How to make a global trade in biofuels work

Easy. Just get everyone in the world to play by an entirely new set of rules.

Published February 6, 2007 11:52PM (EST)

Brazil wants the World Trade Organization to reclassify ethanol from a "food commodity" to a "fuel commodity." If Brazilian ethanol were classified as a fuel, the theory goes, it would be exempt from the tariffs that currently block its easy export into the United States or European Union. Like petroleum, it would be free to come and go as it pleased, for whatever price markets decide.

There's just one problem: Ethanol is both fuel and food. A simple change of category will not change that physical reality.

The food vs. fuel controversy has boiled over this year, driven into a frenzy by the spiking price of corn in the United States. Tyson warns that the price of chicken and pork meat is going to surge. Biofuel critics are suddenly obsessed how much a Mexican tortilla costs. But Brazil has a point: Not all ethanols are alike. The price of sugar isn't spiking. So why not let Brazilian ethanol made from sugar satisfy American biofuel hunger, instead of evil corn-based ethanol?

On a separate vector, a similar argument is made about the environmental pros and cons of various forms of biodiesel. The thought of biodiesel made from palm oil grown from plantations carved out of the virgin rain forest drives environmentalists crazy. But what about biodiesel from inedible jatropha oil seeds grown on "marginal," semi-arid land unsuitable for food production? Who wouldn't want that?

We can come up with scores of similar examples. There are a vast number and variety of biofuel experiments taking place around the globe. Some, like the corn-based ethanol craze in the United States, make little environmental or long-term economic sense. Others, like Brazil's sugar-cane success story, inspire hope for similar triumphs around the world.

John Mathews, an Australian professor of strategic management, believes that encouraging trade of biofuels from the South to the North would simultaneously help alleviate climate change, ward off the threat of peak oil, and encourage economic development in poor countries. And he thinks it can be done without chopping down rain forests or imperiling food security. Last fall I discussed his views as expressed in his Biofuel Manifesto, and came to the conclusion that he dismissed food and environmental issues a little too cavalierly. He has since tightened up his argument. This morning, he e-mailed me a copy of his latest thoughts on the subject, honed and polished and soon to be appearing in the journal Energy Policy.

Mathews makes probably the most forceful case I've seen for the development of an international trade in biofuels in which the nations of the tropical South produce fuel for the North. He asserts that there is enough land in the tropical South that is neither virgin forest nor being used for food to ramp up biofuel production equal to what he calls the addition of "18 more Brazils" -- or enough to satisfy 20 percent of the transportation fuel needs of all the rich nations in the Organization for Economic Cooperation and Development (OECD).

[This paper] argues for an explicit and historic "biopact" between the OECD countries (representing the "North") and developing countries that grow biofuels (the "South") to institute a system within the rules of the WTO that favors sourcing by the North of a growing portion of its fuel needs from the South. This Biopact could guarantee markets for fuels grown in the South, and at the same time guarantee the integrity of these biofuel supplies, to ensure that fuels sold in the North meet certain fundamental environmental and biodiversity guidelines. The countries that do meet these guidelines could expect a welcome from international markets; while firms in those that do not could expect to be rigorously excluded.

And as for the available land...

If we allow for a less than perfect propagation of Brazil's yields to other countries, and postulate that other tropical developing countries manage a yield of only 5,000 liters of ethanol per hectare, then the goal of 18 Brazils would call for 72 million hectares (7,200 square kilometers) to be placed under biofuel cultivation -- arable land that is available now and not from any new forest clearances. Are such tracts of land available?

Actually, they are, and in abundance. There are huge swaths of land in Africa, Southeast Asia, the Indian subcontinent and Latin and Central America that are degraded, and not used for any productive purpose or were formerly used for cattle grazing. To be precise, in just the African countries that signed up for a "Green OPEC" earlier this year, the Food and Agriculture Organization (FAO) of the United Nations estimates that there are 379 million hectares of potential arable land available, of which only 43 million are utilized. So in principle, according to FAO data, there are in just a few African countries over 300 million hectares of potentially arable land available for both ethanol and biodiesel production.

Mathews' assertions about available land sound a little too good to be true. Certainly, there is no shortage of biofuel critics who would dismiss it as hopelessly unrealistic. But let's suppose, for the sake of argument, that Mathews is correct. For his system to work, as he readily admits, the North would have to remove tariffs that currently block the import of biofuels, and set up an enforceable system of global regulation that ensured that rain forests would not disappear from the face of the earth or indigenous populations be left to starve to death. There would have be a quid pro quo: The North would open up markets to Southern exports, on the condition that the South produced those exports in an environmentally sustainable and humane manner.

This is a wonderful dream. In combination with stringent conservation measures, some kind of carbon or gasoline tax and fuel economy improvements, along with ramped-up investment in other renewable sources of energy, such as solar and wind, a healthy global biofuels trade could help make a dent in the challenges posed by an energy-constrained, climate-change threatened future. But there is a monstrously huge hole in the argument. To achieve it would require a dramatic and profound restructuring of how the world currently conducts its business.

Let's give the floor to Almuth Ernsting, writing for BiofuelWatch, a European environmental organization that has emerged as a leading critic of global biofuel mania.

I have seen no scientific paper nor pro-large-scale biofuel institution which agrees with destroying rainforests to make way for energy crops -- virtually all the organizations and papers which call for massive expansion of energy crops insist that this need not and must not happen. Yet, unfortunately, biofuels are being introduced into a world run largely on neo-liberal principles -- or, to be more specific, within trade rules which have a strong bias against regulation and any "trade restrictions" to protect the environment, the climate or communities. Where crops are grown is, by and large, determined by the market -- not by scientists and NGOs drafting maps and plans. The market favors those biofuels which are cheapest. Generally that means those with the highest yields, which are tropical starchy and oily plants such as palm oil and sugar cane. Lower-yield crops can capture the market if costs are kept low and governments guarantee an unlimited supply of new land and perhaps even subsidies -- soy biodiesel being a prime example. Rainforests, biodiversity, healthy soil and clean water and greenhouse gas emissions remain "externalities" in the accounts, which will inevitably be sacrificed for real quick profits. Take the Indonesian example: Although sustainable oil palm monocultures may be an oxymoron, Indonesia could at least tell its plantation companies that they should plant on the 12 million hectares of rainforest land which they already clear-cut and then abandoned, rather than granting them ever more concessions for new forest land. But plantation companies make far more profits by selling timber than by growing palm oil alone -- and they are powerful enough to stop policies which would cut into those profits.

Incorporating environmental regulations into trade negotiations has historically been unsuccessful, in part because both the developing world and developed world have vested interests opposing it. The developing world justifiably sees requirements from the developed world that it abide by rich nation environmental standards as yet another card stacking the deck against it. Meanwhile, the multinationals that profit from moving production overseas aren't eager to raise their own operating costs either.

And then there's that rare case when most of the world does agree on an environmental initiative, such as the Kyoto Protocol or the U.N. Convention on Biodiversity, and the world's No. 1 superpower torpedoes it by refusing to sign on.

So what Mathews is calling for, in order to make biofuel trade between South and North work, is really a fundamental reworking of how global trade is organized that will require taming corporate special interests and assuaging suspicious developing nation governments to a degree never yet seen before on this planet.

No biggie. As Gimli said in the film version "The Lord of the Rings" just before marching off with the surviving Fellowship of the Ring to confront Sauron at the very gates of Mordor: "Certainty of death ... Small chance of success ... What are we waiting for?"

In Nairobi on Monday, Pascal Lamy, the director general of the World Trade Organization, told delegates to a U.N. conference on the environment that "If there is something on the table that can be done to bring environmental benefits, then our position is let's do it. The WTO is very pragmatic on this."

How about this, Pascal: Why don't you lead an aggressive effort to orchestrate an international deal that will promote the trade of environmentally sustainable biofuels from the global South to the global North? Why don't you put that on the table?

By Andrew Leonard

Andrew Leonard is a staff writer at Salon. On Twitter, @koxinga21.

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