The future of biofuel is at a crossroads. Soaring fuel prices, debates on global climate change and environmental consequences, and sustainability and intergenerational equity concerns of fossil fuel usage have prompted governments to expand production and use of biofuels. The potential adverse impacts on food security and human suffering associated with biofuel expansion, on the other hand, have led to growing scepticism on the prospects of biofuel as a promising alternative to conventional fossil fuels.

It is our common experience that this decade has witnessed an unprecedented oil price hike and simmering crisis of food commodities simultaneously. Diversion of massive quantities of staple food commodities from human consumption to biofuel production, increased cost of production, and adverse weather and climatic conditions in major cereal grain producing countries are the oft-cited reasons for the food price hike. Even though some people accuse biofuels of contributing to a rise in food prices, the food-fuel nexus is a complicated issue, hence the role of biofuel policies in food price hikes has become a contentious issue of the day.

Today, top biofuel producers like the United States and Brazil use food crops to make it. The rapid increase in ethanol production from food crops, especially corn and sugarcane, has posed a number of impacts on grain supply and demand systems. FAO data indicates that in 2007, about 23 percent of the coarse grain produced in the United States and 54 percent of sugarcane produced in Brazil was used as feedstock for ethanol production. Similarly, the EU nations diverted 47 percent of vegetable oil for biodiesel production, and in turn imported vegetable oil for human consumption (FAO, 2008).

Increased demand for corn from the ethanol industry has increased corn prices in the international market, and has encouraged farmers to bring more area under corn cultivation. On the other hand, rising corn prices have shifted consumer demands towards rice and wheat, whereas farmers are prompted to shift from rice and wheat to maize cultivation. These demand and supply side effects have thus increased the price of major food crops, not only of corn.

Rosegrant (2008) found that during the period 2000 to 2007, increased biofuel demand contributed to a 30 percent rise in weighted average grain prices. Given the continued higher oil prices, he predicts that the global corn price will be pushed up by 20 percent by 2010 and 41 percent by 2020. The poorest parts of sub-Saharan Africa and Latin America will be hard hit because the price of their staple crop — cassava — is expected to increase by 33 percent by 2010 and 135 percent by 2020.

What if non-edible and secondary crops are used for biofuel production? Countries like Brazil, Indonesia and Malaysia are relying on soybean and palm for meeting the feedstock demand. Similarly, the government of India has recently embarked on an ambitious mission of Jatropha plantation for biodiesel production. Simply speaking, if growing biofuel crops doesn’t compete with the land currently allocated for the production of food grains, biofuel will have minimal impact on food security. Otherwise, the impact would be almost the same as using cereal grains for biofuel production.

During the period 1990 to 2002, the area under palm oil and soy cultivation increased by 43 and 26 percent respectively. This was brought about by massive tropical deforestation. Indonesia witnessed approximately 2 million hectares of tropical deforestation for palm oil plantation in 1999. Similarly, Brazil lost vast areas of forest for palm oil and soy plantation. In addition, oil palm and soy companies have been blamed for devastating forest fires. For example, in 1997-98, about 15 million hectares of forests were lost in Indonesia and Brazil by forest fire for soy and palm cultivation. Besides this, human suffering and displacement of people from forests and native title lands are other uncovered and hidden stories of palm oil plantation in Indonesia.

So, what appears from the scrutiny of the available literature is that biofuels could potentially threaten food security and the environment. In addition, biofuel could potentially compete with agriculture for water. The Consultative Group on International Agricultural Research (CGIAR) has stated that the ambitious biofuel production targets of India and China could worsen the water scarcity situation in the whole South Asian region and compete with food production.

The biofuel issue has been one of the less discussed and most attractive “projects” in Nepal today. Most NGOs, INGOs and donors have a biofuel component in their strategic and programme documents. At the same time, it is also true that most of them do not have any systematic analyses that form the justification for their intervention. So, what appears from the reality is that development agencies are trying to fantasise about the issue rather than being responsive to the needs of the people. It seems as if they are trying to “jump” into the biofuel pond without stripping off their clothes and without ascertaining the depth of the pond. Even though there are some (I must say very scant) media reports showing Jatropha oil being used in automotive propelling, no one would find any systematic and scientific study on the basis of which they can claim that biofuel will really be a worthy investment of the day. There hasn’t been any “scientific study” undertaken in Nepal so far pertaining to the costs and benefits associated with promoting biofuel.

The other important actor, the government, appears like a mute spectator. As far as I understand, there isn’t any official government view on whether or not biofuel is the needed intervention of the day. The Nepal government doesn’t even have any bio-diesel and ethanol blending targets. So it is quite surprising and strange to see biofuel projects operating in a policy and factual vacuum. It appears as if INGOs and NGOs are busy playing their own drums, and the government is performing a tuneless dance.

What is most important today is to have a coherent government policy on biofuel that defines the scale of intervention and the role of actors in the sector. By scale, I mean everyone should be clear on whether biofuel should be produced on a commercial basis (especially for the locomotive purpose) or simply to fulfil local-level energy demand (for example, crushing Jatropha seeds and using it to light lamps and run pump sets). Until and unless we have a precise policy instrument and analysis of the associated costs and benefits, the project efforts will remain largely futile, and it would be nothing more than building castles in the air.

dmkandel@yahoo.com

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