World Bank: Biofuels Increased Food Prices 75%

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The Guardian has a leaked copy of a World Bank study that finds biofuels to be the biggest culprit in global food price increases. This finding will not only feed calls to scrap biofuels (save perhaps those derived from sugar) but may lead to a recognition that resource challenges cannot be pursued in isolation. In particular, food, water, and energy scarcity are interconnected problems and need to be addressed on an integrated basis. It also disputes the claim that increased consumption of meat in developing economies played a significant role in food price inflation.

A potentially inflammatory element is that the report was completed in April and allegedly deep-sixed so as not to discomfit President Bush.

From the Guardian:

Biofuels have forced global food prices up by 75% – far more than previously estimated – according to a confidential World Bank report obtained by the Guardian.

The damning unpublished assessment is based on the most detailed analysis of the crisis so far, carried out by an internationally-respected economist at global financial body.

The figure emphatically contradicts the US government’s claims that plant-derived fuels contribute less than 3% to food-price rises. It will add to pressure on governments in Washington and across Europe, which have turned to plant-derived fuels to reduce emissions of greenhouse gases and reduce their dependence on imported oil….

The news comes at a critical point in the world’s negotiations on biofuels policy. Leaders of the G8 industrialised countries meet next week in Hokkaido, Japan, where they will discuss the food crisis and come under intense lobbying from campaigners calling for a moratorium on the use of plant-derived fuels.

It will also put pressure on the British government, which is due to release its own report on the impact of biofuels, the Gallagher Report. The Guardian has previously reported that the British study will state that plant fuels have played a “significant” part in pushing up food prices to record levels. Although it was expected last week, the report has still not been released.

“Political leaders seem intent on suppressing and ignoring the strong evidence that biofuels are a major factor in recent food price rises,” said Robert Bailey, policy adviser at Oxfam. “It is imperative that we have the full picture. While politicians concentrate on keeping industry lobbies happy, people in poor countries cannot afford enough to eat.”

Rising food prices have pushed 100m people worldwide below the poverty line, estimates the World Bank, and have sparked riots from Bangladesh to Egypt. Government ministers here have described higher food and fuel prices as “the first real economic crisis of globalisation”.

President Bush has linked higher food prices to higher demand from India and China, but the leaked World Bank study disputes that: “Rapid income growth in developing countries has not led to large increases in global grain consumption and was not a major factor responsible for the large price increases.”

Even successive droughts in Australia, calculates the report, have had a marginal impact. Instead, it argues that the EU and US drive for biofuels has had by far the biggest impact on food supply and prices.

Since April, all petrol and diesel in Britain has had to include 2.5% from biofuels. The EU has been considering raising that target to 10% by 2020, but is faced with mounting evidence that that will only push food prices higher.

“Without the increase in biofuels, global wheat and maize stocks would not have declined appreciably and price increases due to other factors would have been moderate,” says the report. The basket of food prices examined in the study rose by 140% between 2002 and this February. The report estimates that higher energy and fertiliser prices accounted for an increase of only 15%, while biofuels have been responsible for a 75% jump over that period.

It argues that production of biofuels has distorted food markets in three main ways. First, it has diverted grain away from food for fuel, with over a third of US corn now used to produce ethanol and about half of vegetable oils in the EU going towards the production of biodiesel. Second, farmers have been encouraged to set land aside for biofuel production. Third, it has sparked financial speculation in grains, driving prices up higher.

Other reviews of the food crisis looked at it over a much longer period, or have not linked these three factors, and so arrived at smaller estimates of the impact from biofuels. But the report author, Don Mitchell, is a senior economist at the Bank and has done a detailed, month-by-month analysis of the surge in food prices, which allows much closer examination of the link between biofuels and food supply.

The report points out biofuels derived from sugarcane, which Brazil specializes in, have not had such a dramatic impact.

Supporters of biofuels argue that they are a greener alternative to relying on oil and other fossil fuels, but even that claim has been disputed by some experts, who argue that it does not apply to US production of ethanol from plants.

“It is clear that some biofuels have huge impacts on food prices,” said Dr David King, the government’s former chief scientific adviser, last night. “All we are doing by supporting these is subsidising higher food prices, while doing nothing to tackle climate change.”

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  1. Francois

    “A potentially inflammatory element is that the report was completed in April and allegedly deep-sixed so as not to discomfit President Bush.”

    This can’t be serious!

    Let’s assume this report would have been published as it should have been. What was Dubya going to do? Bomb the World Bank? Cut the US contribution to it? Call and scold them? Given also the fact that he is soooo respected everywhere, who’s supposed to give a hoot about his feeling anyway?

    Give me a break!

    I can’t wait to see how the politicos (and most especially the candidates) in DC are going to struggle with that report. The amount of spin will be enough to create another Katrina of BS.

    Nobody in Washington seems to have the kahunas to confront the lobbies and tell them to go to hell this time. But for these same politicians, low income Americans (not mentioning people in other countries) can be damned, since they don’t contribute to their electoral slush fund.

    This is pure madness.

  2. Jojo

    No one in power seems to understand that the Earth is complete SYSTEM with many feedback loops. Change one thing and you affect a whole lot more.

    We let politicians under the influence of lobbyists make decisions that affect everyone and everything without much, if any, consideration for potential consequences.

    Ethanol from corn was a dog idea from the very beginning but that didn’t stop the politicians from championing the idea.

    Which is why this article in the latest Wired magazine worries me greatly. We’ve got a bunch of idiots who want to try and cool the Earth by simulating what happens in massive volcano eruptions. Of course, there are some negatives, such as acid rain and who knows what else. Jeez. Is there no end to our foolishness?

    Check out:
    Can a Million Tons of Sulfur Dioxide Combat Climate Change?

  3. Speaker73

    Since April, all petrol and diesel in Britain has had to include 2.5% from biofuels. The EU has been considering raising that target to 10% by 2020, but is faced with mounting evidence that that will only push food prices higher.

    I would like to see a study on the number of lives lost and trillions wasted by arbitrary government mandates.

  4. Anonymous

    I’m sorry, I place the same credence in a single study by an unnamed “senior economist” from the World Bank as I would from any other source. Especially with it being published in The Guardian. Show me the report, show me the methodology. I’m no fan of biofuels, and certainly no fan of George Bush, but I can recognize a hatchet job nonetheless.

    Let’s try and put our politics aside, and look at these things a little more skeptically. I hope you value your credibility more than you do the chance to take a shot at Dubya.

  5. macndub

    75% seems really high. The impact of biofuels is at the margin, of course, and can make a big difference when supply/demand balances are tight, but I just can’t see biofuels having such an enormous impact. Would love to read the study.

    Of course, biofuels also drive up fossil fuel consumption, especially natural gas, since corn-based ethanol in particular requires more fossil energy to produce than it yields. But the impact of biofuels on natural gas prices should be almost negligible.

  6. Michael McKinlay

    Bush is an oil man. He views biofuels as competition for oil. A look at the Texas delegation shows that biofuels are very unpopular for the oil, beef , poultry, and pork interests.

    That said I agree with the report as not only corn is being diverted but additional acreage to corn from other grains and beans. The same can be said for biofuels in other countries as both product and acreage are being diverted from food to fuel.

    The whole corn ethanol subterfuge was a Frankenstein created by Big Ag, the chemical companies and farming state Congress. And all states claim some kind of Ag subsidies.

  7. Anonymous

    I agree that this was a complete hatchet job. They are missing so many things it is laughable. One fundamental point The WTO forced local sustainable farmers out of business by making them compete with heavily subsidized agribusinesses of the west. So to say bio-fuels are starving people is ridiculous. Food should never be outsourced. Ever! It was the world bank that forced Haiti and countless other countries to open there markets to global grain. Haiti used to make 90% of it’s own rice. After it played ball with the World bank now they import 100% from the US.

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