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Monday Morning Development Newsletter:  

Fighting Climate Change: Cures worse than the disease?
By Lykke E. Andersen*, La Paz, 28 April 2008.

The Intergovernmental Panel on Climate Change and Al Gore jointly won the 2007 Nobel Peace Prize "for their efforts to build up and disseminate greater knowledge about man-made climate change, and to lay the foundations for the measures that are needed to counteract such change".

I am sure these enourmous efforts were done with the best of intentions, but I am not so sure they are contributing to World Peace. Certainly, a lot of wasteful and harmful policies are being implemented under the guise of fighting climate change.

One of the worst policies is probably the multi-billion dollar subsidies to turn food crops into so-called “green fuel” (ethanol and bio-diesel). Not only do these programmes cost about a hundred times more than the average carbon sequestration project (1), but they also contribute to increasing the prices of basic food crops, the high prices of which are currently causing food riots in many poor countries (see recent articles in The Economist: Food and the poor: The new face of hunger; Food: The silent tsunami; Famine, farm prices and aid: Food for thought).

Since both demand and supply of food crops is very inelastic, even small shocks to either demand or supply can cause big changes in food prices. And the sudden increase in the demand for crops for the production of bio-fuel is no small shock.

Global ethanol production reached 20 million tonnes in 2006 and is growing at double or triple digit rates. Bio-diesel production in the European Union alone increased from 4.9 million tonnes in 2006 to 10.3 million tonnes in 2007. As countries struggle to reach the legislated targets for bio-fuel consumption, they convert hundreds of millions of tonnes of food crops (wheat, rye, barley, sugar beat, maize, rapeseed, and others) into fuel each year. New Zealand is even turning cows milk into bio-fuel, and France is considering whether it is more profitable to turn grapes into fuel instead of wine. The price of beer in Germany increased by about 40% in 2007 as farmers dedicate barley to fuel instead of beer production (2).

Developing countries are not obliged to meet bio-fuel targets, but are encouraged by the high prices to clear forest and produce crops for bio-fuels. Even Africa, which is more plagued by hunger than any other continent, is turning crops into bio-fuel. South Africa, Malawi, Swaziland, Zimbabwe, Ethiopia, Kenya, Tanzania and Mozambique are all commercial bio-fuel producers, and bio-fuel projects are also under way in Burkina Faso and Madagascar (2).

Companies that were aiming for a green image by switching to bio-fuels, are understandably beginning to get cold feet. The UK transport group, National Express, for example, has discontinued its bio-diesel trial after a scientific report showed that switching its busses to bio-diesel might do more harm than good to the environment. Specifically, the report warned that natural habitats might be destroyed to make room for bio-fuel crops, food prices in developing countries might be pushed up, and the net effect on carbon emissions might be close to zero, or even positive, as the production of bio-fuels is in itself an energy intensive process and it may also release carbon through additional deforestation (2).

The current high prices of food crops obviously benefit commercial farmers, but they harm most of the World’s poor, who have recently seen their purchasing power fall by 25-50% (3). This widespread adverse effect on the poor is orders of magnitude larger than the likely adverse effect from climate change, with the additional problem that there has been no time to adapt or adjust to soaring food prices.


Related articles:

The Cynical Economist: Getting Our Priorities Straight

- Climate Change in Bolivia - Expect Surprises
- Managing Change  
WARNING! Excessive use of the Precautionary Principle may be bad for you
- Now you can off-set both carbon and infidelity
- Environment versus Development

(*) Director, Institute for Advanced Development Studies, La Paz, Bolivia. The author happily receives comments at the following e-mail:
(1) Koplow, Doug (2006) “BIOFUELS - AT WHAT COST ? Government support for ethanol and biodiesel in the United States.” The Global Subsidies Initiative (GSI) of the International Institute for Sustainable Development (IISD) Geneva, Switzerland. According to this report, the cost per metric ton of GHG emissions reductions through public support of corn-based ethanol could have purchased more than 140 metric tons of removal on the Chicago Climate Exchange.
(2) Biofuels International, September 2007, Issue 4, Volume 1.
(3) See IFPRI ( ).

Ó Institute for Advanced Development Studies 2008. The opinions expressed in this Newsletter are those of the author, and do not necessarily reflect those of the Institute or of the sponsors.

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