Energy alternatives: can they make a significant difference?

Middle East, The, August-Sept, 2008

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DOOMSDAY SCENARIOS OF the world's oil supplies reaching a peak and then declining have helped to fuel financial speculation in crude oil and driven prices to record highs. They have also helped to raise expectations that alternative sources of energy--everything from ethanol and biodiesel to nuclear, solar, wind and coal--can provide substantial new supplies in the coming decades. But new research shows that such scenarios and expectations are misplaced. While the use of alternative fuels will grow significantly, it will rail to keep pace with global rises in demand. As a result, the world will need more, not less, crude oil, especially from Saudi Arabia and other Opec producers, as well as much more natural gas.

At present, the world's main energy comes first and foremost from oil, which provides just over a third of the total. Coal accounts for about one-fourth, followed by gas at one-fifth. Alternatives to fossil fuels include biofuels, nuclear energy, solar, wind and hydro-electric power and other "renewable" energies. Of these, biofuels are the most important, accounting for about 10% of current global energy use, according to figures produced by the International Energy Agency (IEA) in Washington D.C.

The World Bank had already estimated earlier this year that 100m people have been pushed below the poverty line because of the big jump in food prices. Many of these are in the Arab world, in countries such as Egypt--the world's number one importer of wheat--Jordan, Iraq, Yemen, Algeria, Morocco and Mauritania. Kemal Dervis, the head of the United Nations Development Programme (UNDP) and former Turkish economy minister, said in May that the urban poor in the developing countries were facing an "inflation tsunami, mainly from soaring food prices, which had made them up to 25% poorer in less than a year.

The World Bank's study has not yet been released officially, and there are suspicions that its publication has been held up since April because it might embarrass the Bush administration, the London Daily Telegraph reported in early July. The US Secretary of Agriculture, Ed Schafer, had maintained in June that the production of biofuels contributed less than 3% to the recent rise in world food prices.

His remarks came in Rome, at a summit of the Food and Agriculture Organisation (FAO) at which its director-general, Jacques Diouf, attacked the Bush administration and other western governments. "Nobody understands," he argued, "how 11 to 12bn dollars a year in subsidies in 2006, and protective tariffs, have had the effect of diverting 100m tonnes of cereals from human consumption, mostly to satisfy a thirst for fuel for vehicles."

Diouf was referring to the annual cost of subsidies paid by the US government to its farmers to produce ethanol from corn and maize, and to the fact that the production of ethanol derived from corn in the US had risen nearly threefold in just four years, from 3.5m gallons in 2004 to an estimated 9m gallons this year. That compares with a rise in the global production of biofuels of just over twofold, from 8m gallons in 2004 to about 18m gallons in 2008, according to estimates produced by the University of Minnesota. By the end of this year, its researchers forecast, ethanol production in the US could consume 30% or more of the country's entire corn crop. Given that the US is the world's most important exporter of grains and other foodstuffs, this diversion of land to produce fuels means that there is both less corn to export as well as other staples, such as wheat and soyabeans that are diverted to other purposes, such as feeding animals to produce meat.

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"Biofuels are responsible for 30m more people going hungry in the world," Ben jamin Senauer, Professor of Applied Economics at the University, has said, adding that if the World Bank figures are correct, the figure could be far higher. Of this 30m, he estimates that some 2.4m are children aged under rive years, of which up to half could die due to malnutrition by the end of this year.

The World Bank's critical assessment follows others from respected global institutions. The International Monetary Fund, in contrast to Schefer's estimates, says that biofuels are responsible for up to 30% of the rise in world food prices. An FAO document prepared for the summit in June maintained that: "Biofuels accounted for 59% of the increase in the global use of coarse grains and wheat between 2005 and 2007, and 56% of the increase in vegetable oils." For households and families in many parts of the developing world, who are dependent on bread and cooking oils for a large part of their calories and dietary needs, this diversion of agricultural production from foods to fuels has produced not only higher costs but shortages that have made the difference between basic nourishment and hunger, several international aid agencies have pointed out.

Yet another study, commissioned by the UK government earlier this year, calls for a complete reassessment of current US and European policy on the cultivation of biofuels to replace petrol, diesel and other fossil fuels. Chaired by Professor Ed Gallagher, head of Britain's Renewable Fuels Agency, a panel of experts concluded that the rush to develop biofuels had played a "significant" role in the dramatic rise in global food prices.