Curiously, only one factor connects all these disparate events: biofuels.
Twenty years ago, no one could have predicted that an electric vehicle manufacturer could become the richest man in the world. Without battery-powered cars, replacing petrol and diesel with plant-based alternatives seemed like the best way to tackle emissions from road transport. Since then, a technological revolution has upended what we thought we knew about energy-efficient vehicles – but the blending mandates that ensure a growing share of bioenergy in the world’s fuel pumps have remained in place and even been improved.
As a result, an industry that has always had questionable benefits is now beginning to stand in the way of cleaner modes of transport. Worse still, the pressure it places on the planet’s limited agricultural land hampers our ability to feed the world’s poorest. It’s time to start dismantling the pipeline connecting the farms to the gas tanks before it does more harm.
Look across the biggest vehicle markets, and biofuel blend mandates are everywhere. In the United States, with the second largest national fleet, ethanol derived primarily from corn accounts for more than 10% of all gasoline sold. India, the second largest market, blends 7.5%, largely from sugar cane. Indonesia and Brazil, which come next, now require blends of 30% and 27%, respectively. Only China, the largest national market of all, has a lower rate of around 2.1%. The European Union, larger even than China, demands a mixed mandate of 10% across the bloc.
There is a problem with such warrants. If supply and demand imbalances drive up the cost of corn, sugar or vegetable oils too much, most industrial and household consumers will work hard to find alternatives better suited to their budget. This destruction of demand helps rebalance the market and bring costs down to affordable levels. Fuel blenders rarely have so much leeway: if they are below the prescribed target, they must buy additional bioenergy at any cost to make up the shortfall.
This is leading to a situation where more and more of the world’s agricultural land is devoted to the production of road fuel. About two-fifths of US corn and soybean crops now end up burning in engines. Even Brazil, whose sugarcane-based ethanol is considered one of the most climate-beneficial in the world, is increasingly dependent on imports of dirtier corn-based ethanol from the United States. United, because the demand exceeds the production capacity of its own farms. Meanwhile, the 10 billion liters of biodiesel Indonesia expects to consume this year will use nearly a quarter of its palm oil harvest and about a seventh of the world’s total.
The trade-offs involved with 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 the climate impact of gasoline, falling to about half for sugarcane ethanol. When mixed at a rate of 10% or less, these numbers seem even less significant, resulting in an emission reduction of a few percent or so. Palm biodiesel, on the other hand, can lead to emissions twice as high as those of fossil fuels, thanks to the destruction of tropical forests necessary for each new plantation.
When electric cars were a pipe dream, even incremental emissions improvements to entire national vehicle fleets were worth it. But by the end of this year, there will be around 25 million plug-in cars among a global fleet of one billion people. Now it’s the growing share of battery-powered cars on the road that will do the heavy lifting when it comes to reducing emissions. The biofuels lobby, which has at times teamed up with Big Oil to oppose government incentives for electrified transport, is increasingly emerging as a hindrance rather than a help.
The world will continue to need biofuels for the foreseeable future. In heavy trucking and aviation, where there are still few prospects for electrification, it may be the only alternative we have to traditional fossil fuels. But making the most of limited agricultural land, while minimizing the pressure it places on the cost of food for the world’s poorest, will force us to dismantle the mandates that have placed bioenergy at the heart of feeding passenger cars around the world.
This change will draw howls of opposition from those who have benefited from the biofuels boom. Taking them can’t come soon enough.
This column does not necessarily reflect the opinion of the Editorial Board or of 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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