Biofuel Blowback - Bad Policies aren't just for America

Bio-fuels are a great paper solution to irresponsible energy use. Just convert soy-beans, corn, sugar cane and other biomass into gas and drive that Hummer downtown with a "More Green than Thou" bumper sticker fastened on the back.

There are, unfortunately, a few pernicious problems with bio-fuels that should question the entire industry and the shallow and vapid thinking from which it spawned:

The bad oil on ethanol

GEOFF Cornford has battled years of drought while managing the North Australia Pastoral Company's Wainui cattle feedlot near the southern Queensland town of Dalby.

Now, just 20km down the road, a new threat looms for the $3 billion feedlot industry in the form of Dalby Bio Refinery's $150million plant, the first in Australia to be devoted to ethanol production. The plant is due to open in August, using sorghum to make a product that until recently held great hope for containing spiralling petrol costs.

Despite a bumper sorghum crop following summer rains, local feedgrain prices of $300 a tonne are twice what they were pre-drought. Like other ethanol producers, the Dalby plant will receive a commonwealth subsidy to compensate for a 38.14c-a-litre fuel excise, about $34 million for its annual production of 90 million litres.

Cornford says further hikes in feedgrain prices are inevitable because of the biofuel plant, which will need about 250,000 tonnes of grain a year: "We've had grain shortages in three of the past four years. The ethanol producers are our competitors for grain but are subsidised by taxpayers."

Like the US, producers of bio-fuels in other countries get large welfare-payments, through subsidies, to produce their wares. This is, despite (of course) the usual political twaddle of "free markets" and "capitalism." These subsidies have can dramatic impacts on a nation and its people.

First, they help guarantee profits (at the taxpayer expense) for inefficient industries. As the Soviets found out the hard, state support of grossly inefficient industries will wreck your economy. The reasons for this are complex, but I think simply put we can see that without the risk of failure, the remaining driving forces required for efficiency simply don't work.

Another impact of bio-fuels is on food prices. Allowing a bio-fuel producer to, through subsidies, buy-up the market in commodities like wheat, sorghum, soybeans and corn will effect other parts of the commodity market and strain those businesses (and their consumers) that rely on these commodities.

Without question, the cost of producing meat will increase as feed-stocks are converted to bio-fuel. Another effect is a down-grading of diets, especially to the poor who, in order to get meat in their diets, will have to downgrade to cheaper, less-healthy meats (if not go without). Other food-price issues include the run-up of cereals, breads, soy products, corn products and a whole-host of processed foods from pasta to provolone. In all cases, it will lead to a worsening of diets as healthier choices become less affordable and poorer food stuffs become the way of life.

But for some, it's more than a difference between rib-eye's and chuck-roast. These price increases can mean the difference between life and death as the impoverished, in many countries, cannot even afford to eat.

An impact generally not foreseen, or much discussed, is increased land use. Truth is due to our modern farming methods western countries already use more land than is necessary to feed our population and substantially help-out the world. Over the decades various western governments have instituted (to a greater or lesser degree) "land bank" programs that have allowed farm land to go fallow and revert to a wild state helping the wild-life while maintaining farm commodity prices within a tolerable range for both consumer and producer while producing enough excess production to export this over-production world-wide.

With the bio-fuel demand substantially increasing commodity prices, land is flying out of these land-bank programs. This not only directly impacts wild-life as habitat is destroyed, but it also impacts watersheds through erosion and runoff issues, water resources through increased irrigation needs, and even increases the production of fertilizers which are made from petrochemicals or bio-stocks (which feed back into the cycle). This environmental impact doesn't, of course, include the massive deforestation going on in South America. Much of which is directly related to soybean production for bio-fuels.