Biofuels: between hope and disillusion

Until recently there has been a general consensus about biofuels. In every region of the world, production of clean fuels was supposed to provide a satisfactory solution to 3 major challenges:

> reduce energy dependency;
> reduce greenhouse gases;
> provide new opportunities for farmers.

But new environmental studies and analysis of recent price changes on agricultural markets over the last few months have cast doubt on the ability of biofuels to live up to such high expectations.

First, the yield from biofuels in terms of energy is not uniform. The most productive plants can only be grown in certain climates and more precisely in tropical zones. This is the case of sugar cane (which provides twice as much energy as corn) used for ethanol and oil palms for biodiesel fuel. In certain countries (like those in the EU), the risk of devoting large areas of arable land to the production of plants, whose potential energy yield is low, seems quite high.

Certain specialists question the economic logic behind investing large amounts of energy through intensive use of fertilizer – often made from fossil fuels and increasingly expensive - to produce energy.

Moreover, competition between food and energy crops is causing real problems because even if biofuels represent 1% of energy produced worldwide, their influence on world agricultural markets is very significant. Increases in the price of tortillas in Mexico as well as the price of beer in Germany are the result of this competition.

Finally, the expansion of biofuels – boosted by new objectives set by certain politicians - could be an important risk for the environment. Indeed, the expansion of sugar cane farming would displace soy crops and pasturelands towards the Amazon forest. The primeval forests of Indonesia and Malaysia could be voluntarily burned down in order to plant oil palms.

In view of this problem, the European Commission launched, on April 30th, a public consultation on the means required to guarantee the environmental feasibility of biofuels in order to prepare a framework directive on renewable energy sources.

Thus, the specific nature of agricultural markets is clearly illustrated by the development of biofuels: prices that are already extremely volatile can be further exacerbated by a change in their share in overall agricultural production. It is therefore necessary to regulate world agricultural markets and build tools that are realistic, efficient and capable of:

> ensuring balance and regulating production of crops for food and energy while harmonizing the interpenetration of agriculture with the other sectors of the economy;
> carrying out exhaustive measurements of the consequences (economic, social and environmental) of biofuel production.

The NAR model will be ready just in time to respond to these new challenges.