31 März 2011

Ethanol backlash masks a bigger energy problem

More favourable options - such as a transition from corn-based ethanol to cellulose-based fuels - would be necessary

This year, approximately 7-8 per cent of the world’s total cereal crop will be used for biofuels – mostly ethanol and biodiesel. In the last year, the commodity food price index (a combined figure that includes a variety of foods) has risen by 40 per cent.

Blaming high prices on corn-based ethanol is appealing because it offers up the vision of an easy fix: stop diverting food to fuel, and food prices will fall. Unfortunately, the problem is much deeper.

Since the mid-2000’s, prices for many food staples have been rising in real terms; we experienced a rapid spike in the summer of 2008, and are in the midst of another spike now. In between these spikes, however, commodity prices for food actually dropped dramatically, before beginning to rise again. These highs and lows can be almost perfectly correlated to the changes in oil prices observed over the same period. The problem is not food for fuel; it’s the fuel we need for food.

Every time the cost of a litre of diesel goes up, it impacts the cost of running a tractor in the field, and the cost of moving finished goods from field to market. The more mechanization involved on the farm, and the further that food is shipped, the higher the costs go. We’ve created a global food supply chain that is able to feed billions – as long as oil is cheap, that is, and as long as the weather co-operates.

Lately, the weather has not co-operated, with drought and flood affecting traditional food exporting nations. Oil prices have returned to highs last seen three years ago. We’re witnessing a backlash against green – in a time when the fragile economy trumps all, renewable energy and biofuel programs begin to look like costly and frivolous indulgences.

Ending public support for greener forms of energy, saving billions in expenditures and reducing the burden on taxpayers, has become a mantra. Ironically, ending support for biofuels just increases our dependence upon fossil resources – the very factor that is driving food prices higher and contributing to global unrest.

We are in an enviable position in Canada. We have the farms and forests, the rivers and rocks, the wind and sun in such abundance that virtually all of our own energy needs could be met through renewable sources – should we desire it.

Achieving such a goal, however, takes discipline, planning, and co-operation – the very tools we seem to lack today. A self-proclaimed energy superpower, Canada has no comprehensive energy policy; no real vision for how we might strategically employ our oilsands, natural gas, shale gas, and offshore resources, and no clear understanding how we might evolve renewable energy sources to our combined economic advantage. Among the policies we lack are clear guidelines to safeguard our food supply from year to year, and clarity on the role that biofuels could or should play within the agricultural sector.

In a year when most Canadians will visit the polls twice, it’s appropriate that we reconsider the role that biofuels and other renewables can and should play in our economy. The growing backlash against greener forms of energy should not be allowed to stop Canada’s shift from fossil to renewable resources.

The presence of such resistance to these options, however, should serve as a reminder that the road to renewables is not an easy or obvious one, and that we need public forums for discussion and debate on these topics. Transparent policies that clearly show evolution towards more favourable options – such as a transition from corn-based ethanol to cellulose-based fuels – would be a good start. It is clear, however, that turning away from biofuels, and other forms of renewable energy, will only increase Canada’s exposure to global volatility that characterizes energy and food markets.

Source: The Globe and Mail, 2011-03-31.

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