Tuesday, April 22, 2008

Be Careful What You Wish For

An unforeseen cause of the bio-fuel aspect of the green economy is that poor people can’t afford the increased price for food that has resulted.

April 21, 2008

Poverty, famine and violence are among the supposed products of global warming in the future. Yet these calamities are with us today thanks to a key element of "green" policy, biofuels. This feel-good measure is becoming a real-world disaster.

The prices of wheat and rice this year will have doubled since 2004, according to World Bank projections. Soybeans, sugar, soybean oil and corn are expected to be 56% to 79% costlier than in 2004. The bulk of the increases have come in the past year and can be attributed to the West's push to turn these crops into fossil-fuel replacements like ethanol. Food prices will likely remain overinflated until at least 2015, the Bank says.

The result of these rising prices is that 100 million people could slip back into poverty, erasing seven years' worth of gains, Bank President Robert Zoellick warned earlier this month. Food inflation and shortages have sparked riots from Egypt to the Philippines, and six people were killed in Haiti alone during nine days of related unrest there this month.

Soaring oil prices have made it more expensive to transport food products, though the World Bank estimates this and costlier fertilizer account for only 15% of the rise in food prices. Improved eating habits in developing nations are also increasing demand for grains – both for human consumption and to feed livestock, since rapid economic growth in places like China means more people have enough money to buy meat. But the Bank notes that "almost all" of the increased growing of one of the key crops, corn, "went for biofuels production in the U.S."

It's no coincidence that the U.S. and the EU, which are leading the biofuel charge, both have powerful ag lobbies that see this latest eco-craze as a new way to milk taxpayers. U.S. and EU promotion of biofuels represent a trifecta of bad regulation: arbitrary production targets to juice demand, subsidies that encourage inefficient use of crops as fuel rather than food, and tariffs that stifle foreign competition. If only Third World consumers had the same influence as rich-world farmers.