Fuel from food? The feast is over

In future years we may look back at the Great Mexican Tortilla Crisis of 2006 as the time when ethanol lost its vroom.

Right or wrong, that was when blame firmly settled on biofuels for the surge in food prices. The diversion of American corn from flour to fuel put the flat corn bread out of reach for Mexico's poorest.

Two years later, the search is on for ways to keep corn on the table rather than in the gas tank. Moving away from food crops, the biofuel of the future may come from the tall grass growing wild by the roadside, from grain stalks left behind by the harvest, and from garbage dumps and dinner table scraps.

Carlo Bakker's tiny biofuel operation, World Mobile Plants, avoids edibles. He says his mini-refinery, loaded into a 40-foot shipping container on a flatbed truck, roams South Africa making biodiesel fuel from used cooking oil, or from sunflower seeds or the jatropha shrub, which grows in poor soil with little water. He says he plans eventually to use organic household waste as well.

Bakker says one mobile unit can make 260,000 gallons per year, which he sells for the equivalent of US$3.79 per gallon, on a par with regular diesel prices.

"We don't compete with the food chain," Bakker said during a biofuels conference in Amsterdam. "We see opportunities not only to make money but to help people."

Governments encouraged the switch to alternative fuels in recent years to lessen dependence on imported oil. But producers are taking a hard look at the food crops used as raw material for these so-called first-generation biofuels. After all, they too had to pay more as prices spiked.

"They got burned. They don't want to go through that problem again," said Vicky Sharpe, director of Sustainable Development Technology Canada, which administers a US$1 billion Canadian government fund to invest in clean technologies.

Universities, corporate research laboratories and startup companies are pouring millions of dollars into finding ways to break down woody or grassy biomass for cellulosic ethanol - or second-generation biofuel - that would unshackle ethanol from the volatile food market.

"You will see a movement from first- to second-generation biofuels, because the second generation uses waste streams. They don't enter the food-versus-fuel debate," said Sharpe. "This is just stuff that would be wasted otherwise."

But second-generation technology is still young, and Sharpe believes commercial plants are still several years away.

Food prices rose steadily for the past three years until they peaked last June. Before they retreated, the World Bank said corn prices had tripled since January 2005. Rice and wheat weren't far behind.

Around the world, the poor - U.N. figures say the number of undernourished is approaching 1 billion - protested that they were hungrier than ever. Food riots erupted in 18 countries, from Bangladesh to Haiti. Some 75,000 Mexicans marched in their capital, accusing the government of "stealing tortillas." Some countries imposed export bans to hoard their grain stocks.

World grain harvests had soared, reaching a record 2.3 billion tons last year. But demand continued to grow, not only for biofuel but for animal feed to satisfy an increasingly meaty diet for the growing middle class in India and China.

Just how much influence biofuels had on food prices is debatable. The U.S. Department of Agriculture said biofuel production was responsible for just 3 percent of the global price increases. It said the real culprits were oil prices, which pushed up fertilizer and transportation costs, and the sharp drop in the dollar's value.

On the high end, a World Bank report in June calculated that 70-75 percent of the price rise was due to biofuels and the cascading effect they had on grain stocks, export bans and investor speculation.

"The moderation of global prices over the last few months is scant consolation to the millions who are still facing high domestic prices and have cut back on eating nutritious food and investing in their child's schooling," a World Bank report said in October.

Energy policies played a role. The European Union last year mandated a 10 percent biofuel mix in transport fuels by 2020, and the U.S. set a production target of 36 billion gallons of ethanol by 2022 - compared with 6.5 billion last year, which already consumed almost one-quarter of the U.S. corn crop.

The EU mandate is being reconsidered, and calls are being heard in Washington to rethink the U.S. goal.

Some producers say critics unfairly lump all biofuels together.

"You should look at biofuels as separate kinds of fuel," says Uwe Jurgensen, head of the Association of Dutch Biofuels Producers.

Brazil's massive ethanol industry, based on sugarcane grown on just 1 percent of its arable land, has little impact on edible sugar.

Biodiesel, the biofuel of choice in Europe, is made largely from rapeseed grown on disused land, Jurgensen said. Only 40 percent of the crushed rapeseed is refined into biodiesel, while the rest is processed into the food chain as animal feed.

Blaming biofuels for exploding food prices "was an easy argument. Either you eat or you drive. If you look at it a bit further, you see that is not the case," Jurgensen said, speaking at a gleaming, soon-to-be-open US$110 million biodiesel factory at Rotterdam port.

Peter van der Gaag agrees. The head of BER-Rotterdam, building a plant in the port city to convert 350,000 tons of wheat a year into ethanol and gas, said just 2 to 3 percent of the world's wheat goes toward ethanol. How much impact can it have on the price of bread? he asked.

"Biofuels are certainly not to blame for poverty, but it is easy for environmentalists to give a bad name to biofuels," he said.

In fact, environmentalists are skeptical of even nonfood biofuels, which consume scarce water and are sometimes cultivated on fertile cropland.

"If biofuels were grown on degraded land, that could be a good thing. But it has to be seen with a lot of caution," said Frauke Thies, a Greenpeace campaigner for renewable energy. "We are not opposed to biofuels in principle, but the practices of today are not sustainable."

Even as scientists work on second-generation answers, foodstuffs are likely to remain in the fuel chain for years to come because of government subsidies. In the United States, biofuels have been getting tax credits since 1978. Globally, the U.N. Food and Agriculture Organization estimates governments supported biodiesel and ethanol with up to US$12 billion in 2006.

Last year, 139 U.S. ethanol plants produced fuel equal to 5 percent of U.S. gasoline consumption. As of July, however, just 33 cellulosic ethanol plants were in the pilot or demonstration phase.

Corn ethanol costs US$1 a gallon to make, but cellulosic fuel from stalks, leaves and straw costs US$5 to US$6. It requires the injection of enzymes to convert plant matter into sugars that are then fermented into ethanol.

Michigan State University's Mariam Sticklen is one scientist trying to reduce that cost, to about US$2 a gallon, by genetically engineering crops to produce their own enzymes.

"It's still early days," she said, "but the world needs a no-food-for-fuel policy."

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On the Net:

UN Food and Agriculture Organization: http://www.fao.org/

World Bank: http://www.worldbank.org/html/extdr/foodprices/