New study relaunches controversy about biofuels and food prices

The findings of this new report regarding ethanol are in contrast with the data recently published by the European Commission. [Lana/Flickr]

A new study commissioned by environmental NGOs found that the production of first generation biofuels has driven up food prices in Europe, running counter to the European Commission’s own data which found the impact of ethanol “negligible”.

In July 2016, the Commission proposed that food-based biofuels should be gradually phased out and replaced with “more advanced biofuels” which do not compete with food crops [See background].

The draft legislation is currently being scrutinised by European Parliament committees, which are preparing their opinions on it.

Several environmental NGOs have claimed that the use of first-generation biofuels has pushed up food prices, an argument which is roundly rejected by the biofuels industry.

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The NGOs generally lump all crop-based biofuels together and are pressuring the Commission to completely ban them after 2020, arguing that the future lies exclusively in so-called advanced biofuels.

On the other hand, the ethanol industry has long called for a system to differentiate between biofuels based on sustainability criteria, claiming that Europe should focus on phasing out fossil fuels as well as biofuels that compete with food crops and drive deforestation, such as palm oil.

Biofuels that have high greenhouse gas savings and low risk of indirect land use change such as ethanol should be protected, ethanol producers claim.

But environmental NGOs insist that all crop-based biofuels negatively affect food prices.

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Driving food prices up

A new study published on 15 September and conducted by consultancy Cerulogy for  the NGOs BirdLife and Transport & Environment, claims that increasing demand for crop-based biofuels has resulted in increased food prices.

The consultancy reviewed over 100 economic modelling studies of the impact on food prices because of increased demand for biofuels made from food crops.

Sini Eräjää, EU bioenergy officer for BirdLife Europe & Central Asia, commented: “Biofuels’ intensive land use also increases food prices for Europeans and developing nations. It just makes sense to stop mandating their use in our cars and trucks”.

According to the study, the rising demand for biodiesel had the highest price impact on vegetable oils in the EU such as rapeseed, palm oil, soy and sunflower, driving a 171% increase in prices in the EU per exajoule (EJ) of biodiesel produced.

In addition, the report found that EU oilseeds saw 25% higher prices.

As far as ethanol is concerned, the report also pointed out that it had a significant impact “with wheat ethanol increasing global wheat prices by 20% per EJ and sugar-based ethanol increasing the world’s sugar prices by about 40% per EJ”.

Jori Sihvonen from T&E urged the industry to turn to advanced technology and move away from crops to produce fuel.

“The biofuels industry needs to face the fact that when you use food to fuel cars you increase demand for food and its price.”

The analysis also emphasised that in the event the EU gets rid of crop-based biofuels by 2030, global vegetable oils (such as sunflower, rapeseed, soy and palm oils) will be 8% cheaper, compared to a scenario with a 7% target for biofuels as the Commission has suggested.

“Thanks to stopping using food-based biofuels in the Union, European consumers would save €10.87 billion in 2030,” the report concluded.

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Industry: look at the reality

Contacted by EURACTIV, Emmanuel Desplechin, Secretary-Generalof the European renewable energy association (ePURE), questioned the results of the study, claiming that the truth is far different.

“The real-world experience on this issue is clear: during the past ten years as biofuels production has gone up, global food prices have come down 20%,” he stated, adding that a 2017 Commission report clearly confirmed that.

“EU ethanol uses only a minuscule 2% of EU grain production, and every tonne of grain used by the ethanol industry produces as much high-protein animal feed as it does low-carbon fuel,” he said.

The Food and Agriculture Organisation of the United Nations (FAO) seems to agree with this argument.

Olivier Dubois, a FAO senior official, recently admitted that Brazil’s sugarcane production did not drive food prices up.

“Brazilians have invested a lot in sugar and now they can produce both food from sugar and ethanol fuel,” he said.

FAO official: Food-based biofuels not necessarily bad

Brazil demonstrates that sugar cane cultivation can supply both food and ethanol for fuel without harming the environment or pushing up food prices, a senior official from the United Nations Food and Agriculture Organisation of the United Nations (FAO) has said.

European Commission

Contacted by EURACTIV, a European Commission spokesperson declined to comment on the report.

However, the findings of this new report regarding ethanol are in contrast with data recently published by the European Commission.

Particularly, in February 2017 the executive published its Renewable Energy Progress Report highlighting that prices of agriculture commodities decreased in the period 2012-2015.

“The EU ethanol consumption had a negligible impact on cereal prices given that the EU share in the global ethanol market did not exceed 7%, and the global cereal market is driven mainly by demand for feed,” the Commission report emphasised.

The Commission said that in 2015, the price of vegetable oils reached its lowest level since 2005, while prices for oilseed-based meals and cakes for feed increased.

But in the case of vegetable oils it stated that lower biofuel demand was among the factors contributing to the fall in oils/fats prices.

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Asked to comment on the Commission’s statistics, T&E’s Sihvonen stressed the EU ethanol market was relatively small now compared to the global cereal market, hence a smaller price impact in comparison to the higher impact from EU biodiesel.

He noted that the previous Commission renewable energy progress report identified a 1-2% price increase caused by EU ethanol production.

“The study shows that cereal prices would be 0.6% higher by 2030. None of those figures are negligible,” he said, claiming that “it is worrying that the ethanol industry cannot acknowledge even this small projected 2030 price impact, when there is heaps of evidence to support that biofuels policies lead to increased food prices”.

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