ENVIRONMENT: Record Financing For Biofuels, Not Food

By Stephen Leahy Reprint | | Print |

Stephen Leahy

BROOKLIN, Canada, Feb 4 2008 (IPS) - Biofuels have quickly turned from environmental saviour to just another mega-scale get-rich quick scheme. Countries and regions without their own oil reserves to tap now see their farms, peatlands and forests as potential "oil fields" – shallow but renewable lakes of green oil.

However, renewable does not mean sustainable, and in most cases the only green part of biofuel is the wealth they generate.

Not surprisingly, given the record high oil prices, worldwide investment in bioenergy reached 21 billion dollars in 2007, according to the U.N. Environment Programme. The Inter-American Development Bank announced 3 billion dollars for investment in private sector biofuel projects – mainly in Brazil – while the World Bank said it had 10 billion dollars available in 2007.

Meanwhile development assistance for food-producing agriculture had fallen to 3.4 billion dollars in 2004 – with the World Bank&#39s share less than 1 billion dollars, according to the Bank&#39s own World Development Report on Agriculture released in October 2007. And most of this financial assistance was spent on subsidising use of chemical fertilisers.

"It&#39s not just the World Bank, regional development agencies, progressive development groups in Europe and many countries are all investing in agrofuels," says Anuradha Mittal of the Oakland Institute, a U.S. NGO focused on social and environmental issues.

"I was amazed to see how much land in India has been taken away from poor people to start up new agrofuel operations," Mittal told IPS after a recent visit to her home country.

Agrofuels are "false solutions" to the critical problem of climate change, and in many cases may simply be making it worse, she says. Worse, because rich countries think they are making real gains in reducing emissions with biofuels while utterly failing to deal with their out-of-control consumption of energy and other resources.

Investors in biofuels can not only make money, they can also get valuable carbon credits under the Clean Development Mechanism (CDM) of the Kyoto climate change treaty. Carbon credits can be used to offset fossil fuel emissions or can be sold on various carbon trading markets. The CDM is a complicated process that provides funding and certifies carbon credits. It funds solar energy projects and wind power as replacements for coal power in less developed countries. With biofuels it has been difficult to determine exactly how much a biofuel project would reduce CO2 emissions compared to fossil fuels when emissions involved in growing the crop, transportation and production are included.

As a result only a few small projects that make biodiesel from waste vegetable oil have CDM funding, says Almuth Ernsting of Biofuelwatch, an environmental NGO in Britain. However, a number of large-scale projects including biodiesel project in Brazil and an ethanol project in Mexico may be approved this year.

"The industry says they need CDM funding," Ernsting told IPS. "If the CDM funds these kinds of large projects then the carbon markets are likely to finance others."

If that happens, as seems likely, another wave of biofuel financing will flood the world when there is considerable scientific debate about the environmental benefits of agrofuels, she says. Recent research shows that fertilisers and tilling the soil releases from 30 to 45 percent of all carbon emissions.

Europe&#39s biodiesel made from Indonesian palm oil was known as early as 2005 to cause deforestation and the draining of peatlands and putting enormous amounts of carbon emissions into the atmosphere. It has been hard to slow this down and while the European Union has expressed concern, it has held fast to its goal of deriving 10 percent of its transport fuel from plant material, says Ernsting.

"If we&#39re serious about fighting climate change then a moratorium on agrofuels is needed to allow time to do a proper assessment," she asserts.

George Weyerhaesuer, Jr, senior executive at the Weyerhaeuser Company, one of the world&#39s largest forest products companies, agrees that the risks and benefits of biofuels need to be worked out.

"We need a way to sort this out and then pass along recommendations to the United Nations," says Weyerhaeuser who is working with the World Business Council for Sustainable Development (WBCSD) in Geneva, Switzerland. WBCSD is a CEO-led, global association of some 200 companies dealing exclusively with business and sustainable development.

There are lots of fuels, feedstocks, processes and different situational circumstances for biofuels around the world. Some may be okay on a small scale only, while others may work on a larger scale, he told IPS.

So who is going to sort out which biofuel and where? Weyerhaeuser suggests the International Risk Governance Council, an independent organisation also based in Geneva whose purpose is to help the understanding and management of global risks. This little known group has bioenergy as one of its current projects and hopes to eventually "prepare risk governance guidelines and policy options for the production of electricity, heat and transport fuel from biomass".

However, he opposes a moratorium, saying: "I&#39m more worried about carbon emissions, some of the biofuels will reduce those."

Others are more worried that biofuels have become a land grab and another way for agribusiness to increase its power and riches. "Agrofuels are not about reducing carbon emissions. It is a big conspiracy to benefit agro-corporations, as well as oil and automobile companies," says Simone Lovera, managing coordinator of the Global Forest Coalition, an environmental NGO based in Asunción, Paraguay.

In Latin America Lovera has seen how agrofuels are devastating the land, farmers and local communities. The principle of sustainable development is being completely ignored she told IPS. "It is all about how to make a profit – the evidence is everywhere."

She doesn&#39t deny that done right biofuels could provide a range of benefits, including reducing carbon emissions and alleviating poverty for poor farmers. "What&#39s lacking is a guarantee that agrofuel projects are done properly," said Lovera.

And a moratorium on further biofuel expansion is needed to allow time to figure out how to do biofuels properly and set up guidelines and a monitoring system. "As things stand now, kids are starving because of agrofuels," she added.