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Re: HLPE consultation on the V0 draft of the Report: Biofuels and Food Security

Mr. Anselm Eisentraut International Energy Agency, France
30.01.2013
Anselm

Overall comments

  • The current draft seems to have a quite negative bias towards biofuels, but in many places lacks sufficient scientific evidence to justify the conclusions drawn.
  • IEA analysis suggests ((see: IEA Biofuel Roadmap, http://www.iea.org/publications/freepublications/publication/Biofuels_Roadmap.pdf) that even when the full range of efficiency measures and advanced technologies are indeed deployed rapidly, biofuels may still have an important role in decarbonising some transport sectors, particularly those related to long-haul transport, since there is a lack of other low-carbon technologies. Some of the conventional (1st generation) biofuels based on starch and vegetableoil based feedstocks will no doubt only play a limited role in achieving significant decarbonisation in the transport sector. There will therefore need to be a shift towards more advanced technologies using  a range of other feedstocks as input materials, notably residues and cellulosic based sources, if major carbon savings are to be made.
  • The report should mention the important role of biofuels in the transport sector, and should discuss the impact of a scenario with large-scale deployment of advanced biofuels, compared to a scenario without biofuels (that the report seems to suggest), which would undoubtedly lead to higher transport sector emissions and thus a more rapidly advancing climate change, with possibly severe impact on agricultural production and therefore food security.

Specific comments

Executive Summary:

p.1, 1st para

  • For instance, the first paragraph in the executive summary starts with a hypothetical, and very unrealistic scenario that assumes the use of the total global crop production for biofuel production.
  • While one might argue such a theoretical exercise is justified in order to outline the maximum contribution conventional (1st generation) biofuels can make towards meeting our energy needs, it lacks some key aspects:
    • 1. The energy content of the biofuels is compared to the total primary energy supply worldwide. This comparison is not reasonable, as biofuels are principally used as transport fuel. The comparison should therefore be made with the world total transport energy demand (18.5% of total primary energy supply).
    • 2. No mention about co-products is made. However, most conventional biofuel crops have high protein feed as a co-product (soybean: 15% biofuel, 85% protein meal; corn: 30% biofuel, 30% DDGS), which draws a very incomplete picture.

p.1, 4th para; p. 14, 3 para

  • There has never been a 10% biofuel mandate in the EU, only a target for 10% renewable energy in the transport sector by 2020. And more importantly, there has not been any decision in the EU to limit the contribution of conventional biofuels to 5% of total transport fuel demand in 2020. The only document that has yet been published is a European Commission draft legislation that includes, amongst others, the 5% cap as a proposal. The draft legislation is currently under review by Member States and will need to be formally adopted through the European Parliament, before it becomes legally binding.

p.2, 3-5th para

  • The definition of 1st, 2nd, and 3rd generation biofuels is not clear, and does not cover some of the new technologies that convert, for instance sugar via microorganisms (other than algae) into fuels. The terms “fuel crops”, and “lignocellulose-technology”, are not defined and thus confusing. We suggest to use the IEA definition of conventional, and advanced biofuels (see: IEA Biofuel Roadmap, p. 8, http://www.iea.org/publications/freepublications/publication/Biofuels_Roadmap.pdf).

3. Biofuels, food prices, hunger & poverty

Overall comments:

  • The chapter lacks the results of robust, scientific analysis on the key factors driving agricultural commodity prices. The source indicated is a 2011 report by the HELP, which again lacks a serious scientific analysis of the issue and instead refers to 3 studies that were published in 2008 (“After some initial debate, hardly anybody today contests the fact that biofuel production was a major factor in the recent food price increases (FAO 2008; Mitchell 2008; OECD 2008).”). However, at this time a proper analysis of the observed increase in food prices was not yet possible and more recent studies have been able to derive a much more balanced analysis on the impact of biofuels on food prices. This includes analysis from the World Bank (2010, Placing the 2006-08 commodity price boom into perspective), as well as analysis of OECD/FAO in their common Agricultural Outlook 2012 (relation between oil price and agricultural commodities: p. 41, Fig 1.17). These studies show that, other than claimed by the authors in the current report, the role of biofuels on commodity prices is limited. The key drivers are the price of oil, weather extremes, demand growth in emerging economies (higher share of meat in the diet), exchange rates and to some extent speculation.  The OECD Outlook, which is based on a robust modelling exercise, outlines in some detail the implications of higher oil prices, demand for meat and other factors on agricultural commodity prices, and shows the effect on different grain types, and should be consulted in detail to revise the conclusions drawn in chapter 3.
  • The chapter seems to underestimate the impact of high prices and increased demand on crop production. Higher prices typically allow for production of crops on less productive land, and also lead to yield increases. On the other hand, without these price signals, farmers are not able to increase production due to economical reasons. The analysis that is missing in this paper is how large global crop production would be without biofuel production as a driving force in the market. The second step would then be to analyse the effect that rapid economic growth in emerging economies, combined with the high energy prices and extreme weather effects observed over the last decade, would have. These questions do deserve considerably more attention in the report, as they are important in order to address questions related to food security.

p.22, para 4

  • The assumed 10% biofuel share worldwide in 2020 is more than unrealistic. Except for Brazil, the US and potentially the EU, no other country/region could reach such a share in the near future. The scenario drawn here should thus be revised to a more reasonable estimate, following for instance IEA analysis, which suggests that by 2020 4.5% of global transport fuel demand will be met by biofuels (IEA (2012), World Energy Outlook 2012, OECD/IEA, Paris).

p.22, last para

  • The fact that there is a lack of scientific evidence supporting your conclusions should be flagged up front. It is questionable that such an important topic like the role of biofuels on food security is addressed by “rough” back of the envelop calculations, which the authors “believe” provide “reasonable evidence” to draw certain conclusions and policy recommendations.

p.23, para 3

  • The report states: “The simplest reason to believe that biofuels have driven large increases in grain prices is that it has made economic sense for biofuel producers to drive up grain prices dramatically”. This statement is contradictory to any analysis on the economics of biofuel production. As is well known, feedstock prices account for up to 80% of total production costs of conventional biofuels, and profit margins are therefore strongly depending on feedstock prices. As shown in the figure below, the increase in corn prices during the summer of 2012 has led to a drop in US ethanol production as a result of lack of profitability. There is therefore no reason to believe that producers deliberately drove up grain prices, and the statement should therefore be revised.
  •  

p. 27, 1st para

  • The chosen data format does not seem to be suitable to analyse the actual impact of weather on yields, and production volumes of grains. A split in different grain types, ideally split by region would be more useful, since weather extremes are typically affecting specific regions, and crop types.

p.28

  • It would be useful to not only present the share of biofuels in growth of grain production, but also as share of the total production.
  • The conclusions drawn from the presented data are questionable and should be compared to analysis presented for instance in the FAO-OECD Agricultural Outlook (see above).

p.34, 3.4.3., 2nd para

  • According to the FAO-OECD Agricultural Outlook 2012 (p.41), a 25% increase in oil price translates into a 14% increase in fertiliser prices. In addition costs for fuel for tractors, and other machinery along the supply chain increase. On the other hand, the energy input costs to an ethanol distillery also increase and reduce the profitability of ethanol production relative to the oil price. The conclusion drawn in the paper seems to underestimate these two strong relations between energy, and agricultural commodity prices, as well as the feedback effect of high energy prices on biofuel production costs.