Ana Escalante

Biofuels: Do They Help the BOP? There are Always Two Sides of a Story

Corn BiofuelsThere has been a lot of controversy recently regarding biofuels – especially corn-based ethanol – and their effect on the global economic dynamic. While biofuels in general could be a very good alternative to oil, are they good for the BOP? Rob and Derek have blogged on this very subject before, but I would like to add my take on the discussion.

Some countries benefit from growing biofuels
, especially if they are using naturally grown crops and crop waste products. Countries in South America and Africa are benefiting from their open land by planting biofuel crops and exporting them. Clearly this is also a major environmental issue. Because of land scarcity, some agricultural countries have seen forest clearing happen in order to produce ethanol crops. The benefits and drawbacks of these activities must be weighed carefully and we should definitely keep on eye on how this evolves.

On the other hand, corn-based ethanol–especially when cultivated in the US–can present a problem. Corn-based ethanol is neither economical nor environmentally helpful and can lead to inflated food prices, according to Prof. David Pimentel from Cornell University. Meanwhile, cassava jathropha, sugar cane, wood chips, switch grass and other alternative biofuel crops seem like a very good option that all grow natively in many areas of the world where the BOP live -Africa, South America, Asia- therefore, helping them produce/export more crops. William Saletan from the Dallas Morning News argues that “biofuel has aroused the same fears as free trade, with a twist. The argument against free trade was that people in poor countries would underbid and take jobs from people in rich countries. The argument against biofuel is that people in rich countries will outbid and take food from people in poor countries. The old buzzword was ’job security.’ The new buzzword is ’food security.’On the other side of the coin, Foreign Affairs magazine recently published an article named “How biofuels could starve the poorThanks to high oil prices and hefty subsidies, corn-based ethanol is now all the rage in the United States. But it takes so much supply to keep ethanol production going that the price of corn — and those of other food staples — is shooting up around the world. To stop this trend, and prevent even more people from going hungry, Washington must conserve more and diversify ethanol’s production inputs. This article is very interesting because it links the subjects of global poverty and biofuels, and it questions how much more ?green? biofuels are. It suggests that the U.S. should limit its dependence of fossil fuels. Instead of promoting tax-breaks and subsidies for biofuels, the article argues that the government should promote energy efficient goods, buildings, and factories as well as alternative sources of energy. I agree with this solution, and add that more scientific research on alternative sources of fuel can?t be bad; we should definitely stay in the watch of what new findings come up.

Barrett Sheridan from Newsweek says, High food prices always hit the poor hardest, and these days there is plenty of bad news. Corn prices are nearly $4 a bushel, almost double their 2005 level. In Mexico, for instance, that translates into a 50 percent rise in the price of corn tortillas, which has elicited protests from tens of thousands of workers. Many blame the burgeoning U.S. biofuel industry, centered around corn-based ethanol, for the crunch. Fidel Castro says diverting corn into fuel is a “tragic” turn of events for the world’s poor, while Venezuela’s Hugo Ch?vez calls it “craziness.”

There is no panacea for the world’s energy crisis. Yes, biofuels are a better alternative than oil, and there is no doubt on that. But subsidies are not the best solution in the long run either. Should we drop trade barriers and let the market act on its own?

People that argue against free trade will say that competition from poor countries will bring down wages here in the US, but at the same time wouldn?t bring down food prices? This biofuel-revolution will change the economic dynamic around; poor countries will start being producers and rich countries will be consumers. Biofuels are a big discussion today, but I don?t think that because of that we should give up on them just yet? Any thoughts?