Biofuel expansion: challenges, risks and opportunities for rural poor people

Feb 2008

On 2 January 2008, the cost of crude oil crossed US$100 a barrel for the first time, raising global concerns. Continuing near-record oil prices, fears of unaffordable and rapidly depleting sources of fossil fuel and the desire to achieve energy security and mitigate climate change have combined to heighten interest in biofuel production as a cost-effective, alternative source of energy.
Many governments have developed policies meant to promote affordable, alternative energy sources capable of maintaining current energy consumption standards, supporting further economic growth and reducing oil dependency. In addition to producing energy from solar, wind, nuclear and marine sources, the policies also aim at producing biofuels to meet the ever expanding demand of the transportation sector, mainly bio-ethanol from grains, and bio-diesel from vegetable oils and animal fat.
Many developing countries are now launching biofuel programmes based on agricultural feedstocks: bio-diesel from palm oil in Indonesia and Malaysia as well as from oil-rich, inedible plants such as jatropha and pongamia in India; and bio-ethanol from sugarcane in Mozambique and in several Latin American countries, such as Honduras, Nicaragua and Panama.
Although assessments of the global economic potential of biofuels have just begun, current biofuel policies could, according to some estimates, lead to a fivefold increase of the share of biofuels in global transport energy consumption – from just over 1 percent today to 5 to 6 percent by 2020. With increasing demand for biofuels, considerable land could be diverted from food to feedstock production. FAO estimates that the amount of land that would be used for the development of biofuels – at present about 1 percent of the world’s arable land – could increase up to 3 percent by 2030 and as much as 20 percent by 2050.
Governments have provided substantial support for biofuel development to enable it to compete with conventional gasoline and diesel. The measures included consumption incentives (fuel tax reductions), production incentives (reduced taxes and direct subsidies) and mandatory blending standards. The private sector responded to these incentives, setting up processing plants for converting crops into energy in a relatively short time. Alarms were raised when the resulting increased demand for fuel crops contributed to increased commodity prices with adverse effects on consumers and environmentally sensitive land that was cleared for planting palm oil. These excesses raised some valid concerns about the impact of biofuel production on local environments, livelihoods of the displaced people and the global greenhouse gas (GHG) emissions.
The impact of increased food prices, especially on the poor, has drawn considerable attention. Yet, the potential for biofuel production to enhance the national energy security for most of the low-income countries that are also net oil importers has had relatively little attention.
This paper considers the pros and cons of the debate over the potential social, economic and environmental impact of the increase in biofuel production. It also recognizes that the developing world has its own set of bio-energy issues, which can be different from those of the developed world.

By: V. Raswant, N. Hart, M. Romano

 
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