Friday, January 25, 2008

Biofuel Disaster Part II

Biofuels are rapidly becoming the penultimate symbol of the dangers of politicized science and the hubris of the global warming entuhsiasts. I blogged below on the disaster that the embrace of biofuels portends for food prices, not to mention the fact that biofuels are anything but a green panacea. Indeed, biofuels do far more damage to the environment than burning fossil fuels. Today, a series of articles flushes out those themes:

A team of researchers led by Nobel-prize winning chemist Paul Crutzen has found that growing and using biofuels emits up to 70 percent more greenhouse gases than fossil fuels. They are warning that the cure could end up being worse than the disease.

Biofuels, once championed as the great hope for fighting climate change, could end up being more damaging to the environment than oil or gasoline. A new study has found that the growth and use of crops to make biofuels produces more damaging greenhouse gases than previously thought.

German Nobel-prize winning chemist Paul Crutzen and his team of researchers have calculated the emissions released by the growth and burning of crops such as maize, rapeseed and cane sugar to produce biofuels. The team of American, British and German scientists has found that the process releases twice as much nitrous oxide (N2O) as previously thought. They estimate that 3 to 5 percent of nitrogen in fertilizer is converted and emitted, as opposed to the 2 percent used by the Intergovernmental Panel on Climate Change (IPCC) in its calculations.

. . . The findings come in the wake of an OECD report earlier this month, which warned against rushing to grow reneweable energy crops because they cause food shortages and damage biodiversity while producing limited benefits.

The growth of corn for ethanol in the United States has already overtaken its cultivation for food, while in Europe the main biofuel crop is rapeseed.

Read the entire article. And as to the effect of the biofuel insanity on food prices, there is an exceptional article in Der Spiegel:

Food prices are skyrocketing. Arable land is becoming scarce. And forests continue to disappear across the globe. The world must decide between affordable food and biofuels.

All it takes for Hans Dietrich Driftmann, a businessman from Germany's northern Holstein region, to explain the way the world works is a package of muesli -- or at least to explain the way his world, the world of agricultural markets, works.

Driftmann picks up a packet of "Köllns kernige Multikorn-Flocken" ("Kölln's Crunchy Multigrain Flakes") and reads out the list of ingredients: oats, wheat, barley and rye. Then he slips a set of price tables out of a plastic sleeve and does a couple of calculations to illustrate how the prices of the muesli's ingredients have changed: rye has gone up by 55 percent, barley by 70 percent and wheat 90 percent. The price of oats has also skyrocketed -- by 80 percent -- since the last harvest a year ago. This final figure is what really hits home for Driftmann.

Meanwhile, almost all supermarkets appear to have raised prices across the board: for bread and butter, milk and cheese, pork and poultry, noodles and chocolate, apple juice and beer. The growing wave of price hikes has pushed inflation to its highest level in 14 years.

Some of those who were born after World War II and never experienced leaner times may only now be learning that food does have a value, even an existential one. Suddenly they realize that food is in fact an indispensable resource, critical for life, and that they can no longer expect it to be available at all times and in all places -- especially not at guaranteed low prices.

When German Agriculture Minister Horst Seehofer, a member of the conservative Christian Social Union (CSU), opened this year's Green Week agricultural fair in Berlin last week, it was under a completely new set of assumptions. For decades, the industrialized world enjoyed the questionable luxury of producing far more milk, butter and wheat than its citizens could ever consume. The surplus was exported, provided buyers could be found, or was placed into indefinite storage or destroyed.

This folly has now come to an end. Europe's mountains of butter have been depleted, its grain silos emptied and its lakes of milk drained. "The era of overproduction is behind us," says Stephane Delodder, an agricultural specialist with Rabobank in the Dutch city of Utrecht.

Worldwide flows of goods are shifting and becoming reorganized. For the first time, we are seeing the emergence of a truly global agricultural market driven by the underlying force of all economic activity: the scarcity of goods. Wheat supplies, for example, have reached a 30-year low. In only one year, inventories in the European Union have plummeted from 14 million to one million tons.

Given this situation, the meteorological forecast of a drought in Australia, an important wheat exporter, can trigger a minor earthquake on the world's futures exchanges, where commodities prices are constantly hitting new all-time highs. Nothing fuels the fantasies of commodity traders quite as effectively as a bushel of wheat or a hectoliter of rapeseed oil.

Of course, the current uproar over rising food prices revolves around a lot more than consumers paying a few extra euros for milk, cheese and bread. The real issue is how mankind will be able to feed itself in the future -- and at what price.

How can agriculture feed a world that grows by 80 million people each year? A world that is increasingly exposed to climatic extremes? And, most of all, a world that doesn't just need food for people and feed for livestock, but is increasingly consuming fuel derived from plants?

The problem is that there is too much demand and not enough land. In a world hungry for agricultural products, the dilemma is that each hectare of arable land can only be used for one purpose at any given time. Potatoes can't be grown where corn is cultivated. Where rye is grown, there is no room left for oats. And when rapeseed is converted into biodiesel, there is no seed left to produce rapeseed oil. This fundamental conflict drives up the prices for agricultural crops. There are growing fears that the world could soon face a food crisis, and that the current bottleneck could expand into widespread starvation.

. . . The fact is that arable land cannot be increased at will. Over the past three decades, the amount of arable land worldwide has stagnated at about 1.5 billion hectares (3.7 billion acres). While new agricultural land is being added in Russia or South America, more and more land is lost to residential and industrial development in Asia and Europe. In China, eight million hectares (20 million acres) of land under cultivation have vanished within a decade. For comparison, just under 12 million hectares (30 million acres) of land are currently used for agriculture in Germany.

These spatial limitations would be tolerable if the world's population wasn't growing at such a breathtaking pace. A person born in 1950 has experienced mankind more than doubling its numbers from 2.5 billion to 6.6 billion people today. If the population grows to nine or even 10 billion by 2050, "the world will see an enormous need for additional biomass produced in agriculture," warns Franz Josef Rademacher, a mathematician in the southern German city of Ulm. Rademacher, a member of the Club of Rome, believes that "shortages will intensify dramatically."

At the same time, millions of people are changing their lifestyles and eating habits. The new middle class in Shanghai, Hanoi and Jakarta, no longer satisfied with a diet of rice and beans, has a growing appetite for pizza and pasta, burgers and pork chops. Meat consumption has doubled in the last 25 years and continues to grow. Meat production, though, requires large amounts of feed. A hog farmer needs three kilos of feed to produce a kilo of pork, and for beef the ratio is even higher: seven to one. Vast amounts of water are needed to produce the grain that goes into feeding livestock. It takes about 900 liters of water to grow enough corn for one kilo of feed.

. . . Governments spend billions to promote the production of plants that can be used to produce fuel and the development of production capacity. Growing amounts of rapeseed are being refined into biodiesel while corn and sugarcane becomes ethanol. On Wednesday, the European Commission examined ways to implement its ambitious climate resolutions. Marian Fischer Boel, the European Union's agricultural commissioner, is convinced that if Europe hopes to achieve its goal of a 20-percent reduction in CO2 emissions by 2020, "there will be no getting around biodiesel and ethanol." The demand for plant-based alternatives to fossil fuels increases along with the price of oil -- with far-reaching consequences for consumers. The EU is calling for fuels to include at least 10 percent biofuels by 2020.

When grain ends up in our fuel tanks instead of on our plates, food prices increase, as does the cost of feed such as corn silage and soybeans. Higher feed costs make it more expensive to raise livestock, which translates directly into higher prices for beef and pork. The price of oil -- OPEC in other words -- ultimately determines how much a pork chop costs at the supermarket.

The Americans, in particular, have high hopes for biofuel making them less dependent on oil-producing countries in the Persian Gulf region. US farmers produced more corn last year than they have since the end of World War II. Tim Recker, a 43-year-old Iowa farmer, says that he and his fellow farmers get as much as they can out of the ground. "We're farmers. Our goal is to produce, produce, produce."

At a recent lunch on Recker's farm -- the meal was steak and beans -- his mobile phone gave a quick buzz: a text message with grain prices. Recker receives similar text messages about three times a day, and the news is almost always good. He and his neighbors are experiencing their own, personal economic miracle. Brand-new grain silos are popping up in the fields around Recker's farm, shining, rocket-like symbols of their builders' faith in the future. Many Iowans already refer to their state as "the new Texas," as if biofuel could serve as a complete substitute for oil.

. . . In places like New Orleans, it becomes clear that even in the America of high-tech companies like Google, Apple and Microsoft, the traditional agricultural industry still plays a powerful role -- and it's an industry in which a handful of corporations dominate the world market.

The largest is Cargill, a family-owned company from Minnesota founded in 1865. With its 158,000 employees and $88 billion (€60 billion) in sales, Cargill is in the same league with major international corporations like BASF, Samsung and Hewlett-Packard. In company literature, Cargill aptly describes itself as "the flour in your noodles, the salt on your French fries and the corn in your tortillas, the chocolate in your dessert and the sweetener in your soft drink."

Cargill, Archer Daniels Midland (ADM) and Bunge form the legendary ABC complex. No one who hopes to be a player in the global business of renewable commodities can get around dealing with at least one of these companies. The agricultural multinationals buy grain and oilseed from farmers and cooperatives, store it in their own silos and dry and process it. They ship their products through their own transfer terminals and charter fleets of freighters to dispatch them to every corner of the world. They grind wheat into flour, process soybeans into animal feed and -- currently an especially lucrative activity -- convert rapeseed into biodiesel. ADM operates Europe's largest biodiesel plant at the Hamburg harbor, where anyone driving past the facility is immediately engulfed by the penetrating odor of French fries. By controlling the entire process, from harvest to finished product, these conglomerates manage to secure the most profitable part of the value-added chain for themselves.

The focus of their business is shifting more and more to the southern hemisphere. Vietnam and Thailand, for instance, have become important rice exporters, Indonesia and Malaysia have developed significant plant oil production industries, and both India and China export large volumes of sugar.

. . . A bitter struggle over the distribution of the best agricultural land has erupted worldwide, from Eastern Europe to halfway around the world in Brazil. Because of its mild climate, the large country straddling the Amazon is on its way to becoming the world's leading agricultural country. In the state of Goiás, which is one of Brazil's most important farming regions and roughly the size of Germany, agriculture has grown by about 7 percent a year since 1990. The country, already one of the world's top exporters of beef, soybeans, sugar, coffee and orange juice, still has enormous potential. "We can easily double our agricultural production," says Brazilian Agriculture Minister Reinhold Stephanes.

The biofuel industry has taken the minister by his word, replacing former soybean fields, grazing land for cattle and cotton plantations with sugarcane fields. In the region surrounding Rio Verde, Goiás breadbasket, sugar barons known as usineiros have bought up vast estates -- paying high prices for the privilege. "Only fools aren't selling," says Gomes de Moraes, a 47-year-old cattle rancher.

. . . Billionaire investor George Soros and former World Bank President James Wolfensohn have acquired holdings in ethanol plants, as has AOL founder Steve Case. All of them are in Brazil hoping to turn a handsome profit, as well as to bask in the role of environmental activist. But the professional world has long harbored doubts over whether biofuel is as environmentally friendly as some believe.

In fact, there are now many critics of the industry, including the Organization of Economic Cooperation and Development (OECD), consumer organizations like Foodwatch, the German government's environmental expert council and even major food corporations like Nestlé. Their verdict on biofuel is devastating.

According to the OECD, expanded biofuel production will lead to "untenable strains" on the commodities markets "without yielding significant benefits for the environment." Foodwatch is convinced that the strategy, while benefiting farmers, will do nothing to protect the climate. Germany's environmental expert council says that the industry raises expectations that "fly in the face of accepted science." Nestlé CEO Peter Brabeck-Lemathe bluntly characterizes biofuel production as "environmental lunacy."

The environmental upshot is indeed disappointing. Much of the energy the farmers produce is offset by the amount of energy that goes into producing the plants in the first place. They consume fossil fuels to harvest plants, for shipping, for storage and drying, not to mention the energy required to produce pesticides and fertilizers. The economical possibilities are also limited. Even if the US's entire corn crop were converted into fuel, it would satisfy only about 12 percent of the demand for gasoline.

In Germany, the rapeseed plant has displaced many other crops. Few farmers plant feed peas or beans anymore. Rapeseed fields, with their yellow flowers, take up the largest amount of space -- 1.7 million hectares (4.2 million acres), or about 60 percent more than in 2000 -- among renewable commodities. Some of the expansion comes at the cost of fallow land, green space and bogs -- in other words, natural CO2 sinks.

A simple calculation points out biofuel's less-than-stellar potential. To fill the roughly 100-liter (26-gallon) tank of an SUV, an ethanol producer has to process about a quarter of a ton of wheat. This is enough wheat for a baker to bake about 460 kilograms of bread, which has a total nutritional value of about a million kilocalories -- enough to feed one person for a year.

So are the SUVs of the rich ultimately consuming the bread of the poor? According to Lester Brown, the president of the Washington-based Earth Policy Institute, this question sums up the essence of a new clash between North and South. "The stage is clear for a conflict between 800 million car owners and the two billion people who represent the poorest of the poor worldwide."

The poor are the first to feel the painful effects of turbulence in agricultural markets. Some spend up to 80 percent of their disposable income on food. "The world's poorest people are especially hard-hit," says John Powell, the deputy executive director of the UN World Food Programme (WFP).

. . . China already depends heavily on Brazil for its grain imports, and the two countries have signed extensive supply agreements. The world's pantry can apparently offer virtually unlimited capacity to satisfy Chinese demands -- but this comes at a high price for the rest of the globe. Ancient rainforests are being destroyed. As the agricultural industry expands its sugarcane plantations, soybean farmers are forced to move closer to the Amazon, where they buy land from cattle ranchers. The ranchers, in turn, burn down the rainforest to create new grazing land.

This illustrates how the scarcity of agricultural commodities contributes to the destruction of highly vulnerable vegetation zones, not just in the Amazon region, but also in Malaysia and Indonesia, where oil is derived from the fruit of palm trees. Environmental activists refer to the product as "clear-cutting diesel." According to Paulo Adario of Greenpeace Brazil, "the rainforest burns when the prices of soybeans and ethanol go up."

. . . Schmitz has observed the global agricultural markets for years. Thanks to a complex computer program he and his research team have developed, the professor can even steal a glimpse into the future. The program simulates what happens when the agricultural conditions change -- as is currently the case.

To run the program, Schmitz feeds vast amounts of data into the computer, including population growth and income development figures, as well as columns of numbers relating to the production, consumption and costs of agricultural commodities. In a probable scenario, demand will continue to rise, because emerging economies like China, India and Indonesia still have a lot of catching up to do. "We have to get used to the idea of a prolonged phase of rising prices," says the professor.

How long would it last? Although Schmitz doesn't want to pin himself down, he says that the current shortages are not a phenomenon that will end in a few months -- or even in a few years. Schmitz predicts: "This could continue for two or three decades."

Read the entire article.

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