U.K. Puts the Brake on Biofuels as G8 Hears Food Price Concerns

Putting On the Brakes

The U.K. government yesterday announced it would slow its expansion of biofuels, following the publication of an independent review that found that renewable fuels could contribute to food price rises and might even lead to an overall increase in greenhouse gas emissions.

The review, carried out by Professor Ed Gallagher, chairman of the Renewable Fuels Agency, examined the indirect effects of biofuels including on land-use change and food prices. It found that current policies on biofuels promotion could lead to net gains in greenhouse gas emissions, rather than savings, and potential negative consequences for biodiversity. On the issue of food prices, it found that current policies could push up grain prices in the European Union (EU) by 15%, sugar prices by 7%, and oil seed by 50%, while globally, millions more people could be pushed into poverty. Such concerns prompted the review to recommend that government policies on biofuels be rethought—although in recognition that there remains scope for biofuels to make a positive overall contribution to efforts to combat climate change, the review called for policies to be "amended not abandoned". It said biofuels should be introduced more slowly than first planned, with controls established to prevent land being cleared of forest or agriculture in order to grow crops for fuel. Rather, the review called for biofuels production to target idle or marginal land and for greater efforts to develop second-generation biofuels—those that draw on plant waste rather than requiring the planting of original crops.

The government responded promptly to the review findings. Transport Secretary Ruth Kelly said the government agreed with the report's "amend not abandon" approach, and would seek to slow the expansion of biofuels. The precise adjustments arising from the announcement remain somewhat unclear, although it seems likely the government's goal for biofuels to make up 5% of the transport fuel mix by 2010/2011 will now be under reconsideration. An alternative approach recommended by the Gallagher review—that biofuels growth be limited to 0.5% a year, only rising to 5.0% in 2013/14, and with further expansion on the condition that it is demonstrably sustainable—may now well be adopted.

The International Context

The announcement that the United Kingdom will moderate its pursuit of biofuels sees it become the first country in Europe to respond to the growing concerns over biofuels impacts with an explicit policy shift (although noting that Ireland agreed to postpone the publication of its biofuels policy earlier this month on similar concerns—see "Related Articles"). The decision will therefore not only have a domestic policy impact, but will also see greater pressure on the EU to reconsider its policy position and back down from the binding 10%-by-2020 targets it established for biofuels use last year. Indeed, the EU is currently carrying out its own investigation into the matter as it seeks to establish suitable sustainability criteria to apply to its 10% target. Reports suggest the body is struggling to maintain its commitment to a headline binding target in the face of growing concerns over the indirect impacts of biofuels. U.K. prime minister Gordon Brown said in April that the government would push for changes to the EU target if the Gallagher review found that greater biofuels use was triggering food price increases and damaging the environment. The government will now be expected to follow through on this promise, and with the United Kingdom having broken the ice on the debate, other countries within the bloc may well join such calls.

Furthermore, the debate over biofuels is not confined to Europe, and international leaders are now being drawn into the conversation. Heads of government from the world's most powerful nations meeting at the Group of Eight (G8) summit in Japan yesterday faced calls from Robert Zoellick, president of the World Bank, for reforms to biofuels policies in rich countries. Zoellick said biofuels production had led to food price rises, laying blame specifically on fuels made from corn and rapeseed products in the United States and the EU. Leaving no doubt that a policy response from the G8 nations was required, Zoellick said: "The U.S. and Europe need to take action to reduce mandates, subsidies and tariffs benefiting grain and oil seed biofuels that take food off the table for millions." Zoellick's words were backed by a World Bank report published last week, which found that the rush to grow crops for energy rather than food had pushed global food prices upwards by 75%.

Outlook and Implications

The last week represents a new peak in the controversy surrounding the indirect impacts of biofuels production. Over the last 12 months, biofuels have gone from being viewed as a major contributor to reducing greenhouse gas emissions and assisting the fight against climate change to, at best, having questionable net benefits, and at worst, being a social and environmental villain. The most negative views of biofuels are undoubtedly unfair; for instance, it is clear that there are also other determinants pushing up the price of food globally and some may see biofuels as being used as a convenient scapegoat to avoid having to address more difficult underlying challenges. Nevertheless, with a growing body of evidence on the potential negative impact of biofuels and with influential institutions such as the World Bank adding weight to the argument, these concerns and uncertainties are now beginning to flow through into government policies. The United Kingdom has now moved to tone down its own biofuels support policies, and similar moves across Europe are likely to follow. Biofuels producers worldwide may now have to brace themselves for a backlash as support mechanisms and incentives are scaled back or even dropped. In Europe, the certainty that seemed to be provided by the EU's binding 10%-by-2020 goal has now been substantially undermined, and companies considering investment in new biofuels production facilities may now have to reconsider, particularly noting the dependence of biofuels investment on clear and stable regulatory frameworks.

With governments beginning to respond to these concerns, opponents of biofuels may now be claiming some victory in their efforts to avoid social and environmental side-effects. Unfortunately, looking at the big picture, there are few winners in this debate. While food, poverty, and sustainability concerns should clearly be paramount, the downside is that an approach that was seen up until fairly recently as a vital contributor to alleviating dependence on fossil fuels and assisting with the fight against climate change, now has a much less certain contribution to make. While the sustainable production of biofuels remains viable in some areas—Brazil being the clearest example—and the development of second-generation biofuels leaves hope for the future contribution of renewable transport energy, in the short term at least, the incredible challenges and complexities of reducing greenhouse gas emissions and avoiding climate change have once again been proven.

Related Articles

European Union: 7 July 2008: EU May Look to Hydrogen, Brazilian Imports to Meet 2020 Renewable Energy Target

Ireland: 3 July 2008: Ireland Delays Biofuels Policy on Food Price Concerns

European Union: 1 July 2008: Incoming EU Presidency Calls into Question Biofuels Target

Brazil: 26 June 2008: Brazil to Export Ethanol to Sweden Under First Sustainable Biofuel Deal

China: 12 May 2008: Food Price Surge Forces China to Rethink Biofuel Plans

United States: 7 May 2008: U.S. Lawmaker Resistance to Biofuels Mandate Grows

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