Are Biofuels Behind Inflation?

According to Fischer-Boel, the rising food demand and dietary shift towards meat in emerging countries like China and India, and the bad weather that hit the EU, US, Canada, Russia, Ukraine and Australia in 2006 and 2007, have each had "an enormous impact on commodity markets".

Other "influences" include increasing speculation on food commodities, she said, pointing to the 15-fold increase in investments in commodity indexes over the past ten years. In February 2008 alone, 140 commodity-based financial products were launched, she noted, describing this is "the highest number ever, and double the number issued each month in 2006 and 2007".

According to Jeffrey Sachs, special adviser to United Nations Secretary-General, one third of the US maize crop in 2008 will be used to fill petrol tanks – representing a "huge blow to the world food supply".

But Fischer Boel insisted that the contribution of EU biofuels policy to the current global food crisis is a mere "drop in the ocean". The EU currently uses less than 1% of its cereal production to make ethanol, she pointed out. What's more, even though the bloc uses two-thirds of its rapeseed crop to make biodiesel, European rapeseed production accounts for only 2% of global oilseed demand, she said, "so this is not something to shake the markets".

She further insisted that the EU can meet its target of replacing 10% of all conventional transport fuels with biofuels by 2020 without putting an excessive strain on Europe's land resources or food and feed markets. Yield increases and the abolition of set-aside in the EU are expected to deliver an extra 46 million tonnes of cereal each year by 2020, she said, adding that countries like Russia, Kazakhstan and Ukraine could also raise their cereal output by as much as 70%.

Both Fischer-Boel and Sachs view second-generation biofuels, made from non-food materials such as crop waste, leaves and straw, as a key component of the biofuels debate.

According to the commissioner, EU biofuel policy should enable these promising new fuels to cover 30% of biofuel demand in 2020.

In the long term, "price rises are not an entirely bad thing," especially for developing counties, where many depend on farming for their livelihood, the commissioner argued. Although acknowledging that the sudden rise in prices had recently caused problems in the urban areas of developing countries, she said rapid aid could help deal with the problem.

But Sachs criticised the EU's ad hoc reaction to the global food crisis, saying poor countries needed structural solutions. "Rather than just shipping expensive food aid, we should be helping the poorest of the poor to grow more food," he told MEPs.

View the EurActiv story by clicking here.

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