Bio-fuel Global Trends
In an article published in the Irish Examiner, on November 22nd 2007, a senior analyst in the US government predicted that oil price would double within a year to $200 a barrel, which then proceeded to occur. These concerns come with the emergence of new markets, which is outstripping production.
Oil producing nations mainly lie in regions of political instability. These governments are extremely protective of their markets. Some are actively opportunistic, raising prices when there is a political threat. Venezuelan president Hugo Chavez on Saturday November 17th stated, “If the United States is crazy enough to attack Iran or commit aggression against Venezuela . . . oil would not be $100 but $200.” (Collins, 2007) .” This is confounded by the fact that currently the global consumption is 80 million barrels a day and the expected demand by 2015 is predicted 120 million barrels a day. Although there will be a shortfall of 20 million barrels a day as production capability will only be 100 million barrels a day (de Margerie, 2007). In this post 9/11 era of political instability, fuel security is the top priority.
Alternatives like bio-fuel are being looked at. Bio-fuel has grown dramatically since 2001, as can be seen in the Figure 1.
Bio-fuel Production Trends
There are two key markets for bio-fuels, the Americas and Europe. The United States and Brazil play a crucial role in the bio-ethanol industry, while Germany is leading the way in the production of bio-diesel in Europe. In 2004 the EU-15 produced an estimated 2.9 billion litres of bio-fuel compared with U.S. bio-fuel production of 12.9 billion litres (Schnepf, 2007). Bio-diesel accounted for nearly 80% of EU bio-fuel production. Germany produced over half of the EU’s bio-diesel. France and Italy are also important bio-diesel producers, while Spain is the EU’s leading bio-ethanol producer, indicated in Figure 2 bellow.
Bio-fuel Impact on Global Food Price
In recent years there has been a distinct trend towards the use of bio-fuels. This rapid change in trends has lead to a large shortfall in supply surging the price of grain to record highs. Due to the growing use of bio-fuels and bad crops for 2007, the price of corn used in ethanol production was forecast to increase from $3.85 (at the close on Monday, November 26th 2007) to $5 a bushel, within a year. An interim report by the Food and Agriculture Organization of the United Nations, in October 2007 stated that; “International prices of wheat have increased sharply since June hitting record highs in September, in response to tightening world supplies, historically low levels of stocks and sustained demand. Maize quotations are also well above their levels of a year earlier despite the bumper crop materializing this year, mainly reflecting fast-growing demand from the bio-fuel industry” (Food and Agriculture Organization of the United Nations, 2007).
The effects of prices are affecting many industries globally. On January 31st, 2007, 75000 people took to the streets of Mexico City to protest against the doubling price of tortillas (The Economist, 2007). Other crops like barley have doubled within the last year from €102 to €200 a ton (McIntire, 2007). Although this was not due to the manufacturing of barley for bio-fuel but rather, less incentives for farmers to plant it. There is increasing incentive to plant bio-fuel crops such as corn and rapeseed, which has much to do with the introduction of new policies and incentives.
Environmental Impacts of Bio-fuels
There are other driving factors for the use of bio-fuels. It is commonly perceived that it can help mitigate environmental disruption such as limiting climate change, reduce acid rain, soil erosion and water pollution, which in part may be unfounded. There are a wide variety of feedstocks and processes used in the production of bio-fuels and as a consequence it is difficult to identify indicative values, for overall CO2 reductions. Sugar-cane ethanol uses fossil fuel input of 10%-12% of final energy and up to 90% CO2 reduction compared with petrol. Corn ethanol needs high-energy input in production and only provides CO2 reduction of 15-25%. Ligno-cellulosic ethanol may need energy input higher than for corn ethanol, CO2 reduction can up to 70%. Bio-diesel uses 30% energy input and up to 60% CO2 reduction (Farm Foundation, 2007).
Second generation bio-fuels such as Ligno-cellulosic ethanol have the potential to greatly decrease emissions (Paul & Ernsting, 2007). These bio-fuels also have the potential to give higher yields per hectare.
Certain studies have indicated that there may be a trade-off between different environmental effects for bio-fuels. A study published by the World Resource Institute indicated that, the agro-production of bio-fuel, namingly ethanol, limits the environmental benefits. New research released in October 2007 by Paul Josef Crutzen, a noble prize winner indicates that when the N2O emission from bio-fuel production is calculated in “CO2-equivalent”, it negates global warming reduction by replacing fossil fuels (Crutzen, Mosier, A. R., Smith, & Winiwarter, 2007).
Bio-fuel crop yield and land requirements
There is a growing concern that, growing fuel crops are enticing more farmers to grow them over crops traditionally used for food production. Figure 3 below indicates the yield of each bio-fuel per hectare.
If crops as wheat and rapeseed are used to produce bio-ethanol and bio-diesel respectively, it will greatly affect food security. Currently 4% of crops produced in the EU- 25 are dedicated to the production of bio-fuel. The production shares are as follows; oilseeds (mainly rapeseed): 40%, sugar beet: 5% and cereals: 1% (Farm Foundation, 2007). If the growth of bio-fuels is to expand at the current rate of production, this will greatly affect the amount arable land available for production of food. For a total conversion to bio-fuels in Europe, there would not be enough arable land to meet demand. It is estimated by 2010, that approximately 18% (16-18 million hectares) of the total agricultural land in Europe, will be dedicated to the production of bio-fuels. This large percentage of land will only account for 5.75% of total fossil fuels utilisation (Biofuels Research Advisory Council, 2007). Hypothetically, if there was a total conversion from fossil fuels to meet 100% utilisation, 324.3 million hectares would be needed to cater for the demand (United States Department of Agriculture, 2007)
It can be concluded that because there is only 103.6 million hectares of arable agricultural cropland available (excluding land for the production of food) in Europe and to sustain demand, grain must be imported from outside Europe. Even if we source these crops outside Europe this could still lead to deforestation, to meet the intensity of demand. If this trend continues, there will be a severe strain on global food supply.
Currently developing countries produce large volumes of grain where ~90% of it is exported. If this percentage were to increase it could cause starvation in developing countries.
Collins, J. (2007, November 19). Gas Prices Raise As Demand Outstrips Production. 18. The Irish Times.
de Margerie, C. (2007). 2007 Oil & Money Conference. London.
Schnepf, R. (2007). Agriculture-based Renewable Energy Production,. US Government, Resources, Science, and Industry Division. Washington: Congressional Research Service.
Food and Agriculture Organization of the United Nations. (2007). Crop Prospects and Food Situation. http://www.fao.org/docrep/010/ah873e/ah873e00.htm.
The Economist. (2007). The Economist , 382 (8514), 38-38.
McIntire, J. (2007, May 30). Bio-fuels Incentives Drive Up the Price of Beer. Retrieved November 23, 2007, from Treehugger: green.bligblog.com/german-biofuels-incentives-drive-up-the-price-of-beer-1716.html
Farm Foundation. (2007, April 13). Biofuels,Food & Feed Trade-off. Retrieved December 5, 2007, from Farm Foundation: http://www.farmfoundation.org/projects/documents/Jacquet.pdf
Paul, H., & Ernsting, A. (2007). Second Generation Biofuels: An Unproven Future Technology with Unknown Risks.
Crutzen, P., Mosier, A. R., Smith, K., & Winiwarter, W. (2007). N2O release from agro-bio-fuel production negates global warming reduction by replacing fossil fuels.
Biofuels Research Advisory Council. (2007). Biofuels in the European Union: A vision for 2030 and beyond. Retrieved December 29, 2007, from European Commission: http://ec.europa.eu/research/energy/pdf/draft_vision_report_en.pdf
United States Department of Agriculture. (2007). EU-25, Bio-Fuels, Biofuels Annual Report. Foreign Agricultural Service. Washington: www.fas.usda.gov/gainfiles/200702/146280256.pdf.