Biofuels are an example of what not to do

The wrong shade of green

“THIS is the craziest thing we're doing,” says Peter Brabeck, the chairman of Nestlé. He is talking about government biofuels targets which require a certain proportion of national energy needs to be met from renewable fuels, most of them biofuels (ie, ethyl alcohol made from crops, usually maize or sugar).

The targets are ambitious. Brazil, Japan, Indonesia and the European Union all say biofuels must supply 10% of energy demand for transport by 2020. China's target for that date is 5%. America aspires to meet 30% of such needs from biofuels by 2030.

Because the energy market is worth vastly more than the market for food, even relatively small targets translate into huge demand for crops. Ethanol currently accounts for just 8% of America's fuel for vehicles, but it consumes almost 40% of America's enormous maize crop. World ethanol production increased fivefold between 2000 and 2010 but would have to rise a lot further to meet all the targets. The FAO reckons that, if this were to happen (which seems unlikely), it would divert a tenth of the world's cereal output from food to fuels. Alternatively, if food-crop production were to remain stable, a huge amount of extra land would be needed for the fuels, or food prices would rise by anything from 15-40%, which would have dreadful consequences.

Not all ethanols are the same. Brazil, the world's second-largest producer, makes its fuel mainly from sugar. Processing plants can go back and forth between ethanol and crystallised sugar at the flick of a switch, depending on prices. Brazil gets eight units of energy for every unit that goes into making it, so the process is relatively efficient and environmentally friendly. In contrast, American ethanol produces only 1.5 units of energy output per unit of input, but its inefficiency is underwritten by government subsidies and high tariff walls. American farmers say that government demand for ethanol is starting to abate, so the impact on maize supplies and prices is more modest now.

All the same, one of the simplest steps to help ensure that the world has enough to eat in 2050 would be to scrap every biofuel target. If all the American maize that goes into ethanol were instead used as food, global edible maize supplies would increase by 14%.

But that is not going to happen. Biofuels have not only diverted crops to fuel but have also diverted public subsidies to farmers without provoking too many objections. Governments are unlikely to abandon biofuels merely because they are inefficient and damaging. “We can't produce biofuels and feed the world's increased population,” says Mr Brabeck. But for the moment we will have to.