Vancouver, Canada (GLOBE-Net) – According to a new report published jointly by the Organization for Economic Cooperation and Development (OECD) and the United Nations’ Food and Agriculture Organization (FAO), biofuels may actually being doing more harm than good.

Biofuels, which can be produced from corn, palm oil, sugar cane and other agricultural products, are considered by many as a cleaner and cheaper way to meet the world’s soaring energy needs than greenhouse-gas emitting fossil fuels. However, the OECD-FAO Agricultural Outlook 2007-2016 says that biofuels may “offer a cure that is worse than the disease they seek to heal.”

Even in the ‘best-case scenario’, biofuels will only be able to achieve a 3% reduction in energy-related CO2 emissions by 2050, thus failing to reduce petroleum fuel consumption, states the OECD report.

The biofuels industry is growing at a significant pace. The Canadian government has mandated a 5% ethanol blend in gasoline by 2010 and a 2% bio-diesel blend in on-road diesel and heating-oil by 2012. The Outlook notes that in Canada, substances harvested to produce the fossil fuel substitutes, ethanol and bio-diesel, will grow by 150% this year.

Similarly, production of biofuels is expected to double in the United States between 2006 and 2016. In the European Union the amount of oilseeds used for biofuels is set to grow from just over 10 million tonnes to 21 million tonnes over the same period. Brazil and China are also set to have major increases in ethanol production over the next decade.

Since the advent of biofuel production, a number of environmental issues related to the resource have been revealed. Environmentalists have noted that large amounts of land in Asia are being cleared to produce ethanol, at times causing higher greenhouse gas emission levels than fossil fuel use might cause. Biofuel production also involves the use of significant amounts of fresh water required to maintain crops.

Another relevant issue has emerged in the Gulf of Mexico, where nutrients used to grow corn have created an oxygen absorbing algae, leaving thousands of square kilometres of land in an oxygen-poor dead zone. The potential for biofuel production to generate similar dead zones in other parts of the world is disconcerting for both environmentalists and decision-makers.

“When acidification, fertilizer use, biodiversity loss and toxicity of agricultural pesticides are taken into account, the overall environmental impacts of ethanol and bio-diesel can very easily exceed those of petrol and mineral diesel,” the Outlook says.

The Outlook also claims that the surge in biofuel production is causing fundamental changes to agricultural markets that could drive up world agricultural prices. While acknowledging that factors such as droughts and low stocks largely explain recent hikes in farm commodity prices, the Outlook suggests that increased biofuel production could inflate the prices for many products in the long-term.

The report is highly critical of current government policy bias towards biofuels, noting that subsidies and tariff-protection measures will drive land owners to divert land away from food or feed production, to the production of energy biomass, thereby driving up food prices.

“As long as environmental values are not adequately priced in the market there will be powerful incentives to replace natural ecosystems such as forests, wetlands and pasture land with dedicated bio-energy crops,” states the study, concluding that subsidies should be phased out - with the money reinvested in research on second-generation biofuels.

The report points out that higher commodity prices are a particular concern for net food importing countries as well as the urban poor. And while higher feedstock prices caused by increased biofuel production benefits feedstock producers, it means extra costs and lower incomes for farmers who need the feedstock to provide animal feed.

In May 2007, the United Nations offered similar warning about biofuels in its first UN Report on Sustainable Bioenergy:

“Use of large-scale monocropping could lead to significant biodiversity loss, soil erosion and nutrient leaching,” the Report said, adding that many biofuel crops require the best land, lots of water and environmentally-damaging chemical fertilizers.

Gustavo Best, a biofuels expert at the Food and Agriculture Organization, noted earlier this year that while individual U.N. agencies had previously issued small-scale reports on biofuels, they were largely optimistic and did not highlight negative consequences because they were not yet known.

However, now both the FAO, the OECD, and the UN are calling for caution in the bioenergy industry.

“Governments should cease to create new mandates for biofuels and investigate ways to phase them out,” the Outlook says, preferably by replacing them with technology-neutral policies such as a carbon tax. Such policies will more effectively stimulate regulatory and market incentives for efficient technologies,” concludes the report.

“A liter of gasoline or diesel conserved because a person walks, rides a bicycles, carpools or tunes up his or her vehicle’s engine more often is a full liter of gasoline or diesel saved at a much lower cost to the economy than subsidizing inefficient new sources of supply,” it said.

As a relatively young industry, it is difficult to predict or quantify the precise impacts of biofuel production, or to objectively weigh benefits and costs. One thing, however, seems clear: environmentally progressive or not, biofuels are not a panacea for the burning of fossil fuels.

A summary version of the OECD-FAO Agricultural Outlook 2007-2016, can be viewed here: http://www.oecd.org/dataoecd/6/10/38893266.pdf

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For More Information: OECD