Posted by StreetWise in Latest News
By Inês Santinhos Gonçalves
Street News Service
When climate change became a major international concern and oil prices reached unthinkable records, biofuels emerged as the miraculous solution for humanity’s problems. But saving the environment came at a very high price for poor countries, since crops that used to be turned into food started being turned into fuel, creating a rise in food prices.
The recipe for biofuels was simple: turn natural crops into fuel that could make the world less depend on oil and stop green gas emissions. Developed countries immediately started investing and even developing countries, like Brazil, found a growing market opportunity.
Both European Union (EU) and the United States (US) set ambitious targets. EU promised that by 2020, 10% of all road fuels would be biofuels. The US wishes to produce 36 billion gallons of biofuels annually by 2022 —in 2007 it was producing, together with Brazil, 4 billion gallons per year.
But soon it became clear that biofuels were not an immaculate answer. Some were too expensive to produce and others spend so much energy to make that the benefit was too small.
But are they good news for the food market? If cheaper and greener fuel leads people into starvation – is it worth it?
Since the year 2000 food prices have increased exponentially. According to the Food and Agriculture Organization of the United Nations (FAO), the Food Price Index rose from 90 to 230 (March 2011). The Food Price Index consists on the average of six commodity group (meat, dairy, cereals, oil and fats, sugar) price indices weighted with the average export shares of each of the groups. In total FAO included 55 different products in this index.
The Economist’s food-price index is higher today than at any time since it was created in 1845. Even in real terms, prices have jumped by 75% since 2005.
In 2008, World Bank President Robert Zoellick, held a bag of rice in his hands and told reporters from all over the world that the 75% rise of food prices was unacceptable. “In Bangladesh,” he said, “a 2kg bag of rice costs half of a family’s daily income.” The price of wheat was 120% more expensive.
According to the United Nations World Food Program, more than 100 million people were pushed into hunger.
The International Food Policy Research Institute says that “up to one third or more” of increases in international market prices of cereals and oils are due to the strong growth in crop-based biofuels programs.
The investment in biofuels is not the only reason for the rise of food prices. The growing demand from emerging economies, especially China and India, the rising input costs (especially energy) and perturbations such as poor harvests resulting from extreme weather or depleted grain stocks are also to blame.