Box 7: Biofuels and the World Trade Organization

The World Trade Organization (WTO) does not currently have a trade regime specific to biofuels. International trade in biofuels falls, therefore, under the rules of the General Agreement on Tariffs and Trade (GATT 1994), which covers trade in all goods, as well as other relevant WTO Agreements such as the Agreement on Agriculture, the Agreement on Technical Barriers to Trade, the Agreement on the Application of Sanitary and Phytosanitary Measures and the Agreement on Subsidies and Countervailing Measures. Agricultural products are subject to the GATT and to the general rules of the WTO insofar as the Agreement on Agriculture does not contain derogating provisions.

Key trade-related issues include the classification for tariff purposes of biofuel products as agricultural, industrial or environmental goods; the role of subsidies in increasing production; and the degree of consistency among various domestic measures and WTO standards.

The Agreement on Agriculture (AoA) covers products from Chapters 1 to 24 of the Harmonized System, with the exception of fish and fish products and the addition of a number of specific products, such as hides and skins, silk, wool, cotton, flax and modified starches.

The discipline of the AoA is based on three pillars: market access, domestic subsidies and export subsidies. One of the main features of the AoA is that it allows Members to pay subsidies in derogation from the Agreement on Subsidies and Countervailing Measures.

The Harmonized System classification affects how products are characterized under specific WTO Agreements. For example, ethanol is considered an agricultural product and is therefore subject to Annex 1 of the WTO AoA. Biodiesel, on the other hand, is considered an industrial product and is therefore not subject to the disciplines of the AoA. Paragraph 31(iii) of the Doha Development Agenda has launched negotiations on “the reduction or, as appropriate, elimination of tariff and non-tariff barriers to environmental goods and services”. Some WTO Members have suggested that renewable energy products, including ethanol and biodiesel, should be classified as “environmental goods” and therefore subject to negotiations under the “Environmental Goods and Services” cluster.

Source: based on FAO, 2007b and GBEP, 2007.

Source: FAO, The State of Food and Agriculture, Biofuels: Prospects, Risks and Opportunities (2008) , Chapter 4, p.52

Liquid Biofuels for Transport Prospects, risks and opportunities

TABLE 1: Biofuel production by country, 2007

TABLE 2: Biofuel yields for different feedstocks and countries

TABLE 3: Hypothetical potential for ethanol from principal cereal and sugar crops

TABLE 4: Voluntary and mandatory bioenergy targets for transport fuels in G8+5 countries

TABLE 5: Applied tariffs on ethanol in selected countries

TABLE 6: Total support estimates for biofuels in selected OECD economies in 2006

TABLE 7: Approximate average and variable rates of support per litre of biofuel in selected OECD economies

TABLE 8: Energy demand by source and sector: reference scenario

TABLE 9: Land requirements for biofuel production

TABLE 10: Water requirements for biofuel crops

TABLE 11: Import bills of total food and major food commodities for 2007 and their percentage increase over 2006

TABLE 12: Net importers of petroleum products and major cereals, ranked by prevalence of undernourishment

TABLE 13: Share of net staple food-seller households among urban, rural and total households

Box 1: Other types of biomass for heat, power and transport

Box 2: Biotechnology applications for biofuels

Box 3: Biofuel policies in Brazil

Box 4: Biofuel policies in the United States of America

Box 5: Biofuel policies in the European Union

Box 6: Main sources of uncertainty for biofuel projections

Box 7: Biofuels and the World Trade Organization

Box 8: Biofuels and preferential trade initiatives

Box 9: The Global Bioenergy Partnership

Box 10: Biofuels and the United Nations Framework Convention on Climate Change

Box 11: Jatropha – a “miracle” crop?

Box 12: Agricultural growth and poverty reduction

Box 13: Cotton in the Sahel

Box 14: Biofuel crops and the land issue in the United Republic of Tanzania

Figure 1: World primary energy demand by source, 2005

Figure 2: Total primary energy demand by source and region, 2005

Figure 3: Trends in consumption of transport biofuels

Figure 4: Biofuels – from feedstock to end use

Figure 5: Uses of biomass for energy

Figure 6: Conversion of agricultural feedstocks into liquid biofuels

Figure 7: Estimated ranges of fossil energy balances of selected fuel types

Figure 8: Support provided at different points in the biofuel supply chain

Figure 9: Biofuel production costs in selected countries, 2004 and 2007

Figure 10: Breakeven prices for crude oil and selected feedstocks in 2005

Figure 11: Breakeven prices for maize and crude oil in the United States of America

Figure 12: Breakeven prices for maize and crude oil with and without subsidies

Figure 13: Maize and crude oil breakeven prices and observed prices, 2003–08

Figure 14: Price relationships between crude oil and other biofuel feedstocks, 2003-08

Figure 15: Food commodity price trends 1971–2007, with projections to 2017

Figure 16: Global ethanol production, trade and prices, with projections to 2017

Figure 17: Major ethanol producers, with projections to 2017

Figure 18: Global biodiesel production, trade and prices, with projections to 2017

Figure 19: Major biodiesel producers, with projections to 2017

Figure 20: Total impact of removing trade-distorting biofuel policies for ethanol, 2013–17 average

Figure 21: Total impact of removing trade-distorting biofuel policies for biodiesel, 2013–17 average

Figure 22: Life-cycle analysis for greenhouse gas balances

Figure 23: Reductions in greenhouse gas emissions of selected biofuels relative to fossil fuels

Figure 24: Potential for cropland expansion

Figure 25: Potential for yield increase for selected biofuel feedstock crops

Figure 26: Potential for irrigated area expansion

Figure 27: Agricultural trade balance of least-developed countries

Figure 28: Distribution of poor net buyers and sellers of staple foods1

Figure 29: Average welfare gain/loss from a 10 percent increase in the price of the main staple, by income (expenditure) quintile for rural and urban households