New Agriculture Outlook from FAO and OECD: biofuels to double by 2017

In France, the OECD and FAO published a new Agricultural Outlook. The report forecasts an increase in global ethanol production to 33 billion gallons by 2017, up 100 percent from 2007, with prices averaging $2.07 per gallon in 2009. Biodiesel production was projected to reach 6 billion gallons in 2017, up from 3 billion in 2007. “Coherent action is urgently needed by the international community to deal with the impact of higher prices on the hungry and poor,” Jacques Diouf, Director-General of the FAO said. “Today some 862 million people are suffering from hunger and malnourishment – this highlights the need to re-invest in agriculture. It should be clear now that agriculture needs to be put back onto the development agenda.”

In starkly competing views on the future, the OECD said in March that “Solutions to the key environmental challenges are available, achievable and affordable” in its 2008 Outlook to 2030, while the UK’s Chief Scientific Adviser said “It’s very hard to imagine how we can see the world growing enough crops to produce renewable energy and at the same time meet the enormous demand for food. The food supply is not keeping up.” Professor John Beddington was addressing a sustainability conference in the UK, where he said that the world’s food supply needed to double by 2080.

By contrast, the OECD report provides environmental and economic forecasts through 2030, and identified four areas for policy action: climate change, biodiversity loss, water scarcity and the impact on human health of pollution and toxic chemicals. The report said that greenhouse gas emissions would grow by 37 percent if no policy action was taken, but spending one percent of economic growth on climate change would reduce that figure to 12 percent.

In January, a senior official at the OECD said that biofuels can only be partly blamed for the recent increases in commodity prices, calling efforts to make a broader linkage “simplistic”.

Loek Boonekamp told the Reuters Global Agriculture and Biofuel Summit that the rise in cereal prices would have happened even without the rise in biofuel production, and that the shortfall in global grain production was more than four times as large as the increase in biofuels-based grain demand.

The OECD in an official paper entitled “Special Issue on Climate Change Climate Change Policies: Recent Developments and Long Term Issues” said, “Biofuels may also be used as a replacement for gasoline. In such a capacity they offer significant advantages for energy security as well as possible new potential for agricultural development.”

Previously, the OECD released its 2007-2016 Agricultural Outlook, which found that “increased feedstock demand for biofuel production, and the reduction of surpluses due to past policy reforms, may keep prices above historic equilibrium levels during the next 10 years.” The OECD wrote that “higher commodity prices are a particular concern for net food importing developing countries as well as the poor in urban populations, and will evoke on-going debate on the “food versus fuel” issue….The expectation that world market prices have attained a higher plateau may facilitate further policy reform away from price support. This would reduce the need for border protection and would provide flexibility for tariff reductions.”

Two researchers submitted a draft paper last fall to the OECD Roundtable on Sustainable Development – an information exchanging forum for Ministers of Trade, Finance and the Environment — calling for an end to biofuels subsidies. The report says that biofuels are an untried technology that can have only limited effect on the climate and will cause a rapid rise in food prices. The study’s authors concluded that US ethanol supports cost $500 for every ton of carbon dioxide removed from the atmosphere — and almost ten times this amount in the EU — and suggested instead the imposition of “technology-neutral” carbon taxes.

It says biofuels could lead to some damage to the environment. “As long as environmental values are not adequately priced in the market, there will be powerful incentives to replace natural eco-systems such as forests, wetlands and pasture with dedicated bio-energy crops,” it says.

The report recommends governments phase out biofuel subsidies, using “technology-neutral” carbon taxes instead to allow the market to find the most efficient ways of reducing greenhouse gases.

”Such policies will more effectively stimulate regulatory and market incentives for efficient technologies,” it said. The study found that only Brazilian sugar, paper-making byproducts and used vegetable oil are suitable feedstocks for biofuel production.

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