Friday, April 4, 2008

[PBN] World cooling on biofuel solution to climate change

From: AFP

Date: 2/4/2008

JAKARTA (AFP) — Once a golden promise in the fight against climate
change, biofuels are fast losing their lustre as high demand for
essential crops drives land clearing and pushes up the price of food.

Biofuels made from food crops such as corn, sugar, soybeans and oil palm
burn cleaner than fossil fuels, but experts say high demand is sending
ripples through the world economy, and could be doing the environment
more harm than good.

Rudy Gosal, a 36-year-old courier who queued with hundreds of others in
Indonesia's capital in March to buy government-subsidised cooking oil,
is one of millions feeling the pinch of the push towards biofuels.

After the latest rise earlier this year, the cost of cooking oil in
Jakarta jumped a massive 70 percent, to around 12,000 rupiah (1.31
dollars) a litre.

Cooking oil in much of the world comes from palm oil. And, in recent
years, mostly European demand for biodiesel has helped push the price to
record highs.

Gosal is relatively lucky -- he supports his wife and three children on
1.6 million rupiah a month, nearly twice the minimum wage here.

But the latest price increase still meant he could afford less tofu to
go with his family's rice. Another likely rise could mean doing without
a twice-monthly luxury: meat.

"If there's a price rise, our salaries don't go up but the cost jumps.
It's out of balance," Gosal said.

Demand for palm oil has also been a major source of land clearing here.

The spread of palm oil plantations into forests and highly sensitive
peatlands on Sumatra and Borneo islands have helped make Indonesia the
world's third-highest greenhouse gas emitter.

The peatlands are a swampy store of semi-decomposed vegetation up to
several metres (yards) deep, and clearing and draining them releases
massive amounts of carbon.

A study published in the journal Science in February found it would take
around 86 years for biodiesel made from palm oil grown on cleared
tropical lowland forest to repay the "carbon debt" generated from
clearing the land.

For biodiesel from cleared peatlands, the study found, the debt would
take more than 840 years to repay.

"Certainly the carbon debt from converting peatlands is far and away
larger than in any of the other ecosystems we considered," said Jason
Hill, an economist at the University of Minnesota and study co-author.

But Indonesia appears intent on running up that debt. Already at least
10 million of its 22.5 million hectares (55.6 million acres) of peatland
have been cleared, according to the Centre for International Forestry
Research, and the clearing shows no sign of slowing.

Shifting crops over to biofuels can also have environmental and social
consequences that cross borders, said Timothy Searchinger, an
environmental law expert from Georgetown University in the United States.

"Whenever cropland in some countries is diverted to fuel, the price goes
up and farmers in other countries produce more, in significant part by
expanding into forest and grassland," he said.

In the United States, for example, government subsidies for corn ethanol
have pushed up global corn prices to levels unseen in decades, spurring
a 15 percent growth in land planted with the crop last year.

Less land devoted to crops like soybeans has led to higher global prices
that may spur farmers in Brazil to clear more of the Amazon to take
advantage of the windfall -- thus increasing carbon emissions, said Joe
Fargione, another author of the Science study.

Meanwhile, in Jakarta's side streets, it's not only cooking oil that is
becoming more expensive. Record global corn prices mean high prices for
livestock feed, making protein sources such as eggs -- and Gosal's
family's twice-monthly meat -- an increasingly rare luxury.

Siegfried Falk, an analyst with German-based consultancy Oil World, said
that despite the hype, palm oil only makes up between 10 and 20 percent
of biodiesel used in the European Union, the largest market for the fuel.

Most European biodiesel comes from rapeseed oil which is less efficient
to produce but is protected by tax incentives, Falk said.

Despite this, he said, palm oil prices are rising as investors react to
high oil prices by bidding up palm oil futures as a possible alternative.

"A lot of people in the market are hoping that (expensive fossil fuel)
creates substantial demand in palm oil, and oils in general," Falk said.

As a result, biofuel producers are struggling with the increased cost of
their raw material.

Indonesian producers are currently only making a fraction of the one
million tonnes (1.1 million short tons) of biodiesel they have capacity
for, said Yohan Soelaiman, a manager at local producer Eterindo.

"Our capacity at the moment is 240,000 tonnes per year and we're only
running 20,000 tonnes," he told AFP.

"We cannot export now because the price (of palm oil) is so high."

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