A Perfect Storm of Stupidity (Food vs. Fuel)

telegraphjournal.canadaeast.com ^ | May 2nd, 2008 | Lisa Keenan

[kellynla]

With food shortages emerging in many parts of the developing world, it's time to ask which we put more value on, human life or an extra car in the garage? Because whether we want to admit it or not, the two have become intricately intertwined.

The biofuel industry came to Saint John a few weeks ago. The occasion was the Atlantic BIOEnergy Conference and the industry leaders made all the right noises: Biofuels are good. They are environmentally-friendly. Atlantic Canada can become a leader in biofuel production, if only the government helps it along with a bit of money (although that appeal could apply to virtually any industry).

At the same time, ironically, the international pages were awash with stories of food riots, exploding prices and export bans on staples by developing nations trying to look after their citizens. Psychiatrists have a phrase for this phenomenon; they call it "cognitive dissonance."

The competition between food and fuel is a relatively new phenomenon, largely for two reasons. For the latter half of the twentieth-century energy, especially, petroleum was relatively inexpensive. Despite the odd spike in energy prices, gasoline and other fuels generally offered the best value for consumers. Petroleum was both plentiful and very adaptable, as one could run automobiles, heat homes or fuel power plants all from the same barrel of oil. Food (by contrast) was expensive and not very adaptable for uses other than for human or animal consumption. (The energy content in a litre of corn-based ethanol is only 70 per cent of the energy content in a litre of gasoline). As the economists say, they were imperfect substitutes, despite the efforts of engineering students (and some environmentalists) to run their cars using vegetable oil.

So what suddenly made biofuels the most attractive fuel source since the days of Moby Dick? In a word, "government."

It should come to no surprise that governments often look for the easiest solution to whatever issue confronts them. When inflation was a problem, we got wage-and-price controls. When doctors' salaries began escalating in the early 1990s, they cut positions at medical schools. When test scores fell in schools, we lost early immersion. The solutions that governments choose are not always the right ones (some would argue they are never the right ones) but they satisfy the immediate problem, even if they create bigger dangers in the long run.

Biofuel production, especially for vehicles, only took off in earnest in the 1980s when prices for Brazilian sugar collapsed. Faced with collapsing farm incomes and rising prices for imported oil, governments in Brazil embarked on a massive program (with massive subsidies) to convert sugar into ethanol for motor fuels. The project was very successful and by the late 1980s 90 per cent of all cars built in Brazil were designed to burn ethanol.

Ethanol production travelled north for similar reasons. In the 1990s, the U.S. government (which had long subsidized corn production) began subsidizing the production of corn-based ethanol for use as a partial substitute for gasoline. This policy was further aided by high import duties on ethanol from Brazil which, as it's made from sugar cane, is cheaper and highly valued. However, by the time 2007 rolled around, what had once been a farm-income support plan to find a use for excess corn had evolved into a program of mandates to produce ever larger quantities of ethanol as a fuel for automobiles. Corn prices have doubled in three years and next year ethanol production will consume one-third of the U.S corn crop. For industries that require corn as a feedstock (everyone from ranchers, through soda companies, to tortilla makers), rising corn prices mean higher prices for their outputs.

Governments (in Canada and Europe) have begun mandating biofuels as part of national fuel standards in order to reduce greenhouse gas emissions. This has proved a fool's errand, as the Canadian government's own scientists report that corn-based ethanol is not effective in reducing greenhouse gases versus gasoline (although it does help combat pollutants that produce smog).

Despite this, governments across Canada are jumping on the ethanol bandwagon in order to be seen to be doing something (anything) to combat global warming. Canadians will soon have a patchwork of regulations mandating biofuels from sea to sea to sea.

In recent weeks, many commentators have said that the recent spike in food prices (grains up between 40 per cent and 130 per cent in the last year) is the result of a "perfect storm" of high energy prices, regional droughts and food being diverted to biofuels. It is, in fact, a perfectly predictable storm brought on by the desire of citizens of developed nations to keep on driving in spite of rising petroleum costs.

Governments have been complicit in this effort, offering the opportunity to do good by replacing gasoline with ethanol, and subsidizing the effort so we don't know the real cost.

It's a Faustian bargain and its time we stopped. Happy farmers are one thing, starving children another. It's time to get off the biofuel carousel, before more damage is done.

[RightWingConspirator]

We need to vote some of the idiots out of office this November.

[dirtboy]

You got that spelling right, bro...