Friday, December 23, 2011

Will Brazil’s biodiesel put food supplies at risk? Brazil hasn’t decided …

Six years after launching a push for biodiesel in efforts to repeat the sugar cane ethanol program, Brazil’s government is facing a dilemma – can it forge ahead with the effort without disrupting food supplies? 

The country is now at a decision point. It can increase the required mix of biodiesel in its fossil diesel, which would help dozens of biodiesel producers that the government encouraged to get into the business -- but this could push up the price of soy and have a ripple effect on food. Or it could leave current 5 percent blend in place to protect food prices, at the risk of weakening the business it helped bring into existence. It certainly is a pickle. So government officials have for the moment decided to put up with industry grumbling and keep kicking the decision down the road.

Biodiesel in Brazil like in most of the rest of the world is made from soy, which is one of the country’s main cash crops. The country made a tepid entrance into the biodiesel sector in 2005 and now has a mandatory 5 percent mix of biodiesel in all of its commercially distributed fossil diesel. This came after the vast expansion of its support for sugar cane ethanol, which now provides nearly half the fuel for Brazil’s cars. The mandatory ethanol blend in gasoline ranges from 20 to 30 percent, depending on availability. But ethanol is pretty much only in cars. Trucks ranging from 18-wheelers for hauling merchandise to municipal busses that get people to work run on diesel. It made sense to do the same thing with diesel, which Brazil has to import large amounts of at considerable costs.

The ideal was for it to work out like the sugar cane ethanol program, but the moral quandary is quite different. Sugar does not feed people, it is in fact making people sick and is starting to be regarded in some circles as toxic. There are some lame arguments about how sugar cane ethanol is driving Amazon deforestation – I say lame because sugar takes up 2 percent of Brazil’s arable land is far away from being the primary driver of rainforest destruction.

Soy is a different animal. It’s a primary provider of cooking oil, it’s a large source of protein, and its price can ripple into the prices of products throughout the food chain. Chicken and cattle feed often comes from soy. And according to at least one study I’ve seen, the climate merits of soy-based biodiesel can be about a wash depending on what type of fertilizers and tilling processes are used. And soy appears to be the only way to go -- Brazil’s efforts to make biodiesel out of new and untested crops that grow on marginal lands have been a real disaster.

Meanwhile the industry is getting antsy. Biodiesel makers want the minimum blend to go from five percent to 15 or 20 percent. They’ve got idle capacity, they’re not sure what to do with workers, their loans are coming due, their venture capitalists want to get into other things. They’ve been invited to a party and now being told by their hosts to wait outside in the rain until they figure out if the party’s actually going to happen.

Food vs. fuels is a difficult nut for Brazil to crack. The issue is just too easily politicized, the Manichean mantras of “feed people, not cars” so emotionally charged in a world that faces significant problems with hunger, and yet so ignorant of how food and energy systems actually intersect. I get the sense Brazil was very much stung by this debate, genuinely hurt by the widespread perception they were sacrificing the environment and the food of the world’s poorest in order to fuel their middle class’ driving habits. The criticism reached a fever pitch at the height of the commodities boom in 2007 and 2008, and I think was what spurred these maligned experiments in growing castor beans and jatropha for biodiesel. I believe there are genuine merits for moving soy out of the mouths of chickens and cows and into the tanks of trucks that could deliver healthier food for a growing population. But that would of course only work if the world would agree to give up some of their hamburgers and chicken fingers.

Brazilian officials have a tough choice to make on this one. I don’t know which way they’ll go, and I don’t envy them.

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