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103

Perspective

Biofuels, climate change and industrial development: can the tropical South build 2000 biorefi neries in the next decade?John A. Mathews, Macquarie University, Sydney, Australia

Received December 20, 2007; revised version received January 11, 2008; accepted January 11, 2008

Published online February 20, 2008 in Wiley InterScience (www.interscience.wiley.com); DOI: 10.1002/bbb.63;

Biofuels, Bioprod. Bioref. 2:103–125 (2008)

Abstract: Biofuels are important because they span three of the greatest issues of our time – world industrial

development; energy security and the transition to a bioeconomy; and global warming. Biofuels have something

important to contribute as a solution in each of these three areas – without being a ‘magic bullet’ or the whole of the

solution in any of them. Indeed, biofuels may be a transitory solution that will phase out after two or three decades

as new electric-powered transport systems take over. But in the meantime, biofuels have the potential to bring

together North and South in a new Biopact of transcendent signifi cance, promising to allow countries of the South

to lift themselves out of poverty through biofuel cultivation, processing and export; and countries of the North to

solve their transport and global warming problems by opening up to biofuels produced sustainably and responsibly

from the tropical South. A goal of 2000 biorefi neries over the course of the next decade is entirely realistic: their

output would be of the order of 400 billion liters of ethanol and/or biodiesel, or about one fi fth of OECD countries’

current transport fuel requirements. The investment required would be of the order of US$240 billion over a decade –

compared with the more than $470 billion expected by the International Energy Agency (IEA) to be invested in the

oil and gas industry in a single year by 2010. In this light, the investment required is modest. Such an investment

can only be undertaken if markets in the North are guaranteed. The best means of achieving such an investment-

grade guarantee is through a comprehensive global trade agreement. But the prospects for such an agreement are

vitiated by the cacophony of opposition to biofuels raised in the North, by non-governmental organizations (NGOs)

and vested interests, who are raising hysterical concerns over the transition from fossil fuels to biofuels, and stand

accused of seeking industrial protection under the guise of environmental concerns. © 2008 Society of Chemical

Industry and John Wiley & Sons, Ltd

Correspondence to: John A. Mathews, Professor of Strategic Management, Macquarie Graduate School of Management,

Macquarie University, Sydney, NSW 2109, Australia. E-mail: [email protected]

© 2008 Society of Chemical Industry and John Wiley & Sons, Ltd

104 © 2008 Society of Chemical Industry and John Wiley & Sons, Ltd | Biofuels, Bioprod. Bioref. 2:103–125 (2008); DOI: 10.1002/bbb

J Mathews Perspective: Biofuels, climate change and industrial development

Introduction

This Perspective article is concerned with the potential of fi rst-generation biofuels grown and processed in countries of the South to reduce their dependence

on oil, to kickstart their industrial development, and at the same time to help solve the fuel problems of countries of the North, and reduce the world’s greenhouse gas (GHG) emissions. Biofuels are important because they span all of these issues. Th ey have something to contribute to the solu-tion of each of the problems, which have so far proven to be intractable – namely extending industrial development and reducing poverty, enhancing energy security, and reducing the sources of global warming. Th e issue is to ensure that biofuels live up to their potential, and do not simply result in a further consolidation of North-South polarization and in further extensions of deforestation and land degradation. Th is perspective proposes a global framework in which all the issues to do with biofuels can be addressed.

In this perspective, I attempt to provide a grounding, an evaluation of ‘where we are at’ with biofuels.a It is not a booster document, but aims to take objections to biofuels seriously (and some of them certainly have to be taken very seriously). Neither is it a polemical document, simply seeking to engage with the polemical documents of others.

Instead a perspective on fi rst-generation biofuels is sought, seen from the vantage point of the likely situation a decade from now, when biofuels from the South will have estab-lished themselves, when imports to the North will have become much more common, and when transport and other industrial systems will have become more ‘biofuel friendly’.b

‘Ethanol produced in Brazil, even when it is imported to Europe [taking into account the energy needed to transport

the fuel across the Atlantic] makes sense. If the United States and Europe are serious about biofuels, they must turn

to the South for their supplies.’

Claude Mandil, Director General International Energy Agency, October 2006

‘The production of biofuels was responsible for a massive increase in hunger. The use of arable land for the produc-

tion of biofuels led to unaffordable food and water prices and increasing competition over land and forests, resulting

in forced evictions.’

UN General Assembly, Summary record of 18th meeting of Human Rights Council, Geneva,

September 26, 2007

‘Much of the current debate on bioenergy […] obscures the sector’s huge potential to reduce hunger and poverty …

If we get it right, bioenergy provides us with a historic chance to fast-forward growth in many of the world’s poorest

countries, to bring about an agricultural renaissance and to supply modern energy to a third of the world’s population.’

Jacques Diouf, Director-General, UN Food and Agriculture Organisation

Keywords: biofuels; climate change; biopact

aThe comments of three anonymous referees have been very helpful in finally

shaping this paper. The arguments have been developed in numerous seminars

and presentations, including at the OECD in Paris (December 2006); Penn State

University’s Biomass Energy Center (February 2007); BioEnergy Outlook 2007

(Singapore March 2007); Global BioEnergy Forum, Rosario, Argentina (October

2007); and the PENSA VI Conference, Ribeirao Preto, Brazil (October 2007). This

perspective should be read in conjunction with earlier publications.1–5 It updates

the ‘Biofuels Manifesto’ that is currently carried on the Biopact webpage, at:

http://www.biopact.com/site/manifestofirst.html

bThe idea of substitution of petrofuels by biofuels has been advocated by the

industry. For example, in January 2008, General Motors CEO Wagoner declared

that the end of the petrol-driven car was imminent, and that the automotive in-

dustry has to start making preparations for the post-fossil fuel era now. GM has

anno unced its long-term strategic alliance with the biofuel company Coskata,

which in turn has announced plans to produce biofuels from a wide variety of

biomass feedstocks. See the report available at http://www.autobloggreen.

com/2008/01/13/gm-and-coskata-announce-worldwide-cellulosic-ethanol-

partnership/

© 2008 Society of Chemical Industry and John Wiley & Sons, Ltd | Biofuels, Bioprod. Bioref. 2:103–125 (2008); DOI: 10.1002/bbb 105

Perspective: Biofuels, climate change and industrial development J Mathews

From such a perspective, biofuel usage will likely be seen as simply the fi rst wave (and therefore a controversial wave) of the coming transition from a fossil-fuel driven industrial system to a bioenergy- (biomass and biofuel) driven system, which over coming decades will almost certainly phase out the short historical ‘blip’ represented by fossil fuel depend-ence. For this is the fi rst substantial point to make: much of the fear and loathing generated by the topic of biofuels is actu-ally a response to an imagined but unrealistic future, where oceans of sugarcane are imagined as taking over from dense rainforests, and agribusiness methods of intense cultivation – with all its associated soil depletion, intensive pesticide and herbicide use, wasteful use of water and toxic runoff – is imagined as ousting all other approaches.

Surely it is such a fear that drives the hysteria of such NGOs like Biofuelwatch, who would have us believe that biodiesel from Southeast Asia is actually worse than continued use of fossil fuels and all the energy insecurity, pollution and GHG emissions associated with them; and that ‘we’ in Europe cannot hope to match ‘their’ productivity (farmers in the South) and so ‘we’ should block ‘their’ exports to our markets. But in answer to such fears, it has to be stated that fi rst-generation biofuels are simply a transitional phenom-enon, a phase on the way to a very diff erent transport and industrial system. People opposed to biofuels are doubtless guided by a fear that we are simply creating ‘biofuelled traffi c jams’ of tomorrow, not just in the North but also in the mega cities of the South. If biofuels were treated as an issue on their own, these fears would be entirely justifi ed. But when we look at the bigger picture, and see the current transition as one involving changes in energy mix; in the design of cities; in the historic completion of the industrialization of the South and a possible ‘fi nal solution’ to the problems of worldwide poverty, then a diff erent frame of reference is appropriate. Such is the approach I take in this perspective.

The biofuels/bioenergy revolution

Biofuels have burst onto the public stage in recent years. Th eir arrival has been ‘fuelled’ as it were by references to ethanol by George W. Bush in his last two State of the Union addresses; by the widely recognized rise of Brazil as a biofuels superpower; by a steady stream of announcements of new investments in biofuels, particularly in Africa, Central and

South America and South and Southeast Asia; by statements of goals for biofuels to constitute up to 20% of fuel consump-tion by 2020 by the EU as well as by individual US states such as California; and not least by the cacophony of opposition to biofuels – particularly to biodiesel from tropical countries dubbed pejoratively as ‘deforestation diesel’. Planting biofuels has become an extremely controversial matter – from being seen as saviour of the planet to planting them being seen as a ‘crime against humanity’.c For all these reasons, and many more, biofuels call for a steady and evolving evaluation.

When President George W. Bush delivered his State of the Union address in January 2007, he challenged America with his ‘20 in 10’ proposal, under which Americans would replace 20% of their gasoline use with biofuels within 10 years. Th e President called for supply of 35 billion gallons of ‘renewable and alternative fuels’ (meaning biofuels as well as alternatives such as natural gas and LPG) by 2017 – but he did not specify that they all had to be produced within the USA. He left the door open to imports being able to make their contribution: ‘Global production of alternative fuels helps us reach our goal and increase our energy security’ was how he put the matter.d Th us the ground is being prepared for an historic accommo-dation between the USA and other OECD (Organisation for Economic Co-operation and Development) countries and the countries of the South where biofuels can be produced effi -ciently, cheaply and without the threat of terrorism.6 Th e US goal of ‘20 in 10’ can indeed be met by promoting the crea-tion of many Brazils in the South. Th is is an attractive vision for both North and South to embrace.

Likewise the EU has committed itself to ambitious goals for substitution of petrofuels by biofuels, and in some cases made explicit recognition of the fact that such fuels could be produced most effi ciently in the South.e Similarly ambitious

cFor Jean Ziegler’s remarks, see ‘UN expert calls biofuels “crime against human-

ity” available at: http://www.livescience.com/environment/071027-ap-biofuel-

crime.html; for the column in The Guardian by George Monbiot, see: http://www.

monbiot.com/archives/2007/11/06/an-agricultural-crime-against-humanity/

dSee the ‘Twenty in Ten’ statement at the White House website: http://www.

whitehouse.gov/stateoftheunion/2007/initiatives/energy.html

eThe EU conference on ‘Harvesting sustainable energy’ was convened in Brus-

sels in July 2007; for the conference speeches, and other materials, see the EU

President’s website: http://ec.europa.eu/commission_barroso/president/focus/

biofuels/index_en.htm On EU experience with biofuels, see the report by CEC.7



goals have been stated by China, by India and by Japan. And there is very active international cooperation, such as the formation of the International Biofuels Forum, launched in New York in March 2007, bringing together six major players – the USA, the EU, Brazil, India, China and South Africa – for mutual discussions on joint promotion of bioenergy.f Th ese and many other initiatives indicate that biofuels and bioenergy generally constitute a global issue of prime signifi cance.8–13

Current concerns over biofuels are focused on the fi rst-generation technologies and processes, involving either fermentation of sugar-rich crops such as sugar-cane or starch-rich crops such as corn, grain or cassava (in the tropics); or involving use of oilseeds and technologies based on transesterifi cation to produce biodiesel. Second-genera-tion technologies, where a much wider range of biomass will be available, and processes will involve a smaller ecological footprint, are expected to moderate the concerns dramati-cally. But these are still several years off . In the meantime, fi rst-generation technologies are being applied in the North, buttressed by substantial subsidies, and in the South, where success has triggered a quite astonishing wave of hostility.

Much of the fear and loathing unleashed in the Western press and blogosphere against biofuels can be explained by simple misunderstandings and failures to comprehend the reality of growing new biofuel crops in the South as opposed to the diffi culties they would encounter in the North. Much of the concern is also well-founded, and if biofuel crops were allowed to grow unchecked in the South, at the expense of rainforests and eco-diversity and by taking over the best and most fertile land that could be used for food crops, then there would indeed be major cause for concern.

Th e benefi ts that such a program would bring for devel-oping countries are numerous. Th ey would include: building rural incomes and abolishing poverty; kick-starting indus-trial development; generating fossil fuel import independ-ence; improving health through cleaner air in cities; creating industrial development value chains and export revenues; and reducing GHG emissions through the spread of carbon-neutral and even carbon-negative biofuels.

Th ese benefi ts could be bought at a heavy cost, if appropriate policies are not put in place. Th e issues that

expanded production of biofuels create, and which demand a response, include: putting pressure on land and other resources, particularly water; threatening to intensify use of agrimonocultures and with them fertilizers and pesti-cides; putting food production under pressure; promoting deforestation and land degradation; and raising social concerns such as the potential spread of large plantations and corporate agribusiness models at the expense of small-scale farming. All of these issues are serious and demand a response. It is to be argued in this perspective that the best way of meeting the concerns is for the countries of the North to negotiate a comprehensive trade agreement on biofuels with countries of the South – an agreement that could be called a Biopact.

I attempt to place these issues in a fresh perspective; I off er an evaluation of biofuels, one that seeks to meet the objec-tions raised so far and off ers practical and realistic solutions to them, but one that is also alive to the enormous potential unleashed by biofuels for sustainable and responsible indus-trial development in the South.

Let us start in a very concrete fashion by looking at an African country plagued by poverty and famine and desper-ately low-productivity agriculture. In this setting let us eval-uate what a diff erence a single, modern biorefi nery built in such a country could accomplish. To be even more concrete, let us consider the case of Zambia.

Impact of a 200 megaliter biorefi nery in an African country

Zambia is a landlocked East African country in the territory formerly called Northern Rhodesia. It has a population of around 7 million in a large area of 752 000 square kilometers. Once one of colonial Africa’s success stories, Zambia started its slide into poverty with the falling of copper prices in the 1970s; this was exacerbated by indebtedness in the 1980s. Life expectancy is now less than 40 years. In 2002, there was a crop failure, with a wheat harvest of less than 800 000 tonnes against anticipated consumption of 1.4 million tonnes – a drastic shortfall calling for food aid and resulting in famine. Th ere has been widespread unemployment across the area known as the copperbelt, now the site of severe land degrada-tion. Zambia, then, is a typical African country with what appear to be overwhelming problems.

f See the press release issued by the United Nations at the group’s founding:

http://www.un.org/News/briefings/docs/2007/070302_Biofuels.doc.htm



Consider a biorefi nery built in Zambia with an annual output of 200 million liters (200 megaliters, or ML) – the now standard modular version, as developed for example by the advanced US fi rm Cilion. If Zambia plays its cards right, it should be able to build the very latest integrated biodiesel and ethanol biorefi nery that is now available and being put onto drawing boards in the USA (e.g. by consultants such as Ascendant Partners) and by engineering service fi rms, such as Dedini (Brazil) or Praj (India). Bear in mind that it is the latecomer’s advantage to be able to combine the very latest in technology with low costs and plentiful resources – exactly the situation that applies in Zambia.14–16

First, the annual output of 200ML: it could be sold on the domestic market, allowing a price of $1 per liter, thus making an annual saving on oil imports of $200 million. Or it could be exported, thus pulling in $200 million in foreign exchange earnings, each year. Compare this with what the country gets in terms of food aid. Zambia’s Food Reserve Agency (FRA) was in fact appealing to the interna-tional community in 2007 for assistance in reconditioning the country’s dilapidated grain silos. Much of the 2006 harvest was lost because grain was stored in stacks of jute bags covered in tarpaulins, and the grain rotted. Th e FRA appealed for $6 million to undertake the necessary repairs in 2007 to stave off famine. Th is is a sum that could be earned by a single biorefi nery in less than a week.

What about the benefi ts accruing to Zambia in the value chain leading up to the biorefi nery? Here we can make use of a study published by McKinsey, where the value chain for Brazilian ethanol is displayed (carried forward to the year 2020).g From this study, we can prudently allocate 26% of the

income generated by the biorefi nery to the producers of the feedstock – whether this is sugarcane or other starchy crops for ethanol, or oilseeds for biodiesel.

If the biorefi nery is producing mainly ethanol, then it will be conjuring up feedstock in the form of sugarcane, or cassava, or sweet sorghum, or any combination of these (preferably a combination, to minimize monoculture eff ects) to be planted in the vicinity. At a yield of 4000 liters per hectare (slightly below the yields currently achieved in Brazil) the biorefi nery would draw on 50 000 hectares of sugarcane fi elds, or a larger area of cassava or sweet sorghum cultivation. If there is some social management of the program (as there should be) then the Zambian Government would ensure that there is land reform that enables land-less peasants or unemployed industrial workers to farm the plots that will produce this feedstock. Assuming that each family secures a grant of 10 hectares of land (a generous assumption) then a single biorefi nery could provide attrac-tive employment for 5000 laborers and their families, or for perhaps 25 000 people. Th ese are people who would be working the land to raise the feedstock, and receiving an annual income of around $10,250 for the output from their 10-hectare plot (assuming a proportion of 26% of the retail price of ethanol at the pump, as per McKinsey). Since their wages are pretty much their only source of expenditure, relying as they do on tropical rains for water and on recy-cling vegetable waste for fertilizer, they would retain most of this $10,250 income – depending on the land-leasing arrangements negotiated by the Government. Th is income is, obviously, a lot more than they would receive from food aid.

If the biorefi nery is producing mainly biodiesel, then it will conjure up quite diff erent, oilseed-bearing crops in its vicinity. Th ese might be fi elds of Jatropha curcas, or cottonseed, or linseed – all non-edibles that do not compete directly with food supplies. Or they might be soya or oil palm, or some local species that happens to do well in the vicinity (as the people in the Niger Delta are discovering in relation to the mangrove Nypa palm).h

If there is some form of international regulatory oversight of the process (such as through a Biopact), then the Zambian Government can be involved in determining where the biorefi nery is to be located, and to ensure that its feedstocks

gVicente Assis, Heinz-Peter Elstrodt and Claudio F.C. Silva, ‘Positioning Brazil

for biofuels success’, The McKinsey Quarterly, 2007 special edition: Shaping

a new agenda for Latin America, available (restricted access) at: http://www.

mckinseyquarterly.com/article_abstract_visitor.aspx?ar=1950&L2=3

For a final price of 73 cents per liter paid in Europe (compared with $1.60 in

Europe today) the value chain allocates 19 cents to the feedstock producer; 16

cents to the refinery operator; 3 cents for supplies and licensing of IPR-pro-

tected enzymes; 5 cents for transport and logistics; 20 cents for import tariffs;

8 cents for blending and distribution in Europe; and 1 cent for other contingen-

cies. Scaling this up to a final price paid of $1 per liter in Europe (a more realis-

tic target price today), we find the feedstock producer can command 26 cents,

and the refinery operator 22 cents, with the rest being distributed through

supplies and logistics, import tariffs, blending and distribution etc. hSee Nypa palm profile: http://www.bioenergywiki.net/index.php/Nypa_palm



will not infringe on any existing rainforest. Th ere is enough potentially arable land in Zambia for this to be done real-istically, since the country suff ers from a high level of land degradation associated with very poor farming practices and the past ravages of the copper mining industry.

Where, in fact, will the land in Zambia come from? According to the UN Food and Agriculture Organization (FAO), Zambia has just over 40 million hectares of arable land, of which only 9% is under cultivation. So, in that case, 10 biorefi neries in Zambia would call on 500 000 hectares – or just one-eightieth of the country’s potentially arable land.i Zambia could appeal to the World Bank and build 10 biorefi neries each year over the next decade, and expand the land under cultivation with biofuel feedstock to 0.5 million hectares, from the present level of 3.6 million hectares being used to produce food, and still be way under the potentially arable limit of 40 million hectares.

What does such a modern biorefi nery cost? In the USA, the new biofuels company Cilion is investing $80 million in each such 200 ML biorefi nery. Th is is a good price that refl ects the fact that Cilion is in the market as a large purchaser, and that skilled labor and materials are on hand, due to the current boom in building ethanol plants in the USA. In a devel-oping country like Zambia, my industry contacts inform me that a more realistic price would be $120 million for a 200 ML biorefi nery – a capital project cost of $0.60c a liter as compared with Cilion’s cost of $0.40c a liter. Add a further $0.40c a liter for costs of capital, amortization and other charges, so that the total real costs would be $200 million. Th ere would, of course, also be further costs incurred by the need for infrastructure, ports, roads and possibly pipelines. Zambia would no doubt call on an investment consortium to build such a biorefi nery and infrastructure, calling on foreign investors as well as local entrepreneurs and (if the government is smart) maintaining 51% local control over the process. In fact this is exactly what is happening in Zambia right now, with a plant being commissioned by the UK fi rm D1 Oils, together with local Zambian partners.

Given the favorable prospects for biofuels from a wide variety of feedstocks, there is no reason why Zambia could not canvass international support to build one new biore-fi nery each year for the next 10 years. Investment of $2000 million, or $2 billion, would be called for over the decade, most of which would come from international investors. Th e combined 10 biorefi neries, once built and operational, would generate income of $2 billion per year from consumers in the advanced countries, or if used for domestic purposes, a saving of $2 billion in oil imports. Let us say that it is 50:50 – so that the biorefi neries pull in $1 billion from the advanced world as well as save $1 billion in oil imports. Th ey will draw feedstocks from half a million hectares of land (if using ultra-effi cient sugarcane) and a larger area – perhaps a million hectares – of mixed starch crops (for ethanol) and oilseeds (for biodiesel) and provide employment potentially for 250 000 people who would otherwise be on the brink of starvation and in need of food aid.

Th is is the real deal on food vs fuel. Th ere is no contest in a country like Zambia. Numerous studies have demonstrated that Zambia is poor because its agriculture is of such low productivity, linked to the fact that farmers have poor equip-ment, poor materials and poor tenure over their tiny plots of land.18 Every hectare reclaimed from degraded land and used for growing biofuels to be sold commercially (locally or through export) will be creating an income generator that can be used by people to feed themselves and to lift them-selves out of poverty. And technologically, the biorefi neries will act as powerful propagators of advanced technology and effi cient management – two features sorely needed in a country like Zambia.

We can see what is possible by comparing the situation in Zambia with the small miracle that has occurred over the last three years in its neighboring country, Malawi. Malawi has for years adhered to the World Bank and USAID stric-tures to liberalize agriculture and eliminate subsidies for inputs such as fertilizer – despite the rich countries paying their own farmers billions in subsidies that grossly distort agricultural markets. But aft er a terrible harvest in 2005, Malawi’s President, Bingu wa Mutharika, fi nally did as the rich countries acted, not as they preached. His government reinstated fertilizer subsidies and seed subsidies. Th e results: record-breaking crops in 2006 and again in 2007. Corn production leapt from 1.2 million tons in 2005 to 2.7 million

iThis assumes a productivity of 4000 liters per hectare (less than is obtained

today in Brazil) and an annual output from each biorefinery of 200ML, or 400ML

for the two refineries. Hence the area needed to sustain such an output for the

two biorefineries would be 50 000 hectares each, or 100 000 for the two. On

biorefinery costings, see Bohlmann.17



in 2006 and 3.4 million in 2007. In 2006, roughly half the country’s farming families received coupons entitling them to purchase two 50kg bags of fertilizer for $15 – or one-third of the market price. Th is was enough to fertilize nearly half a hectare of land. Th ey also received subsidized seed to plant a quarter of a hectare. Th ese tiny subsidies were suffi cient to generate a leap in agricultural productivity, and turn Malawi from a basket case to a breadbasket, selling more corn to the United Nations World Food Program than any other country in sub-Saharan Africa.j

If all countries in Africa followed this Malawi example, obviously the potential for producing fuel to substitute for oil imports, and to generate fuel exports, would be enor-mous. Th e issue is to get the process of transition started.k Th e IEA’s Bioenergy Task 40 researchers have estimated Africa’s potential as being able to generate seven times the entire energy currently consumed as oil throughout the world.l In fact Africa’s agricultural potential is vast, and it can be tapped only when investments are made in the rele-vant inputs, including fertilizer, improved seeds, infrastruc-ture such as roads and ports, and above all in the skills of the farmers themselves, who need to know about the choices available to them.

Now compare this with what an NGO like Biofuelwatch has to say on the topic of biofuels to be grown in Malawi and Zambia.m Th e group notes fi rst that global warming will make agriculture more diffi cult in such a country – a general statement that is true enough but which applies to the planet rather than to Zambia specifi cally. It implies that more advanced agricultural techniques might be needed – something that biofuel production would address. Th e

group then notes the terrible suff ering caused by famine in Zambia. But the famine is not caused by growing biofuels – none are being produced in Zambia as yet. Th e famine is caused by desperate poverty and desperately low agricultural productivity – both matters that can be improved by turning to biofuels and subsidizing fertilizer inputs, as in Malawi. And then Biofuelwatch veers off and seems to assume that biofuel production would be at the expense of food produc-tion, and that biofuels would be literally taking food out the mouths of starving people. But as we have seen, biofuel production would be in addition to whatever low-produc-tivity food production is going on, and would actually raise the productivity of food production overall. With sound management from the government, it would take place on land not already under cultivation, such as on degraded land from mining in the copperbelt, and would involve cultivation of non-edible crops like jatropha so that there can be no question of any competition being forced between food and fuel. A sensible land reform program such as has been driven through in Brazil under the biodiesel program would ensure that the principal benefi ciaries would be land-less laborers. As a fi nal swipe, the group states that the fuel produced is destined ‘for cars in Europe and possibly other rich countries’ – as if such a destination is immoral in a country where people are starving. But the reality is that biofuels exported to the North would be a magic wand to pull in income from the North – substantial income of $1 billion per year (far exceeding what is granted by food aid). And this income would be precisely what is needed to solve Zambia’s hunger problem and kick-start a process of indus-trial development. Far from growing biofuels in Africa being seen as a ‘crime against humanity’ the real crime is to stunt Africa’s potential as an agricultural producer of food, fi ber and fuel, and preventing countries from choosing a policy to kick-start their industrialization through the use of their abundant resources.

Building 2000 biorefi neries in the South over the next decade

Let’s scale up the role play for Zambia and consider an overarching goal for the South as a whole of building 200 biorefi neries each year over the course of the next decade, resulting in 2000 such biorefi neries by the end of the decade. Is such a goal feasible? What could such a program

jSee the story ‘Ending famine, simply by ignoring the experts’ by Celia Dugger

(New York Times, December 2, 2007) at: http://www.nytimes.com/2007/12/02/

world/africa/02malawi.html.

kSee the story by Kimani Chege, ‘Biofuel: Africa’s new oil?’ at SciDev, Decem-

ber 5, 2007: http://www.scidev.net/dossiers/index.cfm?fuseaction=dossierre

aditem&dossier=4&type=2&itemid=667&language=1; as well as the article by

Marguerite Culot on prospects for biofuels in Africa (Culot 2007).

lSee the Biopact report ‘Malawi’s super harvest proves biofuel critics wrong –

or, how to beat hunger and produce more oil than OPEC’, available at: http://

biopact.com/2007/12/malawis-super-harvest-proves-anti.html

mSee ‘Country study #1: Jatropha plantations in Malawi and Zambia’ in Almuth

Ernsting, Biofuels: Renewable Energy or Environmental Disaster in the Making?,

Biofuelwatch, available at: http://www.biofuelwatch.org.uk/biofuel_paper.pdf



accomplish? Again let us assume that latecomer advantages are being captured, and that the biorefi neries are technically advanced, being able to produce ethanol from starch-based feedstocks or sugarcane, as well as biodiesel from a variety of oilseeds.19

If the refi neries match the current modular variety being invested in by Cilion, and have an annual production capacity of 200ML of ethanol, then their combined output aft er all are constructed over the course of a decade would be 400 billion liters of ethanol. Compared with current Brazilian output of just under 20 billion liters in 2006, this is an increase of 20 times what Brazil can currently achieve.

Is there a market in the North for such an output? Certainly there is. Th is is the energy contained in 7 million barrels of ethanol per day, or 5 million barrels of oil equiva-lent per day (because ethanol has a slightly lower energy content than gasoline). It amounts to about one-fi ft h of OECD countries’ current transport fuel requirements. So it could accommodate the whole of the OECD moving to an E20 blend, which is in line with current mandates being promulgated by the EU, by the USA and by individual states such as California.

Let us assume, for the moment, that such a goal is achiev-able. What would be the output and input implications? On the output side, 400 billion liters of ethanol produced in the South could be sold in the North (assuming a price of $1 per liter) for $400 billion. Alternatively this output could be used domestically to off set imports of oil and their damaging eff ects on balance of payments, in this case by $400 billion. Again let us assume 50:50, and agree that 2000 biorefi neries would earn the South $200 billion in hard currency, and save the South $200 billion in expenditure on imports of oil. Th ese sums dwarf current aid fl ows, debt forgiveness and the current World Bank Global Environment Facility that stands at just over $1 billion. Th ese sums, in other words, start to make a real impact on the industrial development prospects of the South.

On the input side, each biorefi nery would draw on 50 000 hectares of cropland (calculated as the most effi cient energy producer, sugarcane), so 2000 such refi neries would draw on 100 million hectares of extra cropland devoted to biofuels, over and above what is allocated to food production. Th is is an area of 1 million square kilometers, or an area the size of

Egypt. Obviously, such an area can be found without diffi -culty in Africa, South Asia and Latin America. For example, according to the FAO, this cropland is already available in just one African country, namely the Democratic Republic of the Congo (DRC) – torn by civil war for the past four decades. According to Dr Josef Schmidhuber, senior econo-mist at the FAO, the DRC has between 80 and 115 million hectares of arable land – excluding forested land; only 5% of this land is currently utilized for food production.n

In overall terms it is easy to see why this is a feasible proposition for the South, but quite impossible for the North – at least, using fi rst-generation technology that ferments ethanol from high-sugar or high-starch feedstocks like sugarcane, or cassava. As the world moves to second-generation biofuel production, utilizing a huge variety of much more abundant and cheaper biomass (such as tops and crushed remains of sugarcane in the South, or wood residues, grasses or municipal waste in the North), then the situation changes. But that is a decade away. We are talking about the possibilities available now.

In terms of investment required, most of which would be mobilized in the North, if we take $200 million as the benchmark (based on the amount invested by Cilion in each of its biorefi neries plus a risk mark-up as well as costs of capital) then a total of $400 billion would be needed over 10 years, or on average $40 billion per year.o

Is this a feasible fi nancial goal? Actually it is entirely feasible, by making some quick comparisons. Th e global oil industry invested just over $50 billion in new refi ning capacity in 2005, up from $34 billion in 2000, according to the IEA’s World Energy Outlook 2006. So biorefi ning in the South would, by these calculations, still be attracting less than the investment that is currently going into oil refi ning.

In fact, the oil and gas industry anticipates investing a total of $470 billion in just a single year, by 2010 – again, accor-ding to estimates from the IEA. Th is fi gure encompasses all

nDr Schmidhuber made his comments to Reuters in January 2008; see ‘Bright

future for biofuels in Congo, UN says’, available at: http://africa.reuters.com/

business/news/usnBAN747406.html

oFor simplicity, these figures are given without Discounted Cash Flow cor-

rections; obviously in any serious investment plan, the DCF factors would be

included.



investments, in exploration, acquiring new leases, purchasing rigs and ships, building pipelines, and so on. As the biofuels industry becomes a serious global entity, a similar scale of investment will be called for. But right now, it can be seen that $400 billion over 10 years is a modest goal for fuels that the North wants and needs.p

For a diff erent kind of comparison, consider global Foreign Direct Investment (FDI) fl ows from developed to developing countries, which amounted to $334 billion for just the single year 2005 (UNCTAD 2006).20 If this were repeated over the course of a decade, the cumulative FDI of $3,340 billion would exceed by tenfold the investment needed for biorefi neries.q

Indeed the entire enterprise could be funded by the oil industry. Profi ts of the global oil industry in 2005/2006 were $140 billion, and profi ts of Exxon-Mobil, the largest oil company, were $35 billion in 2005 and $40 billion in 2006. So Exxon-Mobil on its own could fi nance the entire biofuels program in the South over a 10-year period, thereby trans-forming itself from being the world’s largest oil company to the world’s largest biofuels company. But this is extremely unlikely, partly because the oil giants of the West are extremely slow to move into new investments, but mainly because there is a fl ood of new investment being attracted into biofuels.

Issues and concerns raised by expansion of biofuels – and how to deal with them

Th e issues raised by the building of 2000 biorefi neries in the South to produce one-fi ft h of the fuel needs of the North, are several. Every one of them is important. Let us go through these issues, in an attempt to forestall genuine concerns and lay down a set of criteria that would be needed if biofuels production in the South is to be sustainable and non-climate threatening.

In much of the literature, this is discussed in an unbal-anced way, attributing to biofuels development perverse outcomes that merely refl ect the current fears related to practices in the North. We are not talking about expanding ergocultural output in the North, but in the South. Other-wise very smart commentators, who go on debating the energy yield of corn-based ethanol production in temperate climates – as if it really mattered –still do not grasp this. Th e point is that the yield of corn-based ethanol will never match that of tropical cane-based ethanol, or cassava-based ethanol, and so the debate over the merits of the corn-based variety should cease forthwith.

Th e second misunderstanding is that people argue whether biofuels could substitute entirely for the present level of petrofuel consumption – which stands at over 80 million barrels of oil per day.r But this will never happen, and will never need to happen. Apart from the fact that improved fuel effi ciency standards will doubtless be enforced all over the world, including in laggards such as the USA and Australia, the real reason why biofuels need only make up for up to a fi ft h of current levels of consumption is that transport systems – once weaned off the tyranny of fossil fuels – will rapidly fi nd new and more energy-effi cient forms of propulsion than burning carbon-based fuel in a tank. Electric vehicles of various kinds, as were produced by GM and Ford in the 1990s before they hastily closed down the whole operation,s and equipped with vastly improved batteries for storing energy, and green power from utilities sourcing their power generation from renewable sources (including biomass) for charging the batteries, will take over within a matter of a few years – perhaps by 2020 or therea-bouts or even earlier.t Biofuels will have served their purpose

pThe special study in the IEA 2006 report, on ‘Current trends in oil and gas

investment’, the planned investment by the oil and gas industry in the five years

from 2005 to 2010 would rise from $340 billion in 2005 to $470 billion in 2010 –

but allowing for inflation adjustments, this is no more than a 5% increase.

qThese figures revise those published in an earlier article of mine,1 where a

higher investment level of US$1 is assumed for every liter of ethanol produced

per year.

rThis is the misunderstanding that underpins the otherwise excellent Editorial in

The Independent, ‘A switch to biofuels will not save the planet’, March 17, 2007.

sSee the documentary ‘Who killed the electric car?’, written and directed by

Chris Paine, where the case that GM sabotaged its own EV1 car in order to

focus instead on SUVs; see official movie website at: http://us.imdb.com/title/

tt0489037/combined

tFor a report on progress with the ‘smart’ electric car, the ‘Think City’ due to be

produced in Norway in 2008, see the report ‘Have you driven a Fjord lately?’,

available at: http://money.cnn.com/magazines/business2/business2_ar-

chive/2007/08/01/100138830/index.htm



in weaning the world off petrofuels and greening our trans-port systems. But even more signifi cantly, they will have served the extremely valuable function of giving the under-developed world one last shot at catching up with the West and abolishing poverty.

As noted above, the principal concerns raised by the expansion of biofuels in the South are these:

• Pressure on land and other resources, particularly water;• Th reat of more intensive agricultural techniques,

resulting in greater use of pesticides and fertilizers, and more intensive monoculture;

• Food production to be put under pressure;• Deforestation to create monocultures; and• Social concerns such as the potential spread of large

plantations and corporate agribusiness models at the expense of small-scale farming.

Over-extension of resources and non-sustainable

culture

Th is is the dominant concern from which much else derives. People fear an unstoppable process that will start with seas of sugarcane in Brazil and extend to oceans of sugarcane in other tropical countries, covering Latin and Central America, Africa and Southeast Asia, destroying rainforests, wrecking ecosystems, leaching the soil, creating fertilizer and pesticide runoff s that will poison the oceans – and all for fuels that will simply keep the world’s SUV drivers in their cars for a few more years before they are forced to change their destructive habits. Th at just about sums up the sense of the objections made so far.

As with many other controversial issues, there is an unde-niable element of truth to these concerns. Untrammelled growth in biofuel feedstocks driven solely by market forces would undoubtedly lead to many of these fears being real-ized, depending on prices of oil and of vegetable food oils.

Much of this concern stems from a misunderstanding that extrapolates production of a few million liters of biofuel today to billions and billions of liters tomorrow. But it can safely be assumed that the scale of 2000 biorefi neries using fi rst-generation bioconversion technologies will never have

to be exceeded. Th ere is no prospect of fi rst-generation bioconversion technologies being dominant for much more than a decade or at most two. Aft er that, biomass feedstocks

will be vastly expanded and reduced in cost, as leaves, grass and woody materials become available to second-generation bioconversion processes. So fi rst-generation processes that require extensive hectarage will give way to second-generation processes, which will not call for such intensive land usage, even while productivity improves. Even with the extensive hectarage required, the resources in developing regions, particularly Africa, are certainly available – as mentioned above with regard to the DCR. Th is vast country, larger than Western Europe, could easily accommodate the biofuel needs of Europe.

But the best answer to the concern over resources is for developing countries to adopt the best available agricul-tural practices, and in particular to adopt biochar amend-ment to soils, which will lower the costs of producing crops, lower the resource intensity of production, and above all, make the biofuels produced carbon negative. How is this possible?

Carbon-negative biofuels

Th e best answer to concerns over the spoliation of soil and possible intensifi cation of nitrogen oxide emissions is for the South to promote carbon-negative biofuel activities – again, with full support from the North. Biofuels are carbon neutral, in principle, because they return carbon to the atmosphere that was removed by the growing plants through photosynthesis. But what if less carbon is emitted to the atmosphere than was removed by growing biomass? Th en we have a case of carbon negativity – a case where carbon is being removed from the atmosphere. It can be achieved simply by, for example, converting part of the biomass to charcoal (biochar) and then returning this biochar to the soil, where it is securely (bio-)sequestered. Biochar is produced by a process of slow burning biomass in the absence of oxygen (slow pyrolysis). Th ere is an alter-native of ‘fast pyrolysis’ where biomass is exposed to a high temperature (in excess of 500ºC) for a few seconds; but this has largely been focused on production of gases or liquids as fuels, rather than on biochar.21 Either way, it is the addition of black carbon to soil that provides the means of permanently sequestering the carbon. But this process turns out to have an array of benefi cial eff ects that are now being discussed in a growing and lively literature



that refl ects current experimental validation of biochar’s eff ects.22–26

It turns out that biochar increases the fertility of the soil, not in the form of organic carbon, but in the way that a coral reef increases the nutrients available to biota in the sea. Microorganisms that fi x nitrogen, for example, are encouraged by the addition of biochar, and it has a quite spectacular impact on reducing release of other GHGs, such as nitrous oxide.27 Th us soils that are being impoverished by conventional fertilizer-driven agriculture have the chance to be regenerated through production of biofuels combined with biochar amendment to the soils.

Th ere is everything to be gained by developing countries taking an initiative from the South and setting biochar stand-ards such that all biofuels grown and produced in the South are ‘carbon negative’. Th is would not only greatly enhance the soil, and reduce the impact of GHG emissions (particu-larly those emanating from nitrogen oxides) but would rebut much of the negative press that dogs biofuels in the North. And in so doing, the countries of the South would be making a connection with their own history. It is now known and understood that the fertile soil of the Amazon, called terra preta (black soil) by the Portuguese colonists, is due to hundreds of years of cumulative addition of charcoal to the soil. Th us biochar amendment of soil is a pre-Columbian technology that has only now been rediscovered in the North. It is only fi tting that it be applied fi rst on a large scale by the tropical countries of the South.

I have argued that producers of biofuels can make a stra-tegic choice as to how much of the biomass they raise into production of fuel and how much into carbon sequestration – such as through production of biochar and its permanent sequestration of carbon in the soil.4–5,u

In terms of atmospheric carbon sequestration, scholars such as Lehmann and others believe that gigatonnes of carbon can be removed through biochar amendment of soils – up to 4 Gt per year, or as much as the carbon fl ux currently created through burning of all fossil fuels. Th ere is already a legislative initiative in the US Congress to channel

federal support towards biochar initiatives.v It is high time that similar legislative initiatives were taken in the coun-tries of the South – starting with Brazil itself, where biochar amendment of soil was discovered centuries ago.

Fear of more intensive agricultural techniques

Experience with bad land-conservation practices, over-use of chemicals and non-sustainable monoculture in the agricul-tural systems of many developing countries does not inspire confi dence that biofuels will fare any better. Yet the impo-sition of sustainability standards, for example as part of a comprehensive Biopact, could have decisive impact – because tropical developing countries can aff ord to grow biofuels sustainably, and indeed have to do so in order to main-tain the claim that their eff orts are leading to an improved global environment. More to the point, many have already demonstrated their capacity to do so. Repeated studies of biofuel production in Brazil demonstrate how bioethanol, for example, produced from sugarcane, can be produced with chemical inputs lower than in countries of the North, with water inputs lower than in the North, and with energy output much higher (eight times higher) than in the North.

I have myself visited a biorefi nery and associated sugar-cane plantation that operates entirely on organic principles, with zero chemicals input, and recycling all organic mate-rials within the growing system. Th is sets a benchmark that could be achieved – with some standard setting by a global trade agreement – in countries growing biofuels throughout the tropics.w

Again, carbon-negative biofuels provide the key to a solu-tion on this issue, since biochar amendment to the soil reduces the need for conventional fertilizers, reduces water

uFowles depicts the choice between biofuels and biochar as an either/or

choice,28 but it is more instructive to view these as end-points in a strategic con-

tinuum. As argued in this contribution, there is every reason to expect farmers to

produce both biofuels and biochar.

vThe Bill introduced by Rep. Salazar is the Salazar Harvesting Energy Act 2007.

The content of the Bill can be found here: http://www.biochar-international.

org/images/S.1884_Salazar_Harvesting_Energy_Act_of_2007.pdf

For commentary on its biochar provisions, see: http://www.biochar-interna-

tional.org/policyintheus.html

wThe sugarcane plantation and associated sugar and alcohol biorefinery is the

San Francisco refinery (Usina Sao Francesco) operated by the Balbo family and

located in the heart of the Brazilian cane growing province of Ribeirao Preto.

For a discussion of the enterprise, and its ‘Native’ brand of organic products,

see ‘Brazilian mill makes profitable switch to organic’, available at: http://www.

caudillweb.com/triplestandards/en/Article.aspx?id=26



needs and water run-off , and generally reduces drastically the ecological footprint of agricultural activities. Th is can only be to the benefi t of farmers in the developing countries. Th e other major agricultural revolution just waiting to happen is that involving perennial crops rather than annuals, even for grain-bearing crops. Th is is another revolution that could well be triggered in developing countries through growing biofuels, where deep-rooted, carbon-conserving approaches will be seen to carry powerful advantages over Western fossil-fuel-driven monoculture approaches.29

Food vs fuel

Th e other clear concern expressed by numerous authors fearful of biofuels is that they will put further pressure on already stretched agricultural activities, resulting in food shortages and possible famines in the South. Of course this is a possibility if biofuels production is allowed to expand in a totally uncontrolled fashion and with big Northern agri-business companies entering markets in the South to create vast monoculture plantations. Th is is one model of develop-ment of a global biofuel industry, and one that has history on its side – as verifi ed by looking at how all previous resource-based industries from copper to cocoa have developed, with Western multinational corporations in control. But with biofuels there is a chance of doing things diff erently.

In fact, as argued above, the food vs fuel debate is entirely wrong-headed as presented by NGOs and vested interests. We have to make the clearest possible distinction between food vs fuel in the North, and the quite diff erent circumstances that apply in the South. In the North, wealthy farmers and agribusinesses are producing more or less on the technical effi ciency margin, where perfect substitutability prevails. A little less corn here, and a little more wheat there, or alfalfa, or whatever, is the norm. And in the North, where agricultural effi ciency is near-maximum, a large-scale diversion of food crops to fuel crops would have predictable impact on food prices, and not just at the end of the food chain but at every step along it, on feed prices for livestock for example. Th is is all perfectly predictable using neoclassical microeconomics.

In the South, very diff erent conditions apply. Agriculture in general is not carried out at maximal effi ciencies, so that perfect substitutability does not prevail. On the contrary, a lot of agriculture in the South is well below maximal effi cien-cies, and sometimes a very long way below such levels – as

is clearly the case in Malawi and Zambia. So in this case, a switch from poor agricultural yields in food crops to higher agricultural yields with biofuels (through South – South tech-nology transfer, for example) could raise technological stand-ards generally and raise incomes for the poor, which would enable them to purchase food (or make the time to grow their own food at higher yields) and purchase self-sustaining serv-ices as well – such as education for their children and better health care. In other words, in the South increasing returns are possible: the same inputs can yield greater outputs than in the North.

Of course, a pure market-driven transition to a transport system of the North with partial biofuel substitution will lead to food vs fuel distortions and price shift s that might be damaging to the poor, as well as to consumers in the North. Th is is yet another reason why a regulated transition is so desirable, one that is regulated under the rules of world trade and the World Trade Organisation (WTO).

Th e Chinese recognize this problem better than most, since they have a history of dealing with periodic famines. Th ey experienced a recent spurt in ethanol production that could be traced to the existence of a surplus in grain and corn production. But in years of shortage, the Chinese have no intention of allowing fuel ethanol to be produced at the expense of grain needed for food. Th e National Develop-ment and Reform Commission (NDRC) is reported to be mulling regulations that would phase out use of food crops for production of fi rst-generation ethanol.x If the rest of the world followed the Chinese example, and legislated to ensure that corn and grain would only be used for biofuel production if there are excess supplies, then the problem would vanish. Alternatively there exist a host of crops and feedstocks that do not compete directly as foods, and which should be favored for biofuel initiatives – and would be favored if policy prescribed such an outcome. Again, a comprehensive trade Biopact could concern itself with ensuring such an outcome.

Deforestation

Biofuels produced in the South could exacerbate trends toward global warming, such as through increased

xSee ‘China mulls banning food in ethanol fuel production’, available at: http://

news.xinhuanet.com/english/2007-06/11/content_6224333.htm



carbon dioxide emissions through loss of tropical rainforest cover or burning of peatlands in Southeast Asia; or through irresponsible agricultural runoff s that are high in nitrogen and add nitrogen oxides to the planet’s GHGs. Irresponsible and unrestrained expansion of the biofuels sector in the South could indeed lead to these calamitous outcomes. It is the fear of such outcomes that drives much of the opposition to biofuels, no matter how or where produced.

Th e principal source of concern is the uncontrolled burning of the rainforest in the Amazon and in Southeast Asia, such as in Sarawak and Borneo. Th is is a clear source of concern to any rational person, and some way has to be found to stop it. Th e way that is currently favored is for NGOs in the North to brand palm oil from Southeast Asia as ‘deforestation diesel’ and take direct political action to block its entry into the markets of the North. But this is simply disguised protectionism and hand-wringing. A far more eff ective approach lies in the negotiation of a trade pact where one of the principal clauses would be an uncondi-tional ban on sourcing biofuels from newly deforested lands, with an adequate tracing mechanism (probably involving satellite monitoring) to ensure that it can be enforced. Th is could be combined with transfer payments made to such countries in return for keeping their rainforests intact.3,30–32

Th e fact is that in almost all tropical countries of the South there is an abundance of degraded land that would be suitable for biofuel cultivation without placing any pres-sure on rainforests in itself. But it has to be recognized that so far, most of the pressure on rainforests has come from logging concerns and agribusinesses interested in growing food crops such as palm oil and soya. Th e possibility of growing biofuels has only emerged recently. Th e fact that it is of recent origin means that it could eff ectively be stopped, and stopped immediately. Th e governments in the countries concerned are for the most part only too willing to join forces with the North to curb the illegal deforestation.

Tropical developing countries preserve for the Earth as a whole a vast public resource in the form of conserved rain-forest which acts as a powerful carbon sink. According to the United Nations Framework for Climate Change Convention (UNFCCC), if this rainforest is cleared (which is happening now at a rate of 1–2% per year) then it releases carbon emis-sions (from loss of carbon sink as well as release of carbon through burning) amounting to 25% of total planetary

carbon emissions. Yet there are currently no mechanisms in place to off er tropical developing countries any incentive for preserving these important carbon sinks. Th e Kyoto Protocol excludes deforestation issues, even from the Clean Develop-ment Mechanism, whereas re-aff orestation aft er clearing is rewarded in the form of carbon credits. Th e perversity of such a situation scarcely needs underlining – as discussed by the Stern report.33

While some proposals from developed countries have canvassed the possibility of exchanging debt relief for forest conservation, two serious proposals have emerged from tropical developing countries themselves. One from Brazil involves the allocation of off sets against Kyoto Protocol targets while a more ambitious proposal has been advanced by the Coalition for Rainforest Nations (led by New Guinea and Costa Rica) that envisages carbon credits exchangeable in international carbon markets being allo-cated to such countries.34 Th is latter proposal, by applying to the country as a whole, gets around the feared ‘loophole’ that would see compensated projects simply being substi-tuted by new projects in the same country. Such carbon credits could generate fi nancial fl ows that would off er serious compensation to countries for denying themselves the short-term benefi ts fl owing from forest clearing, and provide them with the international backing needed to stop illegal deforestation – a policy proposal supported by Stiglitz (2007)35 amongst others. Th is proposal of the Rain-forest Coalition is the best defence yet proposed to protect rainforests as carbon sinks rather than see them converted to food or fuel crops.y It is heartening that the Bali Confer-ence of the Parties in December 2007 fi nally put deforesta-tion issues on the Kyoto negotiating table, in the form of a statement on REDD: Reduced emissions from deforestation and degradation.z

yFor a representative discussion of ‘avoided deforestation’ or what is termed

more formally Reduced Emissions from Deforestation and Degradation (REDD)

see ‘Can carbon trading save our ecosystems?’ available at: http://wrmbul-

letin.wordpress.com/2007/08/06/%E2%80%98reduced-emissions-from-

deforestation%E2%80%99-redd-can-carbon-trading-save-our-ecosystems/

zUNFCCC statement on deforestation, Bali COP 13, ‘Reducing emissions

from deforestation in developing countries: Approaches to stimulate action’

(December 17, 2007), available at: http://unfccc.int/files/meetings/cop_13/ap-

plication/pdf/cp_redd.pdf



Social concerns – driving small-holders off the land

Brazil has led the world in the development of biofuels industry and energy independence, and in its latest guise, promoting a biodiesel program, it deals directly with the social issues of land-holders – so let us review the meas-ures that Brazil has put in place, to evaluate prospects for propagating them across to the entire tropical South. Th e 30-year saga of Brazil’s development of an ethanol industry is well known.36 Under the Lula administration it is now applying its own lessons from this experience in devel-oping a biodiesel industry, a program begun in 2005. Th is latest biofuel initiative from Brazil shows just what can be achieved by a developing country that focuses its institu-tional innovations on capturing its latecomer eff ects (Box 1.)

Th e infl uence of the Brazilian experience is being propa-gated through Latin America (and beyond). For example, in December 2007, the member countries of the Southern

Agricultural Council (CAS: Consejo Agropeduario del Sur) agreed on a program of action to promote biofuel and bioen-ergy activities, taking full account of the social, technical, economic and environmental issues involved. Th e Decla-ration of the Ministers (meeting in Asuncion, Paraguay) stated that:

‘We stress the importance of bioenergy for the CAS member states and take account of the social, techno-political and environmental implications of the sector. From now on we consider bioenergy to be a priority for the CAS, as it can contribute to local and territorial development.’aa

Th is statement really stands for the position that could and should be adopted universally throughout the South.

THE BRAZILIAN BIODIESEL PROGRAM

Th e Brazilian biodiesel program, which is now two years old, is well craft ed and executed. Th ere are at least four latecomer institutional features to the program that have not been widely recognized. First, it is a carefully incremental program, moving through three phases that have been widely discussed in Brazil – a fi rst, voluntary phase, bringing the country up to a level of 2% biodiesel when blended (following the example of the Proalcool program). By 2008, this 2% minimum becomes mandatory, and rises to 5% minimum blend by 2013. (Th e success of the program in its fi rst 18 months means that it is widely anticipated that the mandatory 5% blend (B5) will take eff ect at an earlier date, possibly as early as 2010.) Th us the country as a whole is being brought to a position where by 2010 at the latest (brought forward from the earlier goal of 2013) it will be producing 5% of all diesel requirements from vegetable oils, placing it in a position comparable to earlier European leaders. Th e program is overseen by the Ministry of Mines and Energy.

Second, the capacity of the country is being ramped up in the initial, voluntary stage, by the smart expedient of staging national auctions for biodiesel – and thus creating a market for biodiesel. Four such auctions have been staged so far, by the National Petroleum Agency (ANP), the agency responsible for motor fuel standards. Th ese auctions have encouraged bids from potential suppliers who are thereby induced into the market. Th e auctions have also served as a means of setting guide-line prices for biodiesel, with each auction setting a lower price at which quantities of biodiesel are sold. Th e state-owned oil company, Petrobras, acts as the buyer of last resort, thereby ensuring that the auctions bear some relationship to market reality.

Th ird, there is a distinct and explicit social goal to the biodiesel program – again, learning from the experience of the pro-alcohol program. Th e Ministry of Agrarian Development (which is pro small farmers) has shaped the biodiesel program with its ‘seal of social responsibility’ meaning that small farmers have to contribute over 50% to a large trader’s or distribu-tor’s biodiesel. It is only with such a seal that large companies receive tax credits and are allowed to bid at the auctions. Th e impact has been dramatic, even in just two years. Th e President, Lula, who backs this program as the central initiative of his presidency, claims that 100 000 jobs have been created in Brazil’s impoverished north east through growing oilseeds (mainly castor oil).Th is is backed by data from the Ministry (MDA) showing that since the launch of the program, just over 200 000

aaSee the statement, and commentary, at Biopact: http://biopact.com/2007/12/

south-american-countries-develop-joint.html



What building 2000 biorefi neries in the South could accomplish

Given that it is feasible to discuss a vast expansion of biofuels potential in the South, let us now enumerate the benefi ts of such a large-scale biorefi nery investment program. Th e benefi ts that such a program would bring are numerous, above all for the countries initiating such a program, provided the program was placed under social control. As outlined above, they include:

• Building rural incomes and abolishing poverty• Kick-starting industrial development• Generating fossil fuel import independence• Reducing pollution and generating cleaner air in cities• Creating development bloc and export revenues• Reduced GHG emissions through spread of carbon-

neutral biofuels.

Building rural incomes and abolishing poverty

Th e primary benefi t of a concerted drive to build biofuels capacity in the South would be felt neither in the energy nor

environment sphere but in terms of industrial development. Leaving aside the spurious rhetorical jibes about ‘fi lling an SUV tank’ before poor people’s stomachs, the fact of the matter is that biofuels are one kind of crop that poor farmers can grow, for a cash return, and that the sooner they start to organize to be able to grow such crops in abundance, the sooner they will escape the poverty trap laid for them by Western aid agencies.11,20,37,38

Kick-starting industrial development

Smart countries will ensure that biofuel development goes hand in hand with the building of rural industrial capacity. As in the case of Malawi, government subsidies will be provided to ensure that agricultural productivity is enhanced. In this way a development program can be started, grounded – as it should be in Africa – in agricul-tural activities. And in the case of biofuels, the curse that has blighted agricultural exports from the tropical South, namely Northern agricultural subsidies and market access barriers, will not be applied for much longer – because the countries of the North need the fuels and will have to face up to the fact that they cannot produce these fuels themselves.

small family-owned farms have been induced into growing oilseeds. Moreover the favored oilseeds are castor oilseed (Port: Manona) and palm oil (from a variety of native Brazilian species), rather than soybeans that are grown in the center and south east of the country. (Th is is in addition to the 500 000 rural jobs maintained by the Proalcool program, plus the 500 000 jobs indirectly linked to rural alcohol production.)

Fourth, Brazil is backing a wide variety of oilseeds in these early stages of the program, to see which ones turn out to be best in a tropical country (and bearing in mind that European experience is confi ned exclusively to rapeseed and the US experience to soybean). Certainly output is currently dominated by soybean and palm-oil, but cottonseed and castor oil are also picking up, under the infl uence of the MDA’s social inclusion or rural smallholder development strategies. New candi-dates are coming on to the scene, such as the wonder oilseed Jatropha curcas, widely utilized for biodiesel in India (it grows under harsh conditions; it is a perennial that can be harvested regularly; and above all it is inedible, meaning that its culti-vation will never be seen as a threat to food supplies). Th ere are, as well, conventional but under-utilized sources such as beef tallow, obtained from slaughterhouses. Th e broader Brazil’s scope of oilseed culture, the more it is able to take advan-tage of changes in world prices for these vegetable oil commodities, switching between one and the other. Th us it is a smart latecomer strategy to invest in variety at this early stage of the biodiesel industry.

Th ese four central features of the program are driven by four ministries, all in the pursuit of highly creative latecomer strategies – the Ministry of Mines and Energy, backing renewable energies generally; the ANP, to safeguard standards and conduct the auctions; the MDA, which is essentially launching a new land reform program with the biodiesel projects, in its direct appeal to ‘social inclusion’ as a national goal of the program; and the Ministry of Agriculture, which is promoting a wide variety of oilseed crops and not just soybean. Th e success of the program to date indicates also successful collaboration between these four ministries.



Biofuels development can also help developing countries avoid the other trap which was the export of unprocessed primary commodities. Biofuels by contrast have to be proce-ssed locally – and the building of biorefi neries as described above can be expected to have repercussions all the way along the value chain. A third element favoring biofuels as a means of promoting industrial development is that farmers can start at a relatively low technological level while processors can leapfrog to the most advanced biorefi nery technologies. Th e two pathways can run in parallel.

Generating fossil fuel import independence

Brazil has estimated the savings on its fuel import bills since the launch of the Proalcool program to be of the order of $50 billion per year – which is far larger than the country has spent in promoting ethanol. Likewise the savings for China and India in foregone oil imports would be of the order of hundreds of billions of dollars – the diff erence between success and catastrophe in their development eff orts. Since indebtedness problems are a major barrier to industrializa-tion, the relief of debt through displacement of fossil fuel imports represents a major strategic shift . Some countries in Africa are already taking steps to mandate blending of fossil fuels with biofuels; Uganda is reported to be introducing such a step.bb

China’s domestic supplies of oil peaked in the early 1990s, and so the country became dependent on oil imports – just like the USA 20 years before. Th e imports of oil needed by China have been rising inexorably ever since – as revealed in Fig. 1. Th e situation is even worse in India, as shown in Fig. 2, where imports are expected to exceed 75% of the country’s requirements by 2010. Th is is why an alternative energy foundation for their economies has to be put in place by these countries.

Th e poorer the country, the greater its dependence on fossil fuel imports, and the greater its vulnerability to oil price increases. Th is is the untold story concerning oil price rises: while they may represent a boon for biofuel producers, they represent a catastrophe for most developing countries. Hence there is need for such countries to move to alterna-tive fuels, and in particular biofuels, as a matter of the

highest priority. For the wealthy countries (OECD non-oil producing countries) oil imports represent around 2% of GDP. But for poor non-oil producing countries, the propor-tion is closer to 10%: the poor countries are fi ve times as vulnerable.39

What better way to reduce oil dependence and the crushing burden of oil imports than to grow your own fuel? For the case of Malawi, with its newfound food exports in 2006/2007, the levels of food grown in surplus through the application of fertilizers would have been suffi cient – if turned into fuel – to provide the country with all its oil imports, which currently run at the level of 5500 barrels of oil per day.cc

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bbSee ‘Country to blend fuel with ethanol’, The East African (Nairobi), September

26, 2006, available at: http://allafrica.com/stories/printable/200609260048.html

ccSee ‘Malawi’s super harvest proves biofuel critics wrong – or, how to beat

hunger and produce more oil than OPEC’, Biopact, December 4, 2007, available

at: http://biopact.com/12/malawis-super-harvest-proves-anti.html



Reducing pollution and generating cleaner air in

cities

One of the great but hidden costs of burning fossil fuels is the degradation of the air quality in cities – and one of the great benefi ts of switching to biofuels is that they burn more cleanly. Technically, this is because they are oxygenated fuels – alcohols like ethanol have oxygen in their struc-ture, as opposed to the long-chain hydrocarbons that make up petrofuels. For a graphic illustration of the diff erence, observe a Bunsen burner on a laboratory bench: with the air vent open, the fl ame burns clear and blue; with the vent closed the fl ame turns dirty and yellow. Th is is how we are burning petrofuels and why the air quality in cities is dete-riorating so rapidly. Th e health costs associated with partly combusted fuels (e.g. the build-up in carcinogenic poly-cyclic aromatic hydrocarbons (PAHs), in volatile organic compounds (VOCs) and in particulate matter (PM) are now starting to be recognized; indeed Dr Ray Kearney at the University of Sydney brands fossil fuels as the ‘new asbestos’.dd Author Terry Tamminen, former environmental adviser to Governor Arnold Schwarzenegger, puts it in his very eff ective text, Lives per Gallon:

‘Aft er more than a hundred years of research, many of the health eff ects of smog are well understood, yet they are still very much out of control, both in the United States and in a growing number of cities around the globe.’40

Again it is developing countries that have the worst air pollution in cities, and have the most to gain from switching fuels to biofuels that demonstrably burn more cleanly. But the eff ect will doubtless be moderated by the fact that people drive older and less-well-maintained vehicles in developing countries.

Creating development bloc and export revenues

As mentioned above, the attractive feature of biofuels and bioenergy generally for developing countries is that the sector encourages development of complementary activities, even-tually encompassing an entire value chain. For the case of biofuels, the development bloc would include plantations and

agricultural inputs in the fi rst instance, including seed varie-ties, and cultivation techniques optimized for local, tropical development. In Brazil, for example, a massive research and development (R&D) eff ort has been devoted to unlocking the biological secrets of sugar and ethanol. At the Centro de Tecn-ologia Canavieira (Cane Technology Centre), an R&D facility funded largely by the sugarcane industry, the genome of sugarcane Saccharum offi cinarum has been decoded, and used to select varieties that are more resistant to drought and pests and that yield higher sugar content. Th e Centre has developed some 140 varieties of sugar, which has helped to drive costs down by 1% a year.41 As the industry expands, so it would be expected to form backward linkages to equipment and technology suppliers, and forward linkages to fuel distribu-tion sectors. Th us the complexity and productivity-enhancing potential of the developing economy would be enhanced.

Reduced GHG emissions

Th e great attraction of biofuels is that they are, in principle, GHG neutral: every molecule of carbon burnt and emitted into the atmosphere is replacing one that has been extracted from the atmosphere by a growing plant in the process of photosynthesis. Of course, this is not always achieved in practice. Th e more that fossil fuel inputs are needed along the value chain, the greater the ‘ecological footprint’ of the biofuel. Debate rages in the USA because the plants utilized, and their treatment, ensures that the GHG emission reduc-tions are marginal at best.

Again, taking a perspective from the South, we see that the ecological footprint of biofuels in the South is smaller than in the North, given the lower level of fossil fuel inputs needed to produce energy in the South. Th is fact is never alluded to when discussing the contribution of developing countries to GHG emissions. Th e real problem arises when discussing deforestation and clearing of wetlands. Insofar as the spread of biofuels results in these developments, then it is a source of planetary concern – and calls for a planetary solution.

Investments in the South

Th ere are by now many examples of positive investment strategies by fi rms originating in the North and engaging in investment in the South, in such a way that these general

ddDr Ray Kearney, Associate professor at Sydney University’s Department of

Infectious Diseases and Immunology. See his ‘Fossil fuels – the new “asbestos”’

in Opinion Online, November 23, 2005, available at: http://www.onlineopinion.

com.au/view.asp?article=3861



advantages can be seen to be captured. Th ree such examples are discussed in Box 2.

Adecoagro, Brenco and BeCCo are just three of many new biofuels companies to emerge to take advantage of the new opportunities, raising fi nance in the North and investing heavily in refi ning and infrastructure in the South. A goal of 2000 biorefi neries in the South over the course of the next decade is one that is likely to be easily met by such pioneer investors, provided the business conditions are allowed to remain favorable. Th is is where multilateral institutions such as the World Bank and other regional lending institu-tions such as the InterAmerican Development Bank (IADB), the Asian Development Bank and the Bank for African Development could make their mark.ee Th ey could focus on

smoothing the path for biofuels investments and transform themselves in the process into active agents driving industry towards a new, bioenergetic and sustainable foundation.

Prospects for development

For developing countries looking to lift themselves out of poverty, the place to start is to build a biorefi nery, prefer-ably one at the technological cutting edge that can handle ethanol fermentation as well as oil extraction to produce biodiesel. Th e building of a biorefi nery in an impover-ished country is like building a superhighway through it; it creates many opportunities for associated development. Th ese include local suppliers of equipment, providers of maintenance services, housing and health and educational services for those in the new biofuels industry – each such step ratcheting up the standards for the country as a whole. But the principal eff ect of building a biorefi nery is to create a demand for locally produced feedstock – whether it be sugarcane, or cassava, or sweet sorghum, or (as discovered recently in the Niger Delta) the juice from the Nypa palm which grows in mangrove swamps. And if the biorefi nery

BIOFUELS INVESTMENTS IN THE SOUTH: THE BRENCO, BECCO AND ADECOAGRO CASES

Brenco is an example of an investment company founded in Brazil by US investors who include Vinod Khosla, co-founder of the US ethanol producer Cilion. Brenco raised $200 million in a private placement in March 2007 organized by Goldman Sachs. Khosla’s co-backers include supermarket heir Ron Burkle, ex-World Bank president James Wolfensohn, fi lm producer Steven Bing, and AOL founder Steve Case. Th e fi rm expects further rounds of fi nancing to bring it to a level of $2 billion, which will be invested in biorefi neries in Brazil and elsewhere in the developing world. Th e new company will be headed by Philippe Reichstuhl, former head of Brazil’s state-owned oil company Petrobras, which itself is now becoming a signifi cant player in biofuels markets.kk

Another such example is BeCCo, which also has goals of becoming one of the world’s largest biofuels companies. BeCCo is an interesting example of just how a company can link the USA and Europe to the developing South through an innova-tive biofuels business model. BeCCo is a start-up founded in 2005 and now has operations in Spain, Germany, Hungary, Israel, China, Brazil and Ethiopia. By 2010, the company plans to operate a dozen biorefi neries around the world producing 1.5 million tonnes of biodiesel per year, largely from jatropha and castor oilseed. Its strategy is to be vertically integrated, from leasing its own land, contracting with local farmers to grow the crops, crushing the seeds and refi ning the oil to biodiesel, and then negotiating long-term offt ake contracts with petroleum companies to take and distribute the product. If these plans are fulfi lled, BeCCo would emerge as one of the largest specialist biodiesel producers in the world.

In China, BeCCo has secured leases over 200 000 hectares of land in the interior province of Sichuan where 3000 local farmers are now planting jatropha. It was in Sichuan that BeCCo made its fi rst major deal in China, signing an agreement with the local authorities to develop its biodiesel business. Th e plans call for construction of a biodiesel refi nery near Sichuan’s

eeIn fact, the IADB is already taking steps to be an active partner in the develop-

ment of a biofuels industry in the American hemisphere, through such initiatives

as the InterAmerican Ethanol Commission. See ‘Florida’s Jeb Bush joins

Brazil in promoting ethanol in the Americas’, Brazzilmag, December 18, 2006,

available at: http://www.brazzilmag.com/index2.php?option=com_content&do_

pdf=1&id=7687



produces biodiesel as well, then it will create a demand for vegetable oils such as those from non-edible Jatropha, or cottonseed, or linseed, as the Brazilians are demonstrating.

How this demand is met will depend entirely on the institutional and policy framework created by the national government. If the government follows the Brazil (and Malawi) examples, it will create institutions for providing subsidized inputs, such as fertilizers; for establishing and enforcing standards in the quality of the biofuels produced. It will create a national land reform commission to oversee the leasing of plots of land to currently landless peasants who will be able to grow the feedstock and sell it to the biorefi nery operators. (Indeed the refi nery may be oper-ated by an ergocultural cooperative.) It will create a market for the biofuels produced (e.g. through mandating biofuel levels) so that domestic imports of petrofuels are reduced or eliminated, prior to exporting excess biofuels. It may create a national champion for this purpose, modelled on the

capital, Panzhihua, with an initial capacity of 30 000 tonnes per year, and an initial investment of US$10 million, with expan-sion to 300 000 tonnes per year capacity. Th is deal opened the door to others, in Henan and Inner Mongolia provinces. BeCCo has secured a 10-year offt ake agreement with PetroChina to take the product. (Th is is a ‘take or pay’ contract.) It buys the seeds from small farmers through an agreement negotiated with China’s Bureau of Forestry. (Note the similarity of this arrangement with Brazil’s Ministry of Agricultural Development. Note also that BeCCo is not receiving any subsidies from the Chinese state authorities.) BeCCo’s competitive advantage lies in being fully integrated – from growing their own crops, to crushing the seeds and refi ning the oil to produce biodiesel. In China, BeCCo has developed an innovative hybrid of Jatropha curcas that is ready for harvest within months of planting – compared with the regular variety that requires three years from planting to harvest. A company director, Mr Shlomo Palas, told ReFocus (October 2006)42 that the new crop is capable of yielding four to six tonnes of fruit per hectare instead of two tonnes from the regular crop.

A third example of innovative investments in the South is provided by Adecoagro. Th is company was founded in September 2002 and rapidly became one of the most important food and renewable energy producers in South America. It owns over 225 000 hectares of land with farms distributed throughout Argentina, Brazil and Uruguay, having main produc-tion activities that include crop, sugar, ethanol, coff ee, beef and dairy production. In June 2006, 6000 hectares of fi eld were bought in Venado Tuerto, where they will invest between $250 to $300 million to install a closed loop integrated production plant to produce ethanol from corn. Th e project is expected to achieve high levels of effi ciency by combining a dairy opera-tion with a bioethanol plant. Th e striking feature is that because the ethanol is produced as a byproduct of other integrated activities, its marginal costs are zero. Th e fi rst dairy module was to be operational by the end of 2007 with a starting capacity of 1200 cows. Th e whole project calls for 500 000 tonnes per year of corn to produce 210 million liters of ethanol and suffi -cient byproducts to feed 45 000 cows. Animals are fed mixed rations of grain and silage, and produce dairy products in the form of almost 50 000 tonnes of powdered milk and cheeses. In the process, a million tonnes of manure will be biodigested to produce 37 million cubic meters of biogas, which can then fi re an advanced electric boiler, making the entire operation self-suffi cient in energy. Byproducts of carbon dioxide and biofertilizers can be marketed.ll Adecoagro is also developing its bioethanol interests in other countries of the South American cone, notably in Brazil.mm

kkSee ‘Brazilian ethanol startup to be called Brenco raises $200M towards $2B

goal’, available at: http://www.thealarmclock.com/mt/archives/2007/03/brazil-

ian_ethan.html

ll Source: Integration of Anaerobic Digestion in Producers System (Integración

de la digestión anaerobia en sistema de los productores) Available in Spanish

only. Alejandro Lopez, Adecoagro 2007, available at: http://www.methane-

tomarkets.org/events/2007/ag/docs/14may07_lopez_integration_of_ad_in_pro-

ducers_systems.pdf

mm Soros, one of the stars of the World Ethanol Summit 2007 Sao Paulo – Brazil,

is investing US$900 (€666) million in Brazil – in three sugarcane distilleries in

the central-western state of Mato Grosso do Sul. The Hungarian-born billionaire

is putting his capital in a 150 00 hectare (370 500 acres) ethanol production

project in the south-eastern state of Minas Gerais and Mato Grosso do Sul ,

which will be one of the largest mill complexes in Brazil. Soros’s Adecoagro will

build three ethanol refineries in a first stage. He is also the largest investor in

Brazil’s thriving sugarcane-based ethanol industry according to Marcos JANK,

[President of the Institute for International Trade Negotiations ( ICONE), Brazil].

New investment will increase annual income of the group from the present $125

million to $600 million in eight years.



success of Petrobras in Brazil or Petronas in Malaysia. It will certainly wish to create, or contribute towards, an Ergocul-tural R&D Institute that will focus on raising productivity and expanding the range of feedstocks available for the local soil types and climate. And of course all of these institutions then exert propagation or ripple eff ects through the rest of the economy, lift ing incomes and wealth levels and deep-ening the technological and industrial capacities and capa-bilities. Th is is what we call development.

A template is needed for such institutional developments, and this is already available, in the achievements of Brazil. But Brazil cannot be left alone to spread the gospel of biofuels. Multilateral institutions such as the World Bank, UNCTAD and UNIDO should also be getting behind such an initiative, to promote the goal of 2000 biorefi neries in the South over the course of the next decade.

Creating a global framework for biofuels: A global trade ‘Biopact’

Th e key obstacle to the scenario painted here is the exist-ence of trade barriers erected by the North that block the emergence of a global market for biofuels. Already there is substantial momentum behind the enactment of subsidies to encourage production of ethanol in northern temperate climates – from corn in the USA and from sugar beet in Northern Europe – where the costs of producing the fi nal product are far higher (two to three times) than in India or Brazil. It would make so much more sense for the developed world to produce ethanol on a small scale for its own energy security, and import the bulk of its supplies from tropical countries in Asia, Africa and Central and South America.

Many of the OECD countries already have erected trade barriers against biofuels from the South, in a mind-less expansion of tariff barriers against foodstuff s. Th e USA, for example, operates a tariff of $0.54c per gallon against ethanol imports, at the behest of corn-belt ethanol producers.ff In addition, there are substantial subsidies paid

by state and federal government programs and tax breaks off ered to these producers.gg Strong as the case for disman-tling such trade barriers is, the USA and the EU still buckle under to fossil fuel and farm lobby pressures and block attempts to have them dismantled.hh

Th e range of issues raised by the prospect of the North sourcing biofuels from the South is such that they would be unlikely to be resolved by market forces alone. A comprehen-sive agreement, negotiated between the countries of the North (i.e. the OECD) and countries of the South, as a trade agree-ment to be certifi ed and registered with the WTO, presents itself as an optimal way forward. Th e diffi culties involved in achieving such a trade agreement (or Biopact) should not be under-estimated. What makes the whole process politically feasible is the driving, objective necessity faced by the North in having to fi nd an alternative to petrofuels, and fi nd one that has an impact within the next decade.ii

Th e quid pro quo to be off ered by the countries of the South is sustainable and certifi able biofuels production. Under a comprehensive agreement, there could be well-formulated certifi cation procedures that would hold producers to stand-ards of production that would not threaten deforestation, or soil degradation, or water wastage. Th ere are, of course, existing certifi cation procedures in related areas, such as the Standard for Sustainable Agriculture (SSA) and the Forest Stewardship Council’s forest certifi cation system. But these have had only modest success so far, in the absence of a comprehensive trade agreement. One initiative that could have a dramatic eff ect would be to build ‘proof of origin’ certifi cation into biofuels traded on commodities exchanges.

ggThese subsidies are received largely by agro-industrial groups such as the

privately owned giants, Cargill or Archer Daniels Midland (ADM). According to a

recent report from the European Global Subsidies Initiative, the subsidies paid to

US ethanol producers currently amount to $5.1 billion per year (GSI/IISD 2006).

hhFor example, the International Herald Tribune reported in November 2007 that

the USA and the EU were blocking a Brazilian attempt to have biofuels classi-

fied at the WTO as ‘environmental goods’ and thus subject to lower tariffs. See:

http://www.iht.com/articles/ap/2007/11/05/business/EU-FIN-ECO-WTO-US-

Biofuels.php

iiThe idea of the Biopact has been endorsed, in principle, by many in the inter-

national organizations, notably by the Director-General of the United Nations

agency FAO, writing in the Financial Times in August 2007: ‘Biofuels should

benefit the poor, not the rich’ August 15, 2007, available at: http://www.ft.com/

cms/s/0/963b5354-4ac7-11dc-95b5-0000779fd2ac.html?nclick_check=1

ffIt is worth noting that US Secretary of Agriculture, Sam Bodman, stated at the

Davos summit meeting in January 2007 that the USA ‘will need to have more

imports of ethanol’ to meet the new US mandate to cut gasoline use. Speaking

to Dow Jones Newswires at the World Economic Forum, Bodman said he does

not see subsidies to US farmers remaining in place beyond 2010 or import

tariffs on ethanol beyond 2008.



Such certifi cation would represent only a modest extension of technical documentation already demanded by commodi-ties exchanges such as Brazil’s Commodities and Futures Exchange. Th e point is that certifi cation as part of a commod-ities futures contract is legally enforceable. A Biopact could then generalize this, making proof of origin a requirement for all biofuels traded under the agreement. With such strong backing, governments of countries in the South could clamp down hard on companies engaged in deforestation, putting perpetrators in jail. Strong measures are needed to stamp out unacceptable practices, and there should be no hesitation in advocating and enforcing them.43–44

Th e Biopact envisaged would have dramatic results in both the North, where it would facilitate making countries biofuel-friendly (such as through promoting fl ex-fuel vehi-cles and making biofuels widely available) and in the South, where the biofuels revolution could help drive industrial development and spell an end to poverty. But the Biopact would not have to last forever. Within a decade, the advent of second-generation biofuels from a broad range of biomass inputs (forest products, municipal waste, grasses) would make the countries of the North more self-suffi cient in biofuels, and the countries of the South more technologi-cally sophisticated. For both sets of countries the benefi ts of a Biopact are considerable.

Concluding remarks

Th e twin pressures associated with energy security (peaking of oil supplies) and the recognition of global warming with its associated necessity for GHG emissions reduction, provide the context for the current discussion over biofuels. Under these circumstances continued increases in use of petrofuels is no longer an option.

Options such as the hydrogen economy and running elec-tric vehicles through electricity supplied by nuclear reac-tors are just too far off to be of use in solving the present problem. A more immediate, transitional option is needed. Th e keyword here is ‘transitional’. No-one expects that a future regenerative and sustainable transport system will run on biofuels alone. Th e long-term solution is clearly electric vehicles (perhaps as hybrids, like the present Toyota Prius) and electric public transport systems, where the elec-tric power is itself produced as ‘green power’ from renewable

sources such as wind, solar, geothermal or whatever. Th is is a medium-term solution to the world’s global warming problem (it is zero carbon-emitting) and to the world’s energy security issues (green power is sustainable and decen-tralized and not beholden to any particular country or group of countries). It will come; indeed it is already on the way.

But in the meantime there is a transitional issue and a transitional hurdle to surmount, and time is needed to adapt the world’s transport systems for alternative fuels and alternative power sources. Th e stranglehold of fossil fuels (as evidenced in the US Energy Bill that emerged in watered down form in the US Senate in December 2007) and farm subsidies needs to be broken. And biofuels promise to break that stranglehold. In the process they will open up the world’s transport and wider industries to new and regenera-tive energy sources. Th is is their principal advantage and why they should be supported as a matter of urgency by governments of the North and South as well as by global institutions, such as the World Bank.

Ethanol is a near-perfect substitute for petrol (gasoline) in the transport sector because it has close to the energy content of gasoline while burning more cleanly (less pollu-tion and untoward health eff ects) and being safer for the environment. Biodiesel is a near-perfect substitute for petrodiesel. Both these biofuels can be accommodated by existing infrastructure without the upheavals associated with the introduction of a hydrogen economy. Both ethanol and methanol are near-perfect for fossil fuels substitutes because of their energy characteristics. Ethanol has around 64% of the energy content of gasoline, meaning that a car fuelled by ethanol will drive 64 km for every 100 km driven on gasoline. A huge amount of negative publicity was gener-ated against ethanol by virtue of this one fact alone – yet the obvious point that 64% is a very high energy level was studi-ously ignored, until recently. Now we hear almost nothing on this point from NGOs campaigning against biofuels.

Th e point is that production of biofuels in the Northern countries including the USA and Japan, and indeed Europe, cannot reach the scale of production required to make a meaningful contribution to fuel substitution, because of the untoward energetics, land-use issues, and competition with foodstuff s. Th ere are simply too many factors working against production of biofuels on the scale required, in the North.



Th ese factors work in the reverse direction in the tropical countries of the South. Production of both ethanol and biodiesel on the scale required can be accommodated in the South. Th e land is available, as is the rainfall, particularly in the tropical countries, and much of the cultivation of biofuel crops can be conducted on a sustainable basis, for example, by recycling wastes from bioreactors back to the fi elds.

But the countries of the South, in Africa, Latin America and South and Southeast Asia, need assurances and assist-ance in mounting such a huge eff ort. Th e assurances would be focused on securing access to the markets of the North, while the assistance would be in the form of FDI to build the needed biorefi neries without necessarily maintaining total ownership of these facilities.

With suitable guarantees and assistance, the South can provide the biofuels that the North needs. Th is is the globally rational solution. By sourcing biofuels from the South, the North can solve both its energy security prob-lems and GHG emission problems. It would not be a matter of substituting oil dependence on the Middle East for biofuel dependence on Brazil, since the range of countries concerned would be wide; they would have no interest in cutting off supplies; and the countries of the North would maintain their own modest biofuel production capabilities as an insurance. But to reap these benefi ts, the countries of the North need to open up their markets, which means agreeing to treat biofuels as fuels rather than foodstuff s; dismantling tariff s and subsidies; and ending discriminatory standards. In return they would have the right to demand guarantees that biofuels be produced in a way that does not destroy their energy effi ciencies nor reverse their contribu-tion to curbing GHG emissions. Th ese are the planetary issues in play as the UN, World Bank, OECD and other global agencies debate the bioenergy issues. Progress is slow in achieving the potential gains.jj

Th e prospect of biofuels consumed in the North and sourced from the South represents a possibly enormous contribution to reducing GHG emissions if implemented in a sensible manner. It represents a post-Kyoto way forward, bringing developing countries to the climate negotiating table and reducing the infl uence of fossil fuel lobbies that have so far stymied US involvement in the Kyoto and post-Kyoto process. Th e Biopact would in all probability help to pave the way for a post-Kyoto treaty arrangement that binds all the major countries of the world in a renewed attack on the global warming problem.

A global North-South Biopact would see real progress in the accomplishment of energy security and curbing of GHG emission goals. And it would give a boost to indus-trial development in countries of the South, particularly in Africa, that would dwarf anything made available hit herto through offi cial aid channels. Th is complements the argument for a renewed focus on prospects for develop-ment of the poorest countries (inhabited by the ‘Bottom Billion’) made persuasively by former World Bank econo-mist Paul Collier.45 Th is is the last chance for Africa to enter the mainstream of world development. It must not be missed.

References 1. Mathews JA, Viewpoint: Biofuels: What a Biopact between North and

South could achieve. Energy Policy 35: 3550–3570 (2007).

2. Mathews JA, Can renewable energies be turned to a source of advantage

by developing countries? Revue de l’Energie (2007). In Press.

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