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It’s Time to Get Biofuels Out of Your Gas Tank

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The global trade in the cheapest foods is grinding to a halt.

In April, Indonesia temporarily banned exports of palm oil, cutting off India from one of its biggest sources of imported nutrition. India, in its turn last month, set a ceiling on exports of sugar, helping to keep more calories in the domestic market. Sugar is now hovering around its highest price in five years, while palm oil and soybean oil are at record levels.

Surprisingly enough, a single factor connects all of these disparate events: biofuels.

Two decades ago, no one could have predicted an electric vehicle manufacturer might end up as the world’s richest man. Without battery-powered cars, replacing gasoline and diesel with plant-derived alternatives seemed like the best way of tackling emissions from road transport. Since then, a technological revolution has overturned what we thought we knew about energy-efficient vehicles — but the blending mandates that guarantee a rising share of bioenergy in the world’s fuel pumps have stayed in place, and even been enhanced. 

As a result, an industry that always had questionable advantages is now starting to be an impediment to cleaner modes of transport. Worse, the pressure it’s putting on the planet’s limited farmland is hampering our ability to feed the world’s poorest. It’s time to start dismantling the pipeline connecting farms to gas tanks before it does any more harm.

Look across the largest vehicle markets, and biofuel blending mandates are everywhere. In the US, with the second-largest national fleet, ethanol derived mostly from corn comprises more than 10% of all gasoline sold. India, the next-largest market, blends in 7.5%, largely from sugarcane. Indonesia and Brazil, which come next, now require mixes of 30% and 27%, respectively. Only China, the largest national market of all, has a lower rate of around 2.1%. The European Union, bigger even than China, requires a 10% blending mandate across the bloc.

There’s a problem with such mandates. If supply-demand imbalances push up the cost of corn, sugar or vegetable oils too much, most industrial and household consumers will work hard to find alternatives that better suit their budgets. That demand destruction helps rebalance the market and bring costs back to affordable levels. Fuel blenders rarely have so much discretion: If they’re below the mandated target, they must buy additional bioenergy at any price to make up the shortfall.

That’s leading to a situation where the world’s farmland is increasingly being given over to producing road fuel. Roughly two-fifths of America’s corn and soybean crops now end up burned in engines. Even Brazil, whose sugarcane-based ethanol is reckoned to be some of the world’s most beneficial in climate terms, is increasingly dependent on imports of dirtier corn-based ethanol from the US, as demand exceeds the productive capacity of its own farms. Meanwhile, the 10 billion liters of biodiesel that Indonesia expects to consume this year will use up nearly a quarter of its palm oil crop, and roughly one-seventh of the global total.

The trade-offs involved in biofuels are complex, and often less beneficial than they first appear. Once land-use changes are taken into account, corn-based ethanol has about two-thirds of the climate impact of gasoline, falling to about half for sugarcane ethanol. When blended down at a rate of 10% or less, those numbers look even less significant, resulting in lowered emissions of a few percent or so. Palm biodiesel, meanwhile, can result in emissions twice as high as from fossil fuels, thanks to the destruction of tropical forests that’s necessary for each new plantation.

When electric cars were a pipe dream, even incremental improvements in the emissions of entire national vehicle fleets were worthwhile. But by the end of this year there will be around 25 million plug-in cars among a billion-strong global fleet. From now on, it’s the rising share of battery-powered cars on the roads that will do the heavy lifting of emissions reduction. The biofuels lobby, which has at times teamed up with Big Oil to oppose government incentives for electrified transport, looks increasingly more like a hindrance than a help.

The world will continue to need biofuels for the foreseeable future. In heavy trucking and aviation, where there’s still little prospect for electrification, it may be the only alternative we have to traditional fossil fuels. But making the most use of limited farmland, while minimizing the pressure it puts on the cost of food for the world’s poorest, will require us to dismantle the mandates that have made bioenergy central to fueling passenger cars across the world.

That change is going to attract howls of opposition from those who’ve done well from the biofuel boom. Taking them on can’t happen soon enough.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

David Fickling is a Bloomberg Opinion columnist covering energy and commodities. Previously, he worked for Bloomberg News, the Wall Street Journal and the Financial Times.

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