OECD issues report critical of biofuels, favours moratorium

Yahoo News 16 Jul 08;

The OECD favours a moratorium on expanding biofuel production, a senior official with the Paris-based body said on Wednesday following the release of a report critical of vegetable-based fuels.

"It would make a lot of sense to have a moratorium," Stefan Tangermann, head of agriculture and trade analysis at the OECD told AFP.

"All these programmes should be reconsidered because we found them inefficient in terms of climate change."

The Organisation for Economic Cooperation and Development in a study published Wednesday found that costly public support for biofuel production has but a limited impact on reducing greenhouse gas emissions and on improving energy security.

At the same time, according to the report, development of the biofuel sector "will contribute to higher food prices over the medium term and to food insecurity for the most vulnerable populations in developing countries."

It said for example that if production of biofuels were to remain at current levels, rather than growing at projected rates, medium-term coarse grain and sugar prices would respectively be 13 and 23 percent lower than currently foreseen.

Initially hailed as a weapon in the fight against global warming, biofuels are now denounced by United Nations agencies, the World Bank and non-government organisations as one of the causes of soaring global food prices.

Acreage and resources that could be used to produce food are now given over to biofuel production, reducing food supply.

Production of ethanol, from grain or sugar cane, and of fuels based on vegetable oils has expanded rapidly in the last few years and is expected to double over the next 10 years.

The United States is the world leader in ethanol output, accounting for 48 percent of worldwide production last year, ahead of Brazil at 31 percent.

The European Union is responsible for about 60 percent of global biodiesel production, based on oils such as rapeseed and canola.

The OECD found that in most countries the biofuel sector is heavily subsidised, through budgetary support, requirements that biofuels represent a certain share of the market for transport fuels and protectionist trade restrictions.

The United States, the European Union and Canada were providing overall support in 2006 in the amount of 11 billion dollars a year, a figure expected to rise to 25 billion dollars in 2013-2017, according to the report.

It noted that current overall government assistance to the biofuel sector in the United States, the European Union and Canada reduces net greenhouse gas emissions by less than 1.0 percent of total emissions from transport.

The OECD therefore issued several recommendations. Among then:

-- The redirection of efforts to save fossil fuel energy away from alternative fuels to lower energy consumption generally. "Generally, the costs of reducing greehouse gas emissions by saving energy are much lower than by substituting energy sources," the report said.

-- Governments engaged in biofuel production should make use of land not currently used for food crops and should discourage the use of environmentally sensitive areas.

-- Opening markets for biofuels and feedstocks to allow for more efficient and cheaper production.

-- Modifying official support policies to reduce upward pressure on food prices.