Flying on the Third World’s Empty Stomach

In the crosshairs of the world’s conscience, biofuels are under fire. Converting ever more farmland to fuel rather than food production is causing great suffering in the developing world – which is why the World Bank, the WTO, and other international agencies have teamed up to argue that the use of ethanol to ‘save’ the planet should be curbed. So the airlines’ desire to increase the use of aviation biofuels couldn’t be more badly timed.

Last week France, which has made tackling food price volatility a priority, led efforts at the G20 meeting of agricultural ministers to crack down on speculation in commodities markets – which it blames for rising food prices. Though France did not target biofuels in its G20 agenda, a report it commissioned from the World Bank, the WTO, and other international agencies did.

It calls for a policy rethink; recommending that measures that “subsidize or mandate biofuels production or consumption” are cut in countries like Europe, Canada, India, the United States, and Brazil. Like the United Nations Food and Agriculture Organisation, these organisations are worried that rising cereals prices will cause ever greater levels of political instability.

By raising food prices, biofuel production will make maters worse. The real harm is caused by subsidies to first-generation biofuel production. By lowering biofuel production costs, subsidies increase the link between crop prices and the price of oil.

When oil prices are high, as they are now, food crops have even more value as energy – which is why we’re seeing a rising proportion of crops being diverted to biofuels production, such as corn in the US. Next year, 38% of the corn grown will be turned into ethanol, according to the Department of Agriculture.

Brazil’s land is also increasingly being used to grow sugar cane for ethanol. With the government vowing to stimulate even more ethanol investment, Brazil’s potential as an agricultural superpower is being diminished. But what will make headlines is the inevitable destruction of protected rainforests. It’s this consequence that may finally wake public opinion to the folly of renewable fuel targets and subsidies.

Encouraging deforestation is only one reason though, why renewable fuels have a bigger carbon footprint than fossil fuels. Environmentalists support for ethanol is evaporating because years of study have shown that corn-based ethanol, over its full life cycle, does little to reduce carbon emissions and may actually increase them.

In this context the air transport industry’s plan to increase the use of aviation biofuels – to 2 million tons annually by 2020 – seems rather crass. So too is Boeing’s commitment to biofuels. At the Paris air-show it was showing off its new 747, powered by a blend of 15% biofuel mixed with 85% traditional jet fuel. But it will soon get approval to use a 50-50 fuel blend for commercial flights.

Unless there’s an international agreement to end biofuels subsidies we could see military aircraft being used to deal with the geopolitical consequences of the market distortions that produced the 50-50 blend of ethanol powering them. As always, it’s the poorest who pay for dumb economics.

Related: How Shifting Political Winds Could Finally Kill Ethanol Subsidies [Business Insider], Airlines Cleared for Biofuels [Bloomberg Businessweek]