Australian Interest


It is one of the greatest accomplishments of modern history – the world population doubled in 50 years, but the food supply kept pace. The Malthusian disaster that humanity had been dreading did not come to pass.

We are on the brink of unravelling this extraordinary achievement of our civilisation. We are deliberately enacting policy that will lead us to starve ourselves.

The Club of Rome alarmed the world when it published its famous 1972 warning of coming global famine, The Limits to Growth. But even as the world population grew from 3 billion in 1960 to 6 billion by 2000, food was plentiful.

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How did this happen? Three factors combined to produce a tremendous boost to the earth’s yield of food: good public policy, good science and functioning markets.

Governments and NGOs worked with scientists to develop new “miracle” strands of high-yielding wheat and rice.

Markets worked by allocating the task of producing food to the most efficient places, and then distributing it to the places of greatest demand, or at least insofar as the bastardised international trading rules would allow.

So China, which was supposed to eat the world into a state of starvation, became a net exporter of food in 1996 and remains so.

Today, this accomplishment is unravelling. World food prices are flashing red. The UN’s Food and Agriculture Organisation’s index of all food commodity prices jumped by 37 per cent last year. The price of corn and soybeans has doubled in the past 18 months.

The high price of soybeans in Indonesia has provoked food riots on the streets of Jakarta. Political alarm is rising across the developing world. Three major countries – Vietnam, Egypt and India – have imposed emergency bans on the export of staple crops.

The UN Secretary-General, Ban Ki-moon, has declared a global food crisis. He warns that it will break fragile states. In Afghanistan, people spent an average of 11 per cent of their incomes on food in 2006. That figure is now 45 per cent.

What’s going on?

Governments in most rich countries have started to promote biofuels, and ethanol in particular, as an alternative to oil and a way of cutting greenhouse gas emissions. So far so good.

But here is the first problem. How are biofuels made? Ethanol is made from corn. Corn is one of humanity’s basic feedstocks. When the corn price rises, so does the cost of feeding cattle, producing milk and raising chickens. Farmers respond by planting more corn. And that means less soybean, wheat, canola, and other crops. So all grain prices rise.

To supply the new demand for ethanol, vast areas of the planet that once supplied food are now producing crops for biofuels instead. “The US is now using more corn for production of ethanol than our entire crop in Canada,” says Kurt Klein, a professor of agricultural economics at the University of Lethbridge. Already, world ethanol production has trebled, from 20 billion litres in 2000 to 60 billion litres last year. It is projected to double again in the next few years.

“The current boom in biofuels is causing a displacement of crops grown for food to make room for growing crops for production of ethanol or biodiesel,” says Paul Ehrlich, president of the

Centre for Conservation Biology at Stanford University. “In the last year or two, this seems to be the biggest proximate cause of food shortage and rising prices, but it is just an exacerbation of an already tight situation,” says Ehrlich.

Yet this is all right, surely, if it is the world marketplace allocating resources to the most efficient use?

But it isn’t – and that’s the point. Biofuels are booming because governments like the US and Australia now subsidise ethanol producers. And governments like the EU and Australia have demanded that oil companies add a minimum quota of ethanol to their petrol mix.

The market is not diverting food from tables to fuel tanks – government policy is. But isn’t this justifiable if it helps deal with global warming? No. Would you starve humanity to save it? But in any case, it’s a false premise to think that biofuels will help.

It takes more energy to produce a litre of ethanol than the energy contained in that litre of ethanol. Ethanol is not a solution to global warming – it is part of the problem. Worse, by rushing imprudently to embrace it, governments have created a whole new problem, and a very dire one. As the chief executive of Nestlé, Peter Brabeck-Letmathe, has said: “If, as predicted, we look to use biofuels to satisfy 20 per cent of the growing demand for oil products, there will be nothing left to eat.” The EU is considering a freeze on its ethanol program while it rethinks. Governments everywhere should do the same.

Peter Hartcher is The International Editor of The Sydney Morning Herald.

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