The Financial Times is reporting pressure at the G8 meeting from what the British call “campaigners” for the West to restrict its production of biofuels because of the effect it’s having on on food supplies:
ActionAid, a charity, blamed G8 countries in a report for what it said was a halving of agricultural aid since 1980 to $3.9bn, just 3 per cent of the subsidies given to farmers in the developed world. “Structures that provided access to credit, agricultural inputs and technical assistance have been dismantled,” it said.
The charity also called for a scrapping of all biofuel subsidies and a five-year moratorium on the diversion of arable land for biofuel production.
Appell’s theorem suggests that is unlikely. As petroleum becomes more dear, we’re likely to burn what we can, a point highlighted by the EIA:
Fuel ethanol production is projected to increase from an annual average of 420,000 bbl/d in 2007, to 580,000 bbl/d in 2008 and 640,000 bbl/d in 2009.
There are other reasons this is unlikely, but in the long run, it might help fix some things.
1) Oil prices will rise for decades. [More precisely, I’d expect that if one uses (even) constant dollars, and does any reasonable statistics, prices will escalate, i.e., if one does linear regressions over 10-20-year periods, most will have positive slopes.]
2) The current price uptick, with a little bit of help from speculation, is mostly a demand shock:
a) China + India
b) Increasing internal use by oil-exporting countries.
3) I’m not sure we yet see the coming supply shock
a) Peak Oil
b) Lower net exports, due to b) above.
4) Given all that, at some point, any rational farmer, say in Iowa, says:
a) I can pay incredible prices for diesel fuel and basically go out of business
b) I can grow corn for ethanol (or maybe, miscanthus/switchgrass assuming the processes and infrastructure happen for cellulosic), to use for whatever I can’t electrify. At least, ethanol prices should end up paralleling diesel prices, even WITHOUT the current somewhat crazed subsidies.
At least, here’s what the Iowa Office of Energy Independence says:
5) Sooner or later, the weird subsidies for corn/ethanol/ surplusses to ship abroad aren’t going to persist forever. As shipping costs rise, shipping low-value bulk grain around the world is going to get a lot harder, politically and economically. See http://research.cibcwm.com/economic_public/download/occ_55.pdf
6) In any case, developed-world agriculture policies haven’t helped out the poor, especially in Africa, very much. If the reader isn’t familiar with Norman Borlaug, I’d certainly prefer his approaches in general (i.e., help people feed themselves):