado, da FedEx às vinícolas no vale do Napa, estão correndo para instalar painéis solares subsidiados .

Em 2010, a Califórnia pretende gerar 20% de sua eletricidade usando fontes renováveis . Nada

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suas torneiras financeiras, pois nesse caso os subsídios tornamse relativamente mais caros . O desen-volvimento de novas tecnologias não emissoras de dióxido de carbono parecerão menos urgentes, se houver bastante petróleo barato no mercado . Quando os preços do petróleo caíram nos anos 80, os governos, discretamente, aban-donaram muitos dos planos gran-diosos de independência energética elaborados durante os choques de petróleo dos anos 70.

Na visão de Liebreich, um petró-leo abaixo de US$ 50 por barril comprometeria o ímpeto dos pro-gressos em energia limpa . Khosla, o capitalista de risco, advertiu os presentes ao seminário em San José de que são necessárias tecnologias "incondicionalmente mais baratas" do que os combustíveis fósseis : "Se não for mais barato, não terá escala" .

Por enquanto, porém, a preo-cupação maior é acompanhar o ritmo da demanda . A maioria dos fabricantes de turbinas eólicas têm pedidos que os manterão ocupados nos próximos anos . Executivos da Neste, uma grande refinaria fin-landesa, duvidam que a produção européia de biocombustíveis possa crescer com suficiente rapidez para cumprir a meta da União Européia . A UE teve também de reduzir sua meta de energia renovável, porque o setor não conseguiu crescer sufi-cientemente rápido para atingila .

O crescimento das empresas de energia solar ultrapassou a oferta de silício de alta qualidade necessário para produzir painéis . Os investidores estão se precipi-tando em financiar fábricas para produzir o silício necessário . O Goldman Sachs crê que a produção dobre até 2010 aumentando o receio de um eventual colapso nos preços. Enquanto isso as empresas de energia solar em busca de finan-ciamento tentam se destacar, seja com contratos que garantam seu suprimento futuro de silício ou por meio de tecnologias que diminuam seu consumo do insumo .

Bush sobre o estado da União, em janeiro, quando ele prometeu elimi-nar a dependência americana do petróleo estrangeiro. As ações tam-bém subiram devido à expectativa de que o recémeleito Congresso de maioria democrata injetará mais dinheiro em iniciativas verdes. Afi-nal de contas, diversos dos políticos eleitos tentaram melhorar suas credenciais ambientalistas exibindo enaltecedores comerciais de si mes-mos percorrendo o interior do país em meio a grandes turbinas eólicas .

Mas a lei que um político pode criar, outros podem eliminar e é aqui onde mora um dos maiores perigos para a energia limpa . De tempos em tempos, os políticos americanos têm se abstido de reno-var a vigência de isenções tribu-tárias beneficiando, por exemplo, a geração de energia eólica . Isso fez com que o setor perdesse pressão diversas vezes, antes que subsídios entrassem novamente em vigor (ver gráfico). O incentivo governa-mental deverá caducar novamente no ano que vem. Analogamente, as ações de companhias europé-ias operadoras no setor de ener-gia limpa caíram no início deste segundo semestre, acompanhadas pela queda dos preços, na UE, das autorizações para emissão de dióxi-do de carbono . O preço das licenças tinha caído porque os governos europeus as haviam distribuído em quantidade demasiada aos polui-dores, inundando, dessa maneira, o mercado .

Também os eleitores por vezes perdem o entusiasmo . Em recentes eleições, os californianos, normal-mente um pessoal firmemente ecológico, votou contra uma pro-posta de instituição de um imposto sobre a produção petrolífera para bancar pesquisas sobre fontes renováveis . Apesar disso, os inves-tidores em energia limpa estão, fundamentalmente, apostando em que os governos e contribuintes que investem nessas tecnologias continuarão a jogar muito dinheiro no setor .

É praticamente certo que uma grande queda no preço do petróleo fará com que os governos fechem

tinha caído para cerca de US$ 2,70 por watt. Isso significa uma queda de aproximadamente 18% no preço a cada vez em que a produção duplica, estima ele. A queda dos preços acontece inexoravelmente com o aumento no volume gerado, afirma ele, de modo que os sub-sídios simplesmente ajudam a acelerar o processo estimulando mais vendas .

Chegará o momento, susten-tam os defensores de tecnologias limpas, em que energias renováveis passarão a ser competitivas com combustíveis fósseis, permitindo que os governos ponham fim aos subsídios. Gay acredita que dentro de uma década a energia solar será tão barata quanto a de grandes usinas a carvão . Algo desse tipo já aconteceu no Japão, onde no ano passado os subsídios à geração de fonte solar foram cancelados, após redução gradativa . Quando esses subsídios começaram a valer, em 1994, diz Chris O´Brien, da Sharp, maior fabricante de células solares do mundo, um sistema custava cerca de US$ 16 mil por kilowatt e o governo arcava com metade do custo .

Cerca de 500 sistemas foram instalados no primeiro ano . Uma década depois, o custo tinha caído para US$ 6 mil por kilowatt e 60 mil sistemas tinham sido adaptados . Atualmente, diz ele, o Japão é o mercado número um, "onde os con-sumidores continuaram a comprar sistemas solares sem subsídios" .

Mas tudo isso é um pouco enganoso . Os preços da eletricidade no varejo, no Japão, estão entre os mais altos no mundo, tornando muito mais fácil a participação da energia solar . Na maioria dos países, admite Michael Liebreich, da New Energy Finance, energia e combustíveis renováveis serão mais caros do que os tipos mais sujos num "futuro previsível" .

Isso deixa as atividades comerci-ais envolvendo energia limpa em larga medida na dependência de subsídios governamentais. As ações de empresas atuantes no setor subi-ram, depois do discurso de George

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O potencial para crescimento, defende a maioria dos analistas, é evidente . Mas, gargalos e complica-dores políticos, para não mencionar tropeços tecnológicos, produzirão solavancos no caminho . De fato, temese que a maioria dos investi-dores eufóricos tenha desprezado esses obstáculos, o que parece ter contribuído para uma substancial queda nos preços das ações de empresas no setor de energia limpa

neste ano embora elas tenham se recuperado . O nervosismo fez com que diversas empresas desenvol-vendo energias não poluentes can-celassem lançamentos planejados de ações.

"Há uma discussão válida sobre alguns segmentos", diz Keith Raab, que comanda a Cleantech Ven-ture Network . Em alguns casos, os preços das ações de empresas

no vermelho e a rarefeita chance de gerar lucros no curto prazo lembram os excessos da bolha da internet . Nas palavras de Doug-las Lloyd, da Venture Business Research, "há dinheiro demais correndo atrás de poucas oportuni-dades. Como é possível que tantas companhias de energia solar ven-ham a ter êxito? Não é possível".

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Mumbai Media Forum

April, 2007

The Role of Subsidies in the Indian Agrarian Crisis(March 2007)

The truth about subsidies

galvanising small dairy farmers through cooperatives, had cata-pulted the country into becoming the largest producer of milk in the world .

He called for comprehensive credit and insurance for farmers -- debt is one of the major reasons why cott on farmers in Vidarbha and elsewhere have been com-mitt ing suicide. NABARD has to review its mandate, role and business model with its focus on farmers . Professor Swaminathan specifi ed that the rate of interest for farmers should be 4%, and there ought to be a four- to fi ve-year credit cycle in drought prone areas .

Farmers had to be made credit and insurance-literate; barely 4% of farmers participate in insurance schemes . Farmers could be insured as a group, rather than individu-ally, with a low transaction cost and the village treated as a unit . There could be a Rural Insurance Devel-opment Fund .

Prince Charles, who ironically enough is an ardent exponent of organic agriculture and is vehe-mently opposed to genetically modifi ed crops, received more than $ 480,000 for his personal estate in Cornwall . Similarly, Prince Joakim of Denmark received $ 220,000, and Prince Albert of Monaco $ 300,000.

Eminent agricultural scientist Professor MS Swaminathan, who heads the National Commission on Farmers, opened the workshop by detailing several dimensions of the crisis. He quoted the Approach Paper to the Eleventh Five-Year Plan in December last year : “Economic growth has failed to be suffi ciently inclusive, particularly aft er the mid-1990s. Agriculture lost its growth momentum from that point on and subsequently entered a near-crisis situation, refl ected in farmer suicides in some areas .”

He pointed out how growth in agriculture is dropping below population growth . Between 197172 and 2003, the percentt age of marginal landholders, with less than 1 hectare, has risen from 63% of rural households to 80%. India’s Green Revolution, in which Swa-minathan played a pioneering role, is stagnating, which is why he has been calling, in recent years, for an “EverGreen Revolution”, implying more ecologically sustainable farm ing .

The Green Revolution has been characterised by capital and resource-intensive inputs, which have robbed the soil of its natural regenerative powers . While yields of most crops have been declin-ing, Swaminathan cited how milk production, which was based on

By Darryl D’Monte, InfoChange India News

A Swiss cow gets a subsidy that will allow her to fly first-class around the world! And Queen Elizabeth gets farm subsidies of over $ I million annually. Subsidies don’t always work as they are meant to in India either.

Two humorous anecdotes about farm subsidies sum up their absur-dity as well as their paradoxical nature. Vĳ ay Jawandhia of the Shet-kari Sanghatna in Wardha, who was in Mumbai recently to speak at a journalists’ workshop on the role of subsidies in the agrarian crisis, recounts how he was once asked what he would like to be reborn as, in his next life. Without batt ing an eyelid, he replied : “A European cow!” Seeing the bewilderment on the face of the questioner, he amplifi ed : “A European cow gets $ 2 a day by way of subsidy : that is more than half the world’s popula-tion gets .”

Ron Steenblik, an economist who heads research in an NGO called the Global Subsidies Initiative (GSI), headquartered in Geneva, made a very similar point. Accord-ing to Oxfam, the annual subsidies given to a cow in Switzerland (obviously more than the average in the European Union) are the equivalent of a fi rst-class airfare around the world .

Devinder Sharma, food policy analyst from Delhi, cited data from a European NGO, farmsubsidies .org, to demonstrate how Queen Elizabeth, as a huge landowner, is among the highest recipients of farm subsidies. In 2003-04, she received nearly $ 1.31 million.

galvanising small dairy farmers

" GSI’s mandate is to uncover new subsi-dies and expose bad design and unintend-ed consequences of subsidies. One of the classic examples is India’s fertiliser sub-sidy, which accrues to manufacturers who are then supposed to pass it on to farm-ers. "

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subsidies that artificially depress the prices of agricultural com-modities to make them competitive . In a case studied at length at the Mumbai workshop, several speak-ers referred to how the US provides a subsidy of $ 4.7 billion for the cotton produced by its 20,000 farm-ers (and another $ 180 million to its textile industry) . This means that under World Trade Organisation (WTO) rules prying open free trade in farm produce, Indian cotton farmers can no longer compete in the world market .

Devinder Sharma pointed to the contrast between the two countries : India has 320 million farmers, with an average holding of 4 hectares. The US has a minuscule number, with an average holding of 50 hectares. In the EU, a farmer quits his occupation every minute . As the controversy over SEZs depicts graphically in this country, farm-ers are by no means reconciled to switching to any other occupation .

The US can produce 7 tonnes of rice per hectare, as against 3 tonnes in India, on average . However, while the output of American rice is worth $ 1.2 billion, there is a $ 1.4 billion subsidy! In any case, as Sharma proved, productivity is not the only criterion for profit-able exports . Thailand has now emerged as the biggest exporter of rice, but it produces only 2.8 tonnes per hectare . While economists like Dr Gulati advocated importing foodgrain if it was cheaper than the domestic price, Jawandhia and Sharma warned that importing food was equivalent to importing unemployment in this country . If there is one warning that both the virtual epidemic of farmer suicides and the agitation against SEZs underline, there will be widespread social unrest if the agricultural sec-tor continues to decline and perish, with consequences for the ruling coalition that will be nothing short of disastrous .

According to Steenblik, subsidies given by the EU to dairy producers have resulted in major abnormali-ties : in Latin America, in the 1990s, when the EU donated its surplus

that was very well served by tanks and reservoirs in the past . Tanks are maintained by local village com-munities, so there is better manage-ment through desilting, etc .

Canals, by contrast, require huge capital expenditure, have a long gestation, and require major main-tenance, which is why, throughout the country, the costbenefit ratios of major dams are going awry because reservoirs fill up with silt and their lives become shorter . According to Dr Amar Nath, although the original project reports envisage what cropping patterns there will be in the command area, in the final analysis there is a freeforall where big farmers corner the gains of the scheme . This was the fear voiced about the Narmada dam which, it was alleged, would benefit cash-crop rich farmers in certain districts like Mehsana and Bharuch in Guja-rat and not reach the parched dis-tricts further away . Recent reports allege that the power generated by the dam benefits industries in the state rather than those without elec-tricity . (Only last month, an NGO in Gujarat called Pravah brought out a report that monitors delivery in “the world’s largest drinking water pipeline project,” an offshoot of the Narmada dam .)

Profligate flooding of fields through subsidised irrigation accounting for something like 80% of the country’s total water use can change the face of the countryside for the worse . Farmers along the Rajasthan canal are growing wheat in the desert . In Punjab and Harya-na, excessive irrigation has resulted in waterlogging . This has been amply documented by Shripad Dharmadhikari in his study on the illusory benefits of the Bhakra dam and Nangal canal in that region, which is potentially one of the most productive wheatgrowing areas in the world . Even so, as Profes-sor Swaminathan observes, India is able to produce only 2.71 tonnes of wheat per hectare, as against a whopping 7.58 tonnes in France and 4.25 tonnes in China.

In the developed world, there are countless examples of bad

According to Steenblik, GSI’s mandate is to uncover new sub-sidies and expose bad design and unintended consequences of sub-sidies . One of the classic examples is India’s fertiliser subsidy, which accrues to manufacturers who are then supposed to pass it on to farmers . According to Dr Ashok Gulati, the Delhibased Asian Direc-tor of the International Food Policy Research Institute, the returns were only 53 paise for every rupee spent on subsidising fertilisers through the 1990s. He claimed, somewhat controversially, that returns in the farm related sector were highest on roads -- Rs 3.17 for every rupee spent, in the same decade . This was presumably because produce could be more speedily dispatched to markets and did not perish . (The next highest return, accord-ing to his research, was on farmers’ education .)

Dr Amar Nath, Senior Economist with the National Institute of Pub-lic Finance and Policy, described how the government’s intention was to make fertiliser affordable to farmers, and widely distributed . In reality, this was not the case . “Fertiliser subsidies are indirect and the benefits accrue more to the manufacturers and large farmers than small and marginal farm-ers,” he pointed out . “The share of fertiliser cost in the total cost of inputs in agriculture is so high that only large farmers benefit from this subsidy.” What’s more, the appli-cation of fertiliser is more or less uniform throughout the country, irrespective of weather, soil and topography .

After fertiliser, the biggest sub-sidy in this country is for irrigation . Vidarbha, it is well known, suffers because it is in the rain shadow area of the state and lacks irriga-tion, which is partly why there is so much distress in the region . Some 70% of irrigation in the country is from canals, which is wasteful and poorly targeted, as distinct from tank irrigation . In Karnataka, 40 lakh hectares are irrigated by canals, and only 7 lakh hectares through tanks, although this was one of the states of peninsular India

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produce was introduced, the World Bank estimated that the gains to the world would be $ 90 billion, of which $ 16 billion would accrue to developing countries . According to a study conducted by the Carnegie Endowment for International Peace in the US, however, the actual gains have been only $ 37 billion, out of which 110 developing countries benefited by only $ 6.76 billion. This is equivalent, asserted Sharma, to only half this country’s rural development annual budget .

distorts cropping patterns in the US . Steenblik observed that a SUV, if run on ethanol, receives a subsidy of $ 520 per year, which is about the per capita income of a poor coun-try like Burkina Faso . This policy also does not take into account the ecological impact : every kiloliter of ethanol produced depletes 10 kg of topsoil .

Sharma made a strong case for getting exporting countries to abol-ish subsidies or stop trading with them . When the WTO dispensation on free movement of agricultural

milk powder, it was so plenti-ful that people used it to outline football pitches! Subsidies given to Denmark’s wind energy producers (like Micon, which NEPC in India collaborated with for some years) enabled that tiny country to corner three-quarters of the world trade.

An emerging cause for concern is the subsidy given by the US to biofuels mainly corn to produce ethanol, supposedly a ‘green’ fuel for cars . Not only does this divert corn from human consumption to fuel SUVs and the like, it also

47


May 15, 2007


Field of schemes; Ethanol empire is built on subsidies

The pump price of ethanol is also kept artifi cially high due to a 54 cent-a-gallon tariff Washington slaps on ethanol imports, protect-ing the U.S. industry from competi-tion . Ethanol producers also have received federal loan guarantees, leaving taxpayers holding the bag if projects go bust . Tax credits go to auto-makers who build vehicles that burn E85, a fuel made up of 85 percent ethanol (as opposed to the usual 10 percent blend). These tax credits help auto-makers, but they also benefi t ethanol producers, by promoting use of their product .

A small ethanol producer’s tax credit of 10 cents a gallon was approved in 1990, applying to the fi rst 15 million gallons a company produces each year . But the rules were changed in the 2005 energy bill, extending the credit to cover the fi rst 60 million gallons pro-duced annually . That many dimes adds up to a lot of dollars . The Department of Energy has funded research and development for the industry. And states off er a host of their own subsidies or tax breaks to ethanol makers .

It’s true that other energy sources are subsidized . But as “Biofuels — at what cost?” a recent report from the International Institute for Sustainable Development shows, the subsidies for ethanol, per BTU of energy produced, are by far the highest. They’re more than 10 times higher than subsidies for oil, even counting the costs of protect-ing shipping in the Persian Gulf . The second most highly subsi-dized energy resource, nuclear power, gets only half the subsidies, per unit of energy produced, as ethanol . According to the report, the ethanol craze annually costs

We’ve heard no talk about reduc-ing corn subsidies when a fi ve-year farm bill is negotiated by Congress this year — though that’s the least Congress could do, given all the other taxpayer support the ethanol industry receives . Washington is notoriously reluctant to push any-one away from the federal trough : corn farmers won’t be the fi rst.

Not only do taxpayers subsidize farmers, but they shell out 51 cents in tax credits for every gallon of ethanol produced . Although tax credits have fl uctuated in value over the years, one estimate puts the revenue losses to govern-ment, and the benefi ts to indus-try, at as much as $12.6 billion in 2006 dollars. And those numbers will increase thanks to a sizeable boost in federal ethanol mandates included in the 2005 energy bill.

The Gazette, Colorado Springs

No doubt about it : the ethanol craze has been a boon to some farmers in Colorado and elsewhere . Government production mandates of the corn-based fuel are pitt ing food producers against energy producers, driving corn prices to record highs . This is a blessing for farmers, who are rushing to cash in by planting more acres in corn, but a curse for consumers, who will see prices climbing not just on corn fl akes but on a host of products, including meat and poultry, con-nected to corn .

The prices may moderate as farmers meet soaring demand by planting more acres in corn, as a report in last Wednesday’s Gazett e indicates . But given the number of subsidized ethanol production plants on the drawing board, and the technical challenges involved in producing non-corn-based ethanol, we’re bett ing that the infl ationary eff ects will continue.

In time, ethanol will be exposed as a huge boondoggle with illusory benefi ts for “energy independence” and the environment . But the boom’s benefi ciaries will try riding the gravy train as far as they can, using bogus defenses of the fuel . One of them was trott ed out in last week’s story.

Colorado Corn Growers Associa-tion President Doug Melcher told The Gazett e that higher corn prices will make farmers less dependent on government subsidy programs to make a living . We wish it were so . But direct subsidies to farmers represent only the tip of the ethanol iceberg .

54 cent-a-gallon tariff Washington

usual 10 percent blend). These tax

bill, extending the credit to cover

We’ve heard no talk about reduc-

" ... as “Biofuels — at what cost?” a recent report from the International Institute for Sustain-able Development shows, the subsidies for ethanol, per BTU of energy produced, are by far the high-est. They’re more than 10 times higher than subsidies for oil, even counting the costs of protect-ing shipping in the Persian Gulf. "

48

taxpayers $8.2 billion in outlays and $7.3 billion in forgone revenues (in 2006 dollars). And that, accord-ing to the report, is a conservative estimate .

Thus, it’s dishonest to claim corn farmers will become less dependent on subsidies if direct price supports are eliminated . Without the scaf-folding of subsidies that prop up the entire ethanol empire, from top to bottom, at taxpayer and consum-er expense, corn farmers wouldn’t be reaping the windfall they are .

49


October 26, 2006


EnergíaEEUU : Biocombustibles, promesa sobrevalorada

El informe es el primero de seis estudios sobre subsidios a bio-combustibles comisionados por la Iniciativa Global de Subsidios (GSI) del IISD y dirigidos por Doug Kop-low, fundador y jefe de Earth Track Inc ., una compañía estadounidense de investigación . Los próximos trabajos serán sobre Australia, Canadá, Gran Bretaña, Suiza y la Unión Europea .

El informe fue divulgado en el marco de un continuado estan-camiento de las negociaciones com-erciales internacionales de la Ronda de Doha entre los países ricos y las naciones del Sur en desarrollo, sobre todo en lo relativo a los subsi-dios agrícolas .

El estudio se concentra princi-palmente en la compilación de información sobre más de 200 subvenciones federales, estaduales y de gobiernos locales a la produc-ción y consumo de biocombustibles en Estados Unidos .

"Muchos de esos subsidios están mal coordinados y enfocados . Todo indica que se acumulan sin que las autoridades tengan una clara idea de su impacto potencial en el ambiente y en la economía ", alertó el director de la GSI, Simon Upton .

El informe estima el valor total de los subsidios para los biocombus-tibles entre 5.500 millones y 7.300 millones de dólares anuales, monto equivalente a los fondos que el gobierno otorga a las producciones de azúcar y de algodón juntas.

Más de 90 por ciento de las sub-venciones apoyan a la producción

en la atmósfera es limitada .

El informe, divulgado el miér-coles y titulado "Biocombustibles, ¿a qué costo?", alerta que las poten-ciales consecuencias negativas de los subsidios gubernamentales a la industria no están siendo consid-eradas .

Además de que los subsidios podrían distorsionar aun más la ya altamente subvencionada economía agrícola, la producción a gran escala de insumos para biocom-bustibles, sobre todo maíz y soja, y las emisiones de las cada vez más unmerosas refi nerías de etanol y biodiésel suponen una nueva ame-naza para el ambiente de la zona central de Estados Unidos .

Los subsidios también añaden preocupación sobre la creciente competencia entre la producción de alimentos y la de combustible . Al tornar la balanza a favor de esta última, los precios internacionales de los alimentos aumentarían, con devastadores resultados para las poblaciones pobres, sobre todo aquellas que dependen de la ayuda alimentaria externa y de las import-aciones baratas .

"Las políticas agrícolas deberían una vez más estar separadas de las políticas energéticas", concluye el trabajo, que llama a una moratoria de nuevos subsidios y propone un plan para aplicarlos en forma gradual .

"Se deben usar enfoques más efi cientes para lograr los insistente-mente subrayados objetivos de seguridad energética y de reducir las emisiones de gases inverna-dero", añade .

Por Jim Lobe, Inter Press Service

Washington - Los contribuyentes de Estados Unidos aportan alred-edor de 7.000 millones de dólares al año en subsidios a la industria de los biocombustibles líquidos, fondos que podría ser mejor aprovechados en otras tecnologías protectoras del ambiente y de las fuentes de energía .

A esa conclusión llega un informe de 93 páginas del independiente Instituto Internacional para el Desarrollo Sostenible (IISD, por sus

siglas en inglés) .

El trabajo señala además que la industria podría recibir aun más dinero, entre 8.000 y 11.000 mil-lones de dólares anuales en el futuro cercano, de autoridades federales, estaduales y municipales si se mantienen las actuales políti-cas, a pesar de la evidencia de que la capacidad de los biocombustibles para reducir la dependencia del petróleo de Medio Oriente y la emisión de los gases invernadero

las emisiones de las cada vez más unmerosas refi nerías de etanol y biodiésel suponen una nueva ame-naza para el ambiente de la zona central de Estados Unidos .

preocupación sobre la creciente competencia entre la producción de alimentos y la de combustible . Al tornar la balanza a favor de esta última, los precios internacionales de los alimentos aumentarían, con devastadores resultados para las poblaciones pobres, sobre todo aquellas que dependen de la ayuda alimentaria externa y de las import-aciones baratas .

" Muchos de esos subsidios están mal coordinados y enfo-cados. Todo indica que se acumulan sin que las autoridades tengan una clara idea de su impacto poten-cial en el ambiente y en la economía ", alertó el director de la GSI, Simon Upton. "

50

Mientras, la producción de biodiésel, hecha en base a aceites vegetales o grasas animales, es muy temprana, pero crece rápido . Pasó de apenas cuatro millones de litros en 2000 a 75 millones el año pasado . Basándose en los actuales programas, el informe pronos-tica que los subsidios anuales del gobierno en los próximos seis años podrían aumentar a 8.700 mil-lones de dólares para el etanol y a 2.300 millones de dólares para el biodiésel, sin contar muchos planes públicos por cientos de millones de dólares que acaban de ponerse en práctica .

El mismo argumento, además del hecho de que los biocombus-tibles emiten menos gases inverna-dero que los fósiles, está detrás del actual auge de la industria .

Según Koplow, la capacidad de producción de etanol se incrementó 40 por ciento desde inicios del año pasado .

Con subvenciones gubernamen-tales de entre 5.100 millones y 6.800 millones de dólares, la industria del etanol produjo unos 16.000 mil-lones de litros, según el informe. Esto representa casi una sexta parte de la cosecha total de granos del país, pero menos de tres por ciento del combustible para automóviles que se necesita.

o al consumo de etanol en base a maíz .

Estos subsidios aumentarán en los próximos años porque la mayoría de ellos están atados a la producción de combustibles por parte de inversores privados, que crece en forma acelerada, indica el estudio .

Entre los biocombustibles, el etanol es por lejos el mayor y más antiguo receptor de subsidios . Ya en los años 70, cuando Washington tambaleaba por un salto en los pre-cios del petróleo, se lanzaron varios programas destinados as reducir la dependencia del crudo externo y se apeló al etanol .

51

Biofuels : is the cure worse than the disease?

GSI INSTITUTIONAL COLLABORATION

Roundtable on Sustainable Development (September 2007)

The GSI works in cooperation with a growing international network of research and media partners . These include local research institutes and international intergovernmental organizations .

On 11 September in Paris, the GSI was invited to participate in a meeting of the OECD Round Table on Sustainable Development on the economic potential and environmental impact of biofuels . Ronald Steenb-lik, the GSI’s Director of Research, co-authored the background report for the meeting, together with OECD Round Table staff member, Richard Doornbosch. The two day meeting was attended by leading experts on the subject, including ministers, business leaders, technical experts and relevant non-governmental and inter governmental organizations .

This report generated widespread international media coverage, following a leak to the Financial Times newspaper a day prior to the meeting. Substantive articles questioning the legitimacy and extent of OECD government subsidies to biofuels were published in the mainstream media and carried by news agencies in both OECD countries and beyond . The following is a selection of the coverage that resulted from the OECD report .

52

Biofuels – Is the cure worse than the disease? (September 2007)

September 11, 2007

OECD slams biofuels subsidies for sparking food price inflation

ministers and representatives of a dozen governments, includ-ing the US. Also attending will be Ángel Gurría, the OECD secretary general, scientists, business repre-sentatives and non-governmental organisations .

The survey puts a question mark over the European Union's plan to derive 10 per cent of transport fuel from plants by 2020. It says money saved from subsidies phasing out should fund research into so-called second-generation fuels, which are being developed to use waste prod-ucts and so emit less CO2when they are made .

Adrian Bebb, biofuels campaigner with Friends of the Earth said : "The OECD is right to warn against throwing ourselves headfirst down the agro-fuels path."

swiftly make them unpopular among taxpayers .

The study estimates the US alone spends $7bn (£3.4bn) a year help-ing make ethanol, with each tonne of carbon dioxide avoided costing more than $500. In the EU, it can be almost 10 times that. It says biofuels could lead to some dam-age to the environment . "As long as environmental values are not adequately priced in the market, there will be powerful incentives to replace natural ecosystems such as forests, wetlands and pasture with dedicated bio-energy crops," it says .

The report recommends govern-ments phase out biofuel subsidies, using "technology-neutral" carbon taxes to allow the market to find the most efficient ways of reducing greenhouse gases .

The study, prepared for the OECD's round table on sustainable development, will be discussed in Paris today and tomorrow by

By Andrew Bounds, Financial Times

Governments need to scrap subsidies for biofuels as the current rush to support alternative energy sources will lead to surging food prices and the potential destruction of natural habitats, the Organisa-tion for Economic Co-operation and Development will warn today .

The OECD will say in a report to be discussed by ministers today that politicians are rigging the market in favour of an untried tech-nology that will have only limited impact on climate change .

"The current push to expand the use of biofuels is creating unsus-tainable tensions that will dis-rupt markets without generating significant environmental benefits," say the authors of the study, a copy of which has been obtained by the Financial Times .

The survey says biofuels would cut energy-related emissions by 3 per cent at most. This benefit would come at a huge cost, which would

53

September 12, 2007

Biofuels push damaging, disruptive, OECD says

Robin Speer, director of public affairs for the Canadian Renewable Fuels Association, a biofuels lobby group, said his group disagrees with many of the OECD report's views . Canada generates biofuels mainly from surplus grain and oilseeds, he said, citing evidence of “significant environmental ben-efits” from adding them to tradi-tional gasoline. Ottawa's support for ethanol helps Canadian farmers, creates rural jobs, and adds to our fuel supply, he said .

At the same time, most current players in the business are invest-ing in new technologies that will eventually see commercialization of ethanol made from waste products that contain cellulose . “Everyone is working in that direction,” Mr . Speer said .

Toronto energy watchdog Energy Probe backs the OECD conclusions . “It's hard to see how ethanol makes sense from just about anyone's per-spective, other than the farmers,” said executive director Lawrence Solomon . “It pollutes air, it depletes water, [and] it's inefficient in terms of energy .”

The OECD urged more emphasis on energy conservation and fuel economy .

Because Western countries are subsidizing biofuels, and trade bar-riers block their importation from tropical regions where they can be produced more efficiently, there are “powerful incentives” to replace forests, wetlands and pasturelands with bio-energy crops, the report says .

And even though burning bio-fuels may produce lower levels of greenhouse gases than fossil fuel, when fertilizer use and other impacts are taken into account “the overall environmental impacts of ethanol and biodiesel can very easily exceed those of petrol and mineral diesel .”

One big problem with govern-ment backing of ethanol, the report says, is that it requires major invest-ments in fuel-distribution infra-structure, which then pressures policy makers to continue support over the long term .

The report outlines a number of alternatives to the subsidies and protectionist measures now in place in many Western countries . First, tariffs on imported biofuel should be lifted, to support devel-oping countries where it can be produced more cheaply .

International certification stan-dards for sustainable biofuels should also be set, the OECD report says so that people know which products help the environment . And more government money should go to new technologies, such as making biofuels from waste products or marginal crops .

By Richard Blackwell, The Globe and Mail

The rush to promote biofuels such as ethanol and biodiesel is pushing up food prices and actu-ally damaging the environment, a report from the Organization for Economic Cooperation and Devel-opment says .

Governments should stop sub-sidizing the current generation of biofuels – such as corn-based ethanol – and put more money into researching more advanced tech-nologies, the report said .

“The current push to expand the use of biofuels is creating unsus-tainable tensions that will dis-rupt markets without generating significant environmental benefits,” says the report, prepared for an international conference under way in Paris .

The OECD is the latest in a chorus of voices questioning expansion of biofuels . Last spring a study from Canada's Library of Parliament said Ottawa's investments in biofuel would do little to cut greenhouse gas emissions . In July a report from the Food and Agricultural Organi-zation of the United Nations said high demand for biofuels contrib-utes to inflating food prices.

The OECD report is particularly critical of governments that man-date the proportion of ethanol in automotive fuel – policies now in place in Canada, the United States and many other countries . Any kind of government support for biofuel insulates drivers from the true cost to society of their fuel consumption, it adds .


54

September 11, 2007

Ungünstige Bilanzen für Biotreibstoffespürbar, d.h. bis zu über 80%. Alle anderen konventionellen Methoden zur Produktion von Biotreibstof-fen senken die Emissionen nur um rund 40% oder weniger ohne die Emissionen durch Rodung u .Ä .

Enorm hohe Subventionen Ungünstig ist auch die wirtschaftli-che Bilanz . Die Subventionen für Biodiesel und Äthanol betragen je nach Land zwischen $0.38 und $4.98 pro ersetzten Liter fossiler Treibstoffe. Je Tonne vermiedener CO72Emissionen errechnen sich Subventionen von 165$ bis zu 4520$. In der Regel verdoppeln sich durch den Einsatz von Biotreib-stoffen die Transportkosten der Konsumenten und Steuerzahler . Die OECD empfiehlt verstärkte Anstrengungen zur Entwicklung neuer Techniken für eine billigere und umweltverträgliche Produk-tion von Biotreibstoffen. Ein Ersatz von Subventionen durch technisch neutrale CO 2 Steuern zielt in diese Richtung . Die Reduktion von Importsteuern und Handelshem-mnissen erlaubt Entwicklung-sländern, ihren komparativen Vorteil beim Anbau von Biomasse umzusetzen .

effizient wäre und wenig zum Ziel einer Reduktion der Treibhausgase beitragen würde .

Nahrungsmittel contra Treibstoffe Während die globale Landmasse theoretisch ausreicht, um den Nahrungsmittelbedarf zu decken und gleichzeitig in grösserem Mass Biotreibstoff produzieren zu kön-nen, ist praktisch ein Zielkonflikt zwischen beiden Nutzungsformen und daraus folgend eine Debatte unter dem Titel «Nahrungsmittel oder Treibstoffe» zu erwarten. Laut der Studie entspricht realistisch-erweise die zusätzlich anbaubare Fläche nur einem Fünftel der bere-its landwirtschaftlich genutzten Fläche . Durch das rasche Wachs-tum des Geschäfts mit Biotreibstof-fen entstehen Anreize, Wälder zu roden und Feuchtgebiete trock-enzulegen. Die dabei auftreten-den Treibhausgasemissionen und Umweltschäden führen zu schlech-ten Umwelt und CO72Bilanzen von Biotreibstoffen. Problematisch ist der Anbau von Biomasse für Treibstoffe in Regionen mit gemäs-sigtem Klima, da fossile Treibstoffe eingesetzt werden müssen .

Mit der gegebenen Technik reduzieren nur die Produktion von Äthanol aus Zuckerrohr oder Zel-lulose sowie die Herstellung von Biodiesel aus Abfallprodukten wie Tierfett und gebrauchtem Speiseöl die Treibhausgasemissionen im Vergleich zu Benzin und Diesel

Eine kritische Umwelt und Wirtschaftlich-keitsstudie der OECD

Besuchen Sie die Website der füh-renden Schweizer Internationalen Tageszeitung unter http ://www.nzz.ch

Die an Treibstoffe aus Biomasse gerichteten Erwartungen als umweltfreundliche, versorgungssi-chere Energie sind zu hoch ang-esetzt, wie eine Studie der OECD aufzeigt . Die Umweltbilanz kann schlechter sein als für fossile Treibstoffe, die Subventionen sind enorm hoch .

Die Frage, ob der zur Reduz-ierung der globalen Erwärmung politisch geförderte Einsatz von aus Biomasse gewonnenen Treib-stoffen nicht mehr Umweltprob-leme hervorruft als er beseitigt, ist Gegenstand einer in Paris stat-tfindenden Sitzung des «Round Table on Sustainable Development» der Organisation für wirtschaftli-che Zusammenarbeit und Ent-wicklung (OECD) . Eine für die Gespräche erstellte Studie kommt zum Schluss, dass die angestrebte Substitution von fossilen Treibst-offen für Verkehr und Transport durch agrarische Treibstoffe mit den vorhandenen Technologien die weltweit verfügbaren Nah-rungsund Futtermittel verknap-pen würde, die Biodiversität und die Umwelt schädigen würde, in wirtschaftlicher Sicht nicht


55

September 12, 2007

Les subventions sur les agrocarburants à l’index

déçoivent . Ne représentant, en 2005, que 1 % du total de l'énergie utilisée pour le transport routier, ils contribuent très peu à réduire les émissions polluantes . Pis, ils con-somment eux-mêmes de l'énergie fossile pour être produits et trans-portés . Et toute hausse du prix du pétrole ne peut qu'entraîner une augmentation des coûts de produc-tion .

CHERE TORTILLA Encore plus grave, les " biocarbs " induisent une hausse des prix des denrées agricoles entrant dans leur composition (maïs, etc .), mais aussi de remplacement (blé) . Au point que des manifestations ont eu lieu il y a quelques mois au Mexique en raison de la hausse du prix de la tortilla (à base de maïs). À quand les manifestations contre les sub-ventions agricoles?

des pays riches à produire plus . Les Américains dépensent déjà plus de 7 milliards de dollars par an pour ce faire . . .

Initiée dans les années 70 par la dictature brésilienne de l'époque, la politique visant à développer les carburants alternatifs pour s'affranchir de la dépendance pétrolière a pris de l'ampleur ces dernières années, à mesure que le prix de l'or noir grimpait . Au point d'être promue dans de nombreux pays (ne disposant pas forcément des atouts du Brésil . . .) comme la panacée . Non seulement les agro-carburants allaient aider à réduire les émissions de gaz à effet de serre, mais en plus offrir une deuxième vie aux campagnes, surtout dans les pays riches, et justifier par là même de nouvelles subventions . . . Or, si les agrocarburants de deux-ième génération devraient être plus compétitifs, ceux de la première

Lysiane J. Baudu, La Tribune

L'OCDE juge que les énergies de substitution, coûtent cher, font peu pour l'environnement et renchéris-sent les prix agricoles .

Les agrocarburants ne seraient-ils qu'une fausse bonne idée ? De plus en plus de voix s'élèvent en tout cas pour relativiser les bien-faits de cette énergie alternative, produite à base de canne à sucre au Brésil, de maïs aux ÉtatsUnis ou encore de betterave et de colza en Europe . Dernière en date, celle de l'OCDE . L'organisation vient de remettre un rapport intitulé Bio-carburants : le remède est-il pire que le mal ? aux ministres des pays membres pour une discussion de deux jours. Et de répondre " oui " : compte tenu des impacts négatifs des agrocarburants, aussi bien sur l'environnement que sur les marchés agricoles, l'OCDE estime qu'il ne faut pas inciter les paysans


56

September 11, 2007

Biofuels offer cure worse than the disease OECD

because a person walks, rides a bicycles, carpools or tunes up his or her vehicle's engine more often is a full liter of gasoline or diesel saved at a much lower cost to the econo-my than subsidising inefficient new sources of supply," it said .

Biofuels, made mainly from grains, oilseeds and sugar, have been accused of being responsible for a recent surge in farm com-modities prices, along with other factors such as lower output and tight stocks .

The OECD, which said in July that it saw biofuels keeping prices at high levels into the next decade, said it would lead to an unavoid-able "food-versus-fuel" debate.

"Any diversion of land from food or feed production to production of energy biomass will influence food prices from the start, as both com-pete for the same input," it said .

technologies that would avoid competing for land use with food production ."Governments should cease to create new mandates for biofuels and investigate ways to phas them out," it said .

The OECD said tax incentives put in place in many regions, including the European Union and the United States, to encourage biofuel output could hide other objectives .

"Biofuel policies may appear to be an easy way to support domestic agriculture against the backdrop of international negotiations to libera-lise agricultural trade," it said .

CUT DEMAND Instead it encouraged members of the World Trade Organisation to step efforts to lower barriers to biofuel imports to allow develop-ing countries that have ecological and climate systems more suited to biomass production .

The OECD also encouraged government to work on cutting demand for transport fuel rather than encouraging production of so-called "green" fuels."A liter of gasoline or diesel conserved

By Sybille de La Hamaide, Reuters

Paris, Sept 11 Biofuels, champi-oned for reducing energy reliance, boosting farm revenues and help-ing fight climate change, may in fact hurt the environment and push up food prices, a study suggested on Tuesday .

In a report on the impact of biofu-els, the Organisation for Economic Cooperation and Development (OECD) said biofuels may "offer a cure that is worse than the disease they seek to heal" .

"The current push to expand the use of biofuels is creating unsus-tainable tensions that will disrupt markets without generating signifi-cant environmental benefits," the OECD said .

"When acidification, fertiliser use, biodiversity loss and toxicity of agricultural pesticides are taken into account, the overall environ-mental impacts of ethanol and biodiesel can very easily exceed those of petrol and mineral diesel," it added .

The OECD therefore called on governments to cut their subsidiesfor the sector and instead encourage research into


57

September 12, 2007

Un rapport de l’OCDE souligne les risques des agrocarburants

d'éthanol à base de maïs l'émission d'une tonne de gaz carbonique." Il existe un sérieux risque que la demande excède l'offre souten-able, ce qui inciterait fortement à tricher ", souligne le rapport de l'OCDE . Celuici propose de dis-cuter plusieurs propositions . La première est que l'Agence interna-tionale de l'énergie (AIE), l'OCDE, l'Organisation des Nations unies pour l'alimentation et l'agriculture (FAO) et la Banque mondiale pour-suivent leurs études en commun, afin de mieux évaluer les con-séquences de technologies actuelles et futures de production de biocar-burants .

La deuxième est que les gou-vernements arrêtent de promou-voir les agrocarburants à coups de subventions . Le rapport préconise l'emploi de politiques plus neutres basées sur la création de taxes sur les émissions de carbone .

La troisième proposition suggère que l'Organisation mondiale du commerce s'efforce de réduire les droits de douane sur les agrocar-burants, afin de permettre aux pays en développement de tirer parti de conditions climatiques plus favor-ables à leur production .

L'OCDE s'attend à une progres-sion de 20 % à 50 % au cours de la prochaine décade . Le bilan n'est pas fameux non plus en termes envi-ronnementaux, souligne le rapport, car la tentation sera grande " de remplacer les écosystèmes, comme les forêts, les zones humides et les pâturages par des cultures desti-nées aux agrocarburants " .

A ceux qui font valoir que les réductions de gaz à effet de serre peuvent être réduites de 40 % par l'emploi d'agrocarburants à la place de l'essence classique, il est répondu que l'éthanol et le biodiesel peuvent se révéler plus dommageables, si l'on prend en compte l'acidification des sols qui en résultera, l'usage des engrais et des pesticides et les atteintes à la biodiversité. Le rapport conclut que " la capacité des agrocarburants à couvrir une part importante des besoins énergétiques des transports sans nuire aux prix alimentaires ou à l'environnement est très limitée" .

Pas d'agrocarburants sans subventions . Les EtatsUnis leur consacrent 7 milliards de dollars (5 milliards d'euros) par an, et il leur en coûte environ 500 dol-lars pour empêcher par l'emploi

Alain Faujas, Le Monde

Energie craintes d'une flam-bée des prix alimentaires

Après la Banque mondiale, le 29 mai, c'est au tour de l'Organisation de coopération et de développe-ment économiques (OCDE) de s'inquiéter de la vogue des agrocar-burants destinés à limiter les émis-sions de gaz à effet de serre dans le domaine des transports . Dans un rapport discuté le 11 septembre à l'occasion d'une " table ronde sur le développement durable ", Richard Doornbosch et Ronald Steenblik, supervisés par Brice Lalonde, ancien ministre français de l'environnement, se demandent si " le remède n'est pas pire que le mal " .

Faire passer de 1 % à 11 % la part d'agrocarburants dans la consom-mation totale de carburants d'ici à 2050 n'ira pas sans bouleversements majeurs . " En théorie, écrivent les auteurs, il y a assez de terres sur le globe pour nourrir une population en expansion tout en produisant suffisamment de biomasse. " Mais " la transformation des terres pour la production d'énergie à partir de la biomasse poussera les prix alimentaires vers le haut " .


INDEX

Articles tracked over the calendar year and available from the GSI Secretariat upon request. The numerous blogs and references to the GSI’s research findings in radio and television programmes do not feature in this index .

• “BIOFUELS; Report criticizes industry's reliance on subsidies,” Greenwire, October 26, 2006

• “US : Ethanol subsidies cost government US$5bnUS$7bn per year,” Automotive World, October 26, 2006

• “Group urges US to end subsidies for biofuels,” ICIS Chemical Business Americas, October 30, 2006

• “US biofuel subsidies questioned,” Euractiv, October 30, 2006

• “Study : 2006 U.S. Ethanol Subsidies Will Total at Least $5 billion,” World Refining, November 2, 2006

• “Findings will challenge green business benefit of biofuels subsidies,” Inside Green Business Weekly Report, November 8, 2006

• “Tilting at windmills,” The Economist, November 16, 2006

• “Rapid ethanol expansion questioned,” TheStarPress.com, December 5, 2006

• “Study says ethanol subsidies need to be critically evaluated,” Chesterton Tribune, December 12, 2006

• “Bush Calls for 20 Percent Reduction in US Gasoline Use by 2017; Environmentalists Sceptical,” Bridges Weekly, January 13, 2007

• “Ethanol Makes Gasoline Costlier, Dirtier,” Chicago SunTimes, January 27, 2007

• “Biofuels facts and fiction,” Ecologist Online, February 19, 2007

• “Subsidizing biofuels backfires,” The Globe and Mail, March 14, 2007

• “The truth about subsidies,” Infochange, April 2007

• “Unsubsidised Truth,” Business Standard, April 1, 2007

• “Some thoughts for the plight of farmers,” FnBnews.com, Saturday, April 14, 2007

• “Rise in Food Prices Set to Continue,” theTrumpet.com, April 27, 2007

• “Field of schemes; Ethanol empire built on subsidies,” The Gazette, May 15, 2007

• “Sweden and Netherlands ask OECD to study unfair biofuel subsidies,” Biopact, May 20, 2007

• “The Drive for Low Emissions,” The Economist, May 31, 2007

• “Myths About That $3.18 Per Gallon,” The Washington Post, Sunday, June 3, 2007

• “An expensive epidemic,” Knoxville News Sentinel, June 29, 2007

5858

59

• “The Ethanol Scam : One of America’s Biggest Political Boondoggles,” The Rolling Stone Magazine, July 24, 2007

• “Support für Säufer,” Die Wochenzeitung, August 23, 2007

• “Bush's ethanol dreams make corn a hot commodity,” US Business News, September 2, 2007

• “Anche L’Ocse contro i biocarburanti : dannosi per l’economia e per l’ambiente,” Il Sole 24 Ore, September 11, 2007

• “Biocarburants; risqué sur l’environnement, politiques à redéfinir (OCDE),“ Agence France Presse, September 11, 2007

• “Biofuels offer cure worse than disease – OECD,” Reuters, September 11, 2007

• ”Friends of the Earth rejects EU biofuels targets,” Farmers Weekly Interactive, September 11, 2007

• « L’OCDE eplingle les biocarburants, » Challenges.fr, Septembre 11, 2007

• “OECD : Biodrivstoff skade miljøet,” Teknisk Ukeblad, September 11, 2007

• “OECD Report to Warn Against Biofuels Subsidies FT,” Dow Jones Newswires, September 11, 2007

• “OECD slams biofuels subsidies for sparking food price inflation,” The Financial Times, September 11, 2007

• “Ungünstige Bilanzen für Biotreibstoffe,” Neue Zürcher Zeitung, September 11, 2007

• “Biodiesel könnte gar nicht “bio” sein,” Der Standard, September 12, 2007

• “Biofuels push damaging, disruptive, OECD says,” The Globe and Mail, September 12, 2007

• “I biocarburanti fanno male all’ambiente,” il Giornale, September 12, 2007

• “La OCDE cuestiona la escasa eficiencia y rentabilidad de los biocarburantes,” ABC.es, September 12, 2007

• « Les subventions sur les agrocarburants à l'index, » La Tribune, September 12, 2007

• “Oeso versus biobrandstoffen,” De Standaard, September 12, 2007

• «Un rapport de l'OCDE souligne les risques des agrocarburants, » Le Monde, September 12, 2007

• “Doubt’s raised over EU biofuels targets,” The Financial Times, September 13, 2007

• “Report Challenges EU Subsidies for Biofuels,” Inter Press Service, October 4, 2007

• “Stöd till biobränslen döms,” Dagens Nyheter, October 8, 2007

• “New report questions EU biofuel subsidies,” FO Licht's World Ethanol & Biofuels Report, October 9, 2007

• “Kill king corn,” The Journal of Nature, October 11, 2007

• “Rich nations’ huge biofuels subsidies distort carbon market, study says,” Bio-energy Business, October 16, 2007

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• “U.S. Support for Biofuels to Increase Towards $100 Billion Between 20062012,” Grainnet, October 23, 2007

• “ENERGÍAEEUU : Biocombustibles, promesa sobrevalorad,” Inter Press Service, October 25, 2007

• “Study assesses soaring cost of US subsidies on ethanol, biodiesel; See government support reaching $13 billion by 2008,” Platts Oilgram News, October 29, 2007

• “US Biofuel Subsidies Too Much,” DTN Ethanol Newsletter, October 29, 2007

• “Biofuels : a tale of special interests and subsidies,” The Financial Times, October 30, 2007

• “Who’s Fueling Whom?,” The Smithsonian Magazine, November 2007

• “Las Subvenciones también juegan su papel,” El País, November 1, 2007

• “2007 : Big debate over benefits and costs of biofuels,” The Financial Times, November 9, 2007

• “This is America; we can do better,” Winona Daily News, Winona, Minnesota, November 10, 2007

• “Farm Paid,” Forbes, November 15, 2007

• “Entre altos e baixos, energia limpavira febre de investidores,” Valor Economico, November 20, 2006

• “Fear of biofuels ‘splash and dash,” The National Business Review, November 27, 2007

• “With commodity prices on fire it’s time to wean farmers off freebies,” The Globe and Mail, December 7, 2007

• “Subsidies for Biofuel ‘inefficient’,” The West Australian, April 15, 2008

• “Was der Partner nicht weiß,” Financial Times Deutschland, May 7, 2008

• “USA och EU kan lösa matkrisen,” GöteborgsPosten, May 28, 2008

• “A spoonful of sugar…,” The Mail & Guardian, June 18, 2008

Documents

PRESS SELECTIONS Sample coverage of the Global Subsidies ... · A spoonful of sugar ... The United States have been criticised for diverting corn production to the manufacture of