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6. How could biofuel policies be improved?

• 6.1 What are the challenges of biofuel policies?
• 6.2 What principles should guide biofuel policies?
• 6.3 How could policies ensure environmental and social sustainability?

6.1 What are the challenges of biofuel policies?

Government incentives and support for biofuel production and use have been largely guided by national or regional interests rather than a more global perspective. The desire to support farmers and rural communities has been one of the strongest drivers.

There is a need for a more consistent set of policies and approaches, based on a clearer understanding of the economic, environmental and social implications, in order to balance the potential and risks.

These policies must be formulated in a situation of considerable uncertainty.

• The exact role of biofuels in future global energy supplies is unknown. Yet even if the contribution of biofuels to global energy supply remains small, it may still imply a considerable impact on agriculture and food security.
• The future economic viability of biofuels is uncertain, because it depends on fluctuating fossil fuel prices and on policy developments.
• Technological developments may also influence their profitability on the medium and long term. For instance, commercial competitiveness of second generation biofuel technologies may significantly improve the prospects for biofuel development.
• Replacing fossil fuels by biofuels is not guaranteed to lead to net greenhouse gas emission reductions. The impact depends on how biofuels are produced, transported and used, and the global impact on climate change is likely to be negative if large tracts of additional land are brought into cultivation.

Land requirements are too large to allow liquid biofuels to displace fossil fuels on a large scale; however they may still have a considerable impact on agriculture and food security. The unintended impacts of biofuels, especially on market prices and food-security have frequently been overlooked in policy discussions.

Increases in demand for farm output could boost rural incomes and stimulate rural development, but many poorer people will be disadvantaged by higher food prices and increased competition for land and water.

Biofuels are influenced by policies in agriculture, energy, transport, environment and trade, and these individual policies are not always coordinated. Biofuels can only contribute to policy objectives if their impact in each of these areas is considered. More...

6.2 What principles should guide biofuel policies?

Five guiding principles are proposed.

• (i) Biofuel policies must protect those who are poor and have insecure access to sufficient food. Priority should be given to the impact of higher food prices on vulnerable people in rural and urban areas who have to buy food, particularly in the least-developed countries.
• (ii) Policies should facilitate growth in developing countries by improving economic and technical efficiency and by creating conditions where poorer countries and small farmers can take advantage of future market opportunities.
• (iii) Biofuel policies should be environmentally sustainable. They should ensure that biofuels are produced in ways that are effective in reducing greenhouse gas emissions, while protecting land and water resources from depletion, environmental damage and pollution.
• (iv) Biofuel policies should seek to reduce existing distortions in biofuel and agricultural markets and avoid introducing new ones. They should also take into consideration unintended consequences that may go beyond national borders.
• (v) Policies should be developed with appropriate international coordination to ensure that the global system supports the goals of environmental sustainability, agricultural development and poverty and hunger reduction.

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6.3 How could policies ensure environmental and social sustainability?

Higher agricultural and food prices driven, among other things, by an increased demand for biofuels, are having negative impact on food security in food-importing developing countries, and especially on the many of the poorest households. A sustained effort is needed to protect the poor and food-insecure.

In the immediate context, the most vulnerable people may require direct food distribution, targeted food subsidies, cash transfers, and nutritional programmes such as school feeding. In the short to medium term, social protection programmes must be developed. In the medium to long term, higher food prices could be mitigated by increasing food supply provided that policy interventions do not disrupt trade flows and that investments are made in infrastructure for storage and transportation.

Higher prices for agricultural products can present opportunities for agricultural and rural development in developing countries, but sustained improvements in research, infrastructure, and access to credit and risk management instruments are also needed to increase productivity.

Measures should specifically address the needs of poor smaller farmers by securing their access to natural resources and by ensuring that their land rights are respected.

Policies must ensure that further expansion of biofuel production is environmentally sustainable and will provide a positive contribution to climate-change mitigation. Therefore, an improved understanding of how biofuels affect land-use change is urgently needed, since this can have a significant negative effect on greenhouse gas emissions.

Promotion of good agricultural practices could help to reduce the negative effects of expanded biofuel production. Sustainability criteria are needed for biofuels that do not create trade barriers, particularly for developing countries. There is a need for an appropriate international forum to debate and agree on sustainability criteria.

In OECD countries, subsidies for the production and consumption of liquid biofuels and trade protection measures such as tariffs have restricted market access for biofuel producers in developing countries. These incentives were added to pre-existent high levels of subsidies to the agriculture sector, further exacerbating market distortions.

Biofuel policies need to be reviewed as they have had limited success in achieving energy security and climate-change mitigation. Rapid expansion of biofuel production may increase rather than reduce greenhouse gas emissions.

Subsidies and mandates have created an artificially rapid growth in biofuel production, exacerbating some of its negative effects and promoting biofuels compared to other sources of renewable energy. Expenditures on biofuels would be much better directed towards research and development to improve efficiency and sustainability. This would allow a more gradual development of the sector, reducing the stress on natural resources and the pressure on food prices.

The current combination of subsidies, mandatory blending and trade barriers does not lead to efficient and equitable international allocation of resources.

The international community must provide assistance to developing countries to develop their agricultural capacity while protecting the most vulnerable population groups from the effects of higher food prices. More...