Features International Sugar Journal

Distant thunder reignites the fate of biofuels

One of the immediate consequences of the Russian invasion of Ukraine has been rocketing food prices as global markets factored in the loss of wheat and maize exports from one of the world’s largest grain exporters. This has invariably triggered the “food versus biofuel” debate and invited the re-examination of the sector.

“The production of biofuels uses about 4 per cent of arable land worldwide, corresponding to 32 per cent of world sugar production, 12 per cent of corn, and 15 per cent of vegetable oils. There is significant interchangeability between crops grown for biofuels, animal feed, and food, even though these are not perfect substitutes for each other. A 50 per cent reduction in the amount of grain used for biofuels in Europe and the US, two leading biofuel producers, would compensate for all the lost exports of Ukrainian wheat, corn, barley and rye, according to the World Resources Institute.”1

Recent press reports indicate that Germany and Britain are pushing for temporary waivers on biofuels mandates to check the soaring food prices. In addition, on 11th March, the Czech Republic ended its blend mandate for ethanol in gasoline.

In the big scheme of things, biofuels represent only a tiny percentage of the transport fuel market. They were sold as an answer to curbing greenhouse gas emissions. Arguably, the original intent was only a cover for two major industries.

In Brazil, National Alcohol Programme ‘ProAlcool’ introduced in 1975 was in response to rocketing oil prices in the ‘70s. The intention was to substitute gasoline with cane-based ethanol in automobiles. In December 2017, the Brazilian Senate approved the new national biofuels policy RenovaBio. One of the central rationales of RenovaBio is contributing to Brazil’s compliance with the Paris Agreement on Climate Change. The intention is to enable Brazil to meet its goals, agreed upon at COP 21, in Paris, regarding the 43% reduction in greenhouse gas emissions (GHG) based in 2005. But if you scratch the surface, the intention was to reduce sugar production so the exposure in the highly volatile export market would be reduced.

India’s biofuel policy enacted in August 2018 reflected Brazil’s – cutting down oil imports and acceding to the Paris Climate deal it is a signatory to. However, as with Brazil, the main intention has been to cut down sugar production. This is largely because India is a residual dump exporter of sugar. It has been taken to WTO by the likes of Brazil – structural exporters of sugar – for subsidising sugar exports and impacting global prices. Often cast as a pariah by the structural exporters, significant expansion in cane-based biofuels production would help check the surplus sugar production.

In the US, only 6% of fuel sold is ethanol. The programme to produce biofuels was motivated by environmental concerns – reducing GHG. While, unlike Brazil and India, there is no underlying cynical motive for pursuing the policy, there is the realisation that global oil prices aren’t going to be impacted much if the industry does not exist. The government continues to fund R&D programmes focussing on biofuels. But this is as much to support the overall sector while it still flourishes as it is popular with farmers supported by the powerful agribusiness lobby.

From the outset, biofuels have been a politically-driven commodity. Governments can turn off the tap but are not likely to do so because the investment in the infrastructure has been significant. Biofuels have arguably been a stopgap measure until the arrival of disruptive technology. The electric car is one. The revolutionary lithium-metal batteries developed by Quantumscape and Cuberg, which would supersede the current lithium-ion batteries by between 50 and 80%, increasing the mileage to some 400 miles from a single charge, would doubtless be a game-changer and help transform the automobile market. As the developed countries decarbonise their economies, the fate of biofuels will doubtless be sucked into the vortex of fossil fuel demise.


1 https://www.ft.com/content/471d4513-176c-4837-a7d4-7ef2609b720a