Bismarck once noted that “laws are like sausages: it’s better not to see them being made”. Were he around today, he might add that both laws and sausages are, in the US at least, based mainly on corn.

As I’ve just mentioned in a separate post, today is crunch time for the Waxman-Markey climate bill in the House, and so everyone’s watching the few remaining undecided Democrats, many of whom have big coal interests in their states. One set of Democrats that’s firmly in the ‘decided’ column, though, is the farm-lobby – who will be busting out cold beers and chucking ribs on the grill this weekend if the Bill passes. 

Not long ago, the farm lobby were adamantly opposed to the bill, which they feared could increase their input prices, especially fuel for on-farm energy use. Moreover, the mighty corn lobby was especially unhappy that it wasn’t invited to the cap and trade party, as National Corn Growers Association President Bob Dickey made very plain on May 18th:

“After reviewing the legislation, we can see the bill does not clearly provide for a mechanism by which corn growers can sell carbon credits on the market. We strongly believe the bill will increase input costs without specific opportunities to offset those additions. We cannot support the American Clean Energy and Security Act in absence of the provisions that we have explained in some length to the Committee.”

Well, that was then. The bill now includes an amendment submitted by House Agriculture Committee chairman Collin Peterson, which will:

• create a market for agricultural offsets that allows the sector to take part in cap-and-trade;
• have this market regulated by the US Department of Agriculture, not the Environmental Protection Agency; and
• explicitly exempt agriculture from having an emissions cap of its own.

Oh dear. (more…)

Today sees the launch of The Feeding of the Nine Billion, my Chatham House pamphlet on food prices and scarcity issues, which brings a year-long research programme to its conclusion.  This morning’s Financial Times has a piece on the report here, and there’s a BBC World Service interview with me here (scroll to 9.42; you need RealPlayer installed).

The report’s key diagnosis is that while food prices have fallen significantly from their peak last year, they remain acutely problematic for poor people and por countries at their current levels – and poised to resume their upwards climb when the world emerges from the downturn.  Accordingly, the last thing policymakers can do at this stage is to heave a sigh of relief – on the contrary, they need to treat the current easing in prices as a window of opportunity in which to agree the comprehensive, long-term collective action needed to ensure food security for all in the 21st century.

Long term demand drivers, above all a population set to reach over 9 billion by mid-century and the rising affluence and expectations of a growing ‘gloal middle class’ are half the story, with the World Bank forecasting 50% higher demand for food by 2030. 

On the other hand, scarcity issues will present increasing challenges on the supply side.  Oil prices are also set to resume their climb after the downturn, given that investment in new production has collapsed as oil prices have fallen, setting the stage for a future supply crunch; food prices can be expected to follow them, as biofuels, fertiliser prices and transport costs all play their part.  Climate change, water scarcity and competition for land will all also push prices upwards.

So what needs to be done?  The report sets out a ten point agenda for action at the international level and in developing countries, but overall I think of the challenge in four key areas. (more…)

I’ve been in Japan today, speaking at ‘Reforming International Institutions – Meeting the Challenges of the 21st Century’,  a seminar organized by the United Nations University and the British Embassy in Japan.

You can download my talk here (with pictures, references etc) – or the text only is available below the jump. There’s a webcast too.

Headlines:

• It’s going to be a tough year. The financial meltdown has a long way to go, and the downturn is risking turning into a global depression.
• Trade is a bell wether. Protectionist pressures are already on the rise. If they gain traction, take that as a warning of a wider loss of confidence in global institutions.
• The unravelling of global economic imbalances could prove corrosive to the international order. If countries start to devalue to protect exports, expect a tit-for-tat dynamic to kick in.
• Scarcity issues (energy, water, land, food, atmospheric space for emissions) remain the key medium term driver of global change. Commodity prices will spike again as soon as there’s recovery.
• The downturn has stemmed the uncontrolled growth of emissions, but also lessened the chance of a robust global deal on climate.
• Economic bad times could well drive increased conflict. A major new security threat might be the fabled black swan – hitting just when the global immune system is already overloaded.
• If we experience a long crisis (or a chain of interlinked crises), we are likely to see either a significant loss of trust in the system (globalization retreats), or a significant increase in trust (interdependence increases). 
• You need to stretch time horizons to get the latter – shared awareness (joint analysis of risks and challenges), as a basis for shared platforms (loose coalitions of leaders), which can lobby for a shared operating system (a new international institutional architecture).
• 2009 sets a challenging agenda for the G20 (financial reform and economic recovery – but framed by a broader vision on climate, resources, security etc.)…
• …the G8 (caucus of rich countries able to tee up Copenhagen and kick start development assistance if developing countries begin to teeter)…
• …the UN (especially Ban Ki-Moon’s proposed high level ‘friend’s group’ on climate, but also as a fora for getting to grips with scarcity issues)…
• and the Bretton Woods institutions and the WTO (first of all ensuring they keep their heads above water, then looking to ’save globalization from itself’).
• Oh and be ready for the backlash – people are angry and rightfully so, but that may well lead us down some populist blind alleys.

(more…)

As everyone waits to see what Obama plans to do about reforming foreign assistance in the US, back here in Britain change is in the air too: the Conservatives are coming clean about what they really think about DFID, the Department for International Development.

For a while now, there have been whispers that the Tories don’t really buy into the idea of an independent DFID – and that perhaps (gasp!) they might be considering merging it back into the Foreign Office, where it resided until 1997. Well, following last week’s Independent interview with Conservative aid spokesman Andrew Mitchell, we can put that notion to rest: “We are very committed to DFID continuing as an independent department of state”, says he.

So, a ringing endorsement of DFID, then?  Er, not quite.  Here’s the full context:

The shadow International Development Secretary, Andrew Mitchell, said DFID had begun to encroach on the work of other departments and to come “perilously close” to setting its own foreign policy, a role he said should be reserved for the Foreign Office. He said the Foreign Office will be given much greater influence over the use of overseas aid should the Tories win the next election …

“There are times when DFID comes perilously close to pursuing its own foreign policy and that is not right,” Mr Mitchell said. “Foreign policy is decided by the government and the Cabinet, led by the Foreign Office, and DFID should not be an alternative to this. We are very committed to DFID continuing as an independent department of state. But we would make it more of a specialised development department and a little less like an aid agency,” he said.

That left me wondering just which specific instances Mitchell was thinking of in arguing that DFID was coming close to having its own foreign policy.  Iraq? Afghanistan? Climate change? (Thinking that Paul Wolfowitz might not be such a great idea for President of the World Bank?) Sadly, we don’t know.  Earlier today I called his office to ask him to elaborate, but he declined to say more.

This is a shame, on two counts. First, because it’s a cop out.  For the Opposition front bench spokesman on international development to argue that the Department he shadows has come ‘close to pursuing its own foreign policy’ is a serious claim – and one which he ought to be prepared to substantiate.  To fail to do so leaves him open to accusations of offering soundbites rather than reasoned argument.

More fundamentally, though, it’s a shame that Andrew Mitchell wouldn’t elaborate because this debate needs to be had.   (more…)

(more…)

Land Grab. From the Guardian:

Rich governments and corporations are triggering alarm for the poor as they buy up the rights to millions of hectares of agricultural land in developing countries in an effort to secure their own long-term food supplies.

Click on the map to enlarge.

Although there’s no consensus on whether we’re heading for a 2-3 year recession or a much longer period of deflation a la Japan in the 1990s (c.f. Nouriel Roubini on V, U and L shaped recessions), four implications for development are already clear.

First, donor countries are going to be facing a dramatically different situation in their public sector budgets from next year. With the US Treasury’s $700 billion bailout plan now approved by Congress, the incoming US Administration will face a budget deficit of up to a trillion dollars next year, rather than $300 bn as planned.  Other donors will find their budgets constrained too – by falling growth, lower tax revenues and probably also higher public debt.  In the UK, for example, public borrowing next year is likely to have to rise from an expected £43 bn to £100 bn or more.

All this means that governments will have less to spend – so we should start worrying now about what that means for development assistance.  While it remains to be seen whether those governments that have committed to spending 0.7% of national income on aid will row back on those commitments, it now looks much likelier that for example climate adaptation costs will come out of aid budgets, rather than being additional to 0.7% – as they should be.

This shift will be compounded by the second implication of the credit crunch: change in public attitudes.  So far, the full impacts of the financial crisis have yet to hit the real economy in developed countries.  But when they do, they will accelerate a switch that we can already see, towards more priority on issues that are ‘close to home’, and less on global issues like development and climate change.

Third, the financial crisis will obviously hit growth in developing countries.  Monday’s stock market falls hit developing country exchanges hardest: the benchmark MSCI emerging markets index, for example, fell 11% as investors fled for safety.  Meanwhile, the debate about whether developing countries in Asia and Africa have ‘decoupled’ from developed countries seems to be ending, with the conclusion that developing country growth is not immune from a downturn in the wider global economy.

And fourth, a reduction in commodity prices for the duration of the global downturn (however long that may be) as demand for them falls.  As I’ve mentioned, futures prices for grain crops are already falling; we can expect that trend to be supported by falling energy prices, which will reduce some of the pressure on food that’s come via fertiliser prices, transport costs and demand for crops as biofuels.

That said, let’s be clear: the fall in commodity prices due to a global downturn does not mean that we’re out of the woods for good on high food and fuel prices. As Javier Blas notes in the FT today, the downturn also means that necessary investment in increasing supply will be put off.  As soon as we’re out of the dowturn and demand starts going up again, we’ll discover that there’s been no shift in the underlying supply fundamentals – and hence that the stagflation drivers we were all worrying about until the credit crunch really began in earnest are just waiting where we left them.  Let’s hope policymakers use the current easing as a moment of opportunity to start getting long term policy frameworks in place to manage high commodity prices a bit better than we did over the last two years.

Although all the attention lately has been on food prices and the effect of their sharp rise for inflation, development and security, the rises seen on food have been as nothing compared to some of the increases seen on fertilisers over the same period.

A briefing by Andrew Dorward and Colin Poulton, published in June by the Future Agricultures consortium, gives chapter and verse.  Between May 2006 and May 2008, here’s what prices did for selected key foods and fertilisers:

Cotton – up 29%

Beverages – up 41%

Wheat – up 61%

Maize – up 108%

Rice – up 185%

Urea (a key nitrogen fertiliser) – up 160%

DAP (a major phosphate fertiliser) – up 318%

The underlying causes cover both sides of the supply / demand line.  On the demand side, there’s the basic fact that the need for fertilisers is soaring as a result of higher food prices and demand for crops as biofuels. 

On the supply side, energy costs are a huge factor (especially in the case of nitrogen fertilisers); some fertiliser exporters (like China) have imposed export controls; and in the background, there are capacity limits to increasing production, especially for phosphates – a point that has the peak oil crowd already thinking hard about the concept of peak phosphorus.

None of this, needless to say, is good news for farmers, who according to the paper find themselves hit twice: once on the affordability of fertilisers when purchasing them, and then again (given food / fertiliser price differentials) on their profitability when using them. 

Dorward and Poulton argue that in the short term, it’s still worth developing country governments’ while to subsidise fertiliser use, even if the rates of return are lower – and that donors need to step up fast with additional financing (a proposal that the World Bank signalled its openness to in its ten point plan on food).  Dorward, Poulton and the Bank all agree that the question of getting them to the right place – fast – is as important as the question of who picks up the bill.

In the longer term, the paper suggests, the focus needs to be on more integrated soil fertility management with greater use of organic materials [i.e. compost and manure] together with smarter use of inorganic fertilisers – an area of work that the big agricultural research institutes like CIMMYT are already focusing on heavily.  Moving towards more integrated soil fertility management already makes sense for reasons of environmental sustainability.  If fertiliser prices fail to fall in the longer term, these areas of research are also going to be one of the critical front lines in feeding 10 billion of us.

Freed from the nice-guy constraints of being Josh on the West Wing, Bradley Whitford was clearly having a grand old time as a Machieavellian oil industry lobbyist in Burn Up on BBC2 last week; Neve Campbell and Rupert Penry-Jones (from Spooks) completed the ensemble cast for a production that cost the BBC $15 million to make.  Watch it if you haven’t already – if you live in the UK, you’ve got until 10.29pm on Wednesday 30th July to stream or download both episodes via the BBC’s Iplayer (if you download, you then have 30 days to watch them).

It was a riot – above all because, notwithstanding that this was a political thriller, the scriptwriter (Simon Beaufoy of The Full Monty fame) had really done his homework on climate change and energy policy (a task in which he was helped by Joe Smith from Open University, who co-edited Do Good Lives Have to Cost the Earth? with Andrew Simms).

So we were treated to climate summits with delegates negotiating square bracketed text through the night as the US and OPEC countries raise flags to object to use of the word ‘mandatory’; China playing it both ways, cutting a deal with the EU for carbon sequestration before dropping them like a stone when the US offers free nuclear power instead (agonised British head of delegation: “the Chinese have stitched us up!”); and even – ta da! – the sight of climate negotiators agreeing a climate framework based on per capita convergence, with proper terminology and everything. 

However (spoiler alert: stop reading now if you plan to watch it), all of this then falls apart when ’moderates’ in the US delegation (“Withdraw that proposal, Tuvalu, or kiss your AIDS funding goodbye”) are replaced by even nastier military-industrial-spook types, who – it later transpires - have a Secret Plan, the gist of which is that the US is deliberately allowing climate change to happen on the basis that if it will damage the US, it will really screw China.

As prospects for a global deal recede, oil company CEO Rupert Penry-Jones (who has had a Damascene conversion to the path of climate righteousness after watching an Eskimo set herself on fire in protest at global warming, and then seeing methane hydrate plumes catching fire in holes in the Arctic pack ice as positive feedbacks start to kick in) decides to start playing real hardball: so he leaks secret geological data from Saudi Arabia to environmentalists (and thence the media), which shows that – ta da ! – Peak Oil is upon us.  The film closes with snippets of media reporting of the massive economic crash that follows, and the prospect of something called the ‘third energy age’.

Only thing is, it’s not entirely clear why Penry-Jones has abandoned his earlier view that to tell the world that the oil peak is already passed would be a Very Bad Idea on the basis that it would (a) cause economic Armageddon, (b) kill thousands if not millions and (c) cause World War Three.  I was sort of with Bradley Whitford’s evil lobbyist when he suggested that allowing the news to leak out ve-e-ery gradually might be a better approach.  Leaking the news of Peak Oil being already behind us also looks to me like as much of a recipe for tar sands, liquids from coal and all US corn going to biofuels as it does a recipe for solar, wind and the ‘third energy age’. 

But hey.  Top marks to the Beeb for definitely the edgiest (and most politically accurate) climate drama we’ve seen so far.  Eat your heart out, The Day After Tomorrow.

It’s been his campaign’s policy since October last year, but in case you needed reassurance, here’s what Obama’s July 15 speech on foreign policy had to say about energy security (one of five national security priorities – the others being “ending the war in Iraq responsibly; finishing the fight against al Qaeda and the Taliban; securing all nuclear weapons and materials from terrorists and rogue states; … and rebuilding our alliances to meet the challenges of the 21st century”):

One of the most dangerous weapons in the world today is the price of oil. We ship nearly $700 million a day to unstable or hostile nations for their oil. It pays for terrorist bombs going off from Baghdad to Beirut. It funds petro-diplomacy in Caracas and radical madrasas from Karachi to Khartoum. It takes leverage away from America and shifts it to dictators.

This immediate danger is eclipsed only by the long-term threat from climate change, which will lead to devastating weather patterns, terrible storms, drought, and famine. That means people competing for food and water in the next fifty years in the very places that have known horrific violence in the last fifty: Africa, the Middle East, and South Asia. Most disastrously, that could mean destructive storms on our shores, and the disappearance of our coastline.

This is not just an economic issue or an environmental concern – this is a national security crisis. For the sake of our security – and for every American family that is paying the price at the pump – we must end this dependence on foreign oil. And as President, that’s exactly what I’ll do. Small steps and political gimmickry just won’t do. I’ll invest $150 billion over the next ten years to put America on the path to true energy security. This fund will fast track investments in a new green energy business sector that will end our addiction to oil and create up to 5 million jobs over the next two decades, and help secure the future of our country and our planet. We’ll invest in research and development of every form of alternative energy – solar, wind, and biofuels, as well as technologies that can make coal clean and nuclear power safe. And from the moment I take office, I will let it be known that the United States of America is ready to lead again.

Never again will we sit on the sidelines, or stand in the way of global action to tackle this global challenge. I will reach out to the leaders of the biggest carbon emitting nations and ask them to join a new Global Energy Forum that will lay the foundation for the next generation of climate protocols. We will also build an alliance of oil-importing nations and work together to reduce our demand, and to break the grip of OPEC on the global economy. We’ll set a goal of an 80% reduction in global emissions by 2050. And as we develop new forms of clean energy here at home, we will share our technology and our innovations with all the nations of the world.

It’s a much more progressive target than the G8 was able to come up with: at Hokkaido, the most leaders could manage was ”at least 50%”.  It’s more in line with the IPCC, too, which says that to limit temperature increase to between 2.0 and 2.4 degrees C, the 2050 reduction needed is between 50 and 85 per cent: so assuming you want 2.0 rather than 2.4, and adding in the rate of sink failure as well, we should certainly be looking at closer to an 85 than a 50 per cent reduction by 2050 (see page 15 of this). 

And lest you wonder, yup, he’s talking about 80 per cent below 1990 levels, rather than the 2000 levels (which would be a lot less demanding).  Here’s his campaign’s full energy policy brief.

As a general rule of thumb, my starting assumption is that we need new multilateral agencies like we need a hole in the head.  But if there’s an exception to that rule, then energy has a pretty good claim to be it.  As I argue in Multilateralism for an Age of Scarcity, there is no multilateral agency with a mandate to look at all aspects of the issue:

The International Energy Agency is supposed to represent major consumer countries, but its 27 members are all OECD countries – hence leaving out key emerging economies including China and India.  Although the Organisation of the Petroleum Exporting Countries (OPEC) is generally thought of as the major body representing producer states, in fact well over half of the world’s oil is produced by non-OPEC countries. Yet the most fundamental incoherence on energy is the obvious one: that with consumer and producer states represented by two different institutions in two different cities, it is wholly unclear where any discussions about a comprehensive approach encompassing both producer and consumer interests would take place.

Now, IAEA head Mohamed ElBaradei has written a piece in the FT which starts from the same analysis, and goes on to argue that a new global energy organisation is indeed needed.  What would it do?

“complement, not replace, bodies already active in the energy field … bring a vital inter-governmental perspective to bear on issues that cannot be left to market forces alone, such as the development of new energy technology, the role of nuclear power and renewables, and innovative solutions for reducing pollution and greenhouse gas emissions”;

“provide authoritative assessments of global energy demand and supply and bring under one roof energy data that are now dispersed and incomplete … speed the transfer of appropriate energy technology to poor countries and give them objective advice on an optimal energy mix that is safe, secure and environmentally sound”;

“develop a global mechanism to ensure energy supplies in crises and emergencies, and help countries run their energy services and even do it for them temporarily after a war or natural disaster … co-ordinate and fund research and development, especially for energy-poor countries whose needs are often overlooked by commercial R&D.”

He concludes, “the need for joint action to develop long-term solutions to the looming energy crisis is now undeniable. It is difficult to see how this can be done without an expert multinational body, underpinned perhaps by a global energy convention, with the authority to develop policies and practices to benefit rich and poor countries alike, equitably and fairly”.

So what to make of this call?  A few thoughts.

First, I can’t see much in the first two paragraphs that isn’t already done by the IEA – with the possible exception of advising poor countries on their energy mix, which agencies including UNDP and the Bank already cover.  True, most publicly available data on oil reserves is pretty suspect; but this new agency wouldn’t obviate that problem (which stems from internal machinations within OPEC). 

The interesting element here is the idea of a global mechanism to ensure energy supplies in crises and emergencies (what could the head of the IAEA be thinking of?).  When I was drafting Multilateralism for an Age of Scarcity, this seemed to me one of the real gaps in current multilateral capacities – both for dealing with short term spikes (attack on Iran leads to $200 oil) and long term stresses (peak oil).  In those conditions, a regime for sharing access to what supplies there are will be essential for reducing the risk of competition and friction, and for providing (at least a degree of) predictability, to reduce wild market swings as much as can be.

What I think is missing from ElBaradei’s proposal is a proper account of where food fits in.  There are plenty of major reasons why food prices and energy prices are ever more closely in synch: biofuels, input costs (especially fertiliser), and the fuel used to cultivate land, harvest crops, process, refrigerate, ship and distribute them.  If energy costs keep going up over the long term (as looks likely, recent sharp falls notwithstanding), then food prices will do the same – making it more important than ever to effect a far more integrated international approach.

Gordon Brown’s blunt call on Brits to stop wasting food marks an interesting moment in the food prices debate. 

So far, policymakers have concentrated almost entirely on the supply side – specifically, with the need to increase food production by 50 per cent by 2030, in line with World Bank demand forecasts.  (I worry that too much focus on the overall quantum of food produced risks obscuring the equally fundamental issue of who has access to it – but let’s leave that aside for now.)

What Brown’s emphasis on waste does is to give the demand side of the equation equal billing – a position it’s deserved all along, but hasn’t received from policymakers, presumably due to anxieties about implying that consumers may have to change behaviour. 

The issue of food waste is a massive issue in its own right – the UK wastes 4 million tonnes of food a year, and the forthcoming Prime Minister’s Strategy Unit report on food says that up to 40 per cent of food harvested in developing countries can be lost before it’s consumed.  But its long term significance may be as a bridgehead for opening up a broader front on demand reduction: as the food equivalent of energy efficiency, if you like. 

Another of the battles in that front will be over biofuels – a major new source of demand for crops. The leak last week of an internal World Bank document showed just how significant biofuels have been: it argued that biofuels have been responsible for as much as 75% of food price increases – way more than the 30% previously estimated by the International Food Policy Research Institute.  (The Bank’s 75% figure isn’t new – it’s been kicking around their HQ for at least three months – but its release now will definitely increase pressure on the US to reduce subsidies for corn-based ethanol.)

But what I think’s most significant of all about Brown’s new tack is that it makes him the first head of government to talk clearly about the elephant in the room with food prices: the fact that our diet in developed countries has a direct effect on the food security of poor people in developing countries.  Waste may be the first stop – but the train line we’re on leads directly to the question of how much meat and dairy products we can consume without impinging on others’ fair shares.

So, with a week to go until Japan’s G8 in Hokkaido, how are things looking?  If you want the comprehensive answer, you should head straight for Jenilee Geubert’s excellent dossier on the website of the University of Toronto’s G8 research group – but here are a few highlights.

First, climate change.  A draft communique seen by Dow Jones suggests there are four options on the table: a 50% emissions reduction by 2050 [from what year's level isn't specified]; an unspecified percentage cut by 2050; a 50% cut by 2051 or later; or a more than 50% cut by 2051 or later. 

If you’re wondering where the magical figure of 50% comes from, it’s from the IPCC estimate of what it’ll take to limit average temperature rises to between 2.0 and 2.4 Celsius – though note that (a) the IPCC says 50 to 85%, and (b) that this is before the [rapid] rate of sink failure is taken into account.  So 50% by 2050 is already too low. 

Fukuda has said that the G8 will not aim to set medium term targets.  Tony Blair’s big new report says it must.  So does Avaaz.  The US says a 25-40% cut by 2020 is “frankly not do-able“. The US is meanwhile extolling the benefits of its Major Economies Meeting, but last week’s MEM in South Korea didn’t go so great.

Next: energy.  Oil’s just flown past $143 on the back of geopolitical tensions, so all the signs are that the issue will be charged when leaders gather next week.  Fukuda wants to see more oil production, but after Saudi Arabia’s pledge of only 200,000 more barrels a day last week, it’s hard to see much sign of it – and even harder to detect any sign of join-up between Fukuda’s calls for OPEC to open the tap up a bit more, and Japan’s stated goal of something called a “Cool Earth“.

Meanwhile, biofuels might conceivably also come up, as Fukuda’s not a fan (“it is a fact that the production of bioethanol in some cases compete with food production”) – though Japan will want to avoid putting its American buddies on the spot.  For its part, the US will point to IEA data that shows that biofuels have become crucial for meeting marginal oil demand (want to know how much non-OPEC oil supply growth is from biofuels this year? 63 per cent.)

And then there’s food. Sir John Holmes’s UN task force will be presenting its final report at the Summit.  Leaders will probably pledge to do everything they can to increase food production and increase investment in agriculture – which is a good idea, though it does still leave the small fact that enough food is produced for everyone to eat today, but there are still 850-950 million undernourished people.  Increasing yields isn’t the whole story.

One thing the G8 leaders could do is issue a strong statement of intent on the Doha trade round – and perhaps, if they want to be really relevant, taking security of supply issues into account at the same time.  More generally, World Bank President Bob Zoellick’s ten point plan on food prices will doubtless be referred back to as a good and brief overview of the challenges – worth having another look at that ahead of the summit.

All in all, the three scarcity issues of climate, energy and food will dominate centre stage at Tokayo.  It’s welcome that the G8 is focusing on them, but unclear that G8 leaders know what kinds of deal they should be agreeing on them – or how to get there.  And G8 leaders also appear not to have figured out yet that scarcity issues are uniquely integrated, while the multilateral response to them is anything but.  More on that over the course of this week…

A few weeks back, I wrote a post about Abengoa – a biofuels company which has been taking out full page ads in the FT and elsewhere, arguing that biofuels are nothing to do with rising food prices (an argument that calls to mind the image of Lt. Frank Drebbin in The Naked Gun, standing before an exploding fireworks factory and calling through a loudhailer “Move on! There is nothing to see here!”).  As I said at the time, Abengoa’s ad campaign was pure cornwash.

So it’s with great satisfaction that I pass on news of the following letter in the Financial Times today:

Sir, in an advertisement in the FT on June 18, Abengoa Bioenergy stated that “Bioethanol is currently the only real alternative for eliminating our addiction to oil”, citing our report “Greenhouse Gas Emissions from Transport in the EU25 (2004)” as one of two sources to justify that claim.

It is impossible for a reader of our report to reach the conclusion Abengoa draws. It does not even mention biofuels or bioethanol. If the company is genuinely interested in “supported evidence”, as it claims, it must know that T&E’s view on biofuels bears no resemblance to its own. T&E has consistently warned against volume targets for biofuels at European Union level since at least 2004, when we published our report “Sense and Sustainability”. We believe Europe should set an environmental target to cut greenhouse gas emissions from the production of all transport fuels, not a biofuels quantity target that gives a boost to the fuels Abengoa produces regardless of their environmental performance.

Running Europe’s fleet of heavy, gas-guzzling cars on biofuels rather than petrol is no cure. If Europe truly wants to end its addiction to oil, it should start by making cars twice as fuel-efficient as they are today.

Abengoa has misused our name and research in an advertisement claiming to separate “manipulation” from “evidence”. That is reprehensible. As an environmental group, our main capital is our reputation and credibility, which we will defend.

Jos Dings,
Director,
European Federation for Transport and Environment (T&E),
B-1000 Brussels, Belgium

Wow.  What a truly monumental PR cock-up by Abengoa.  They probably retain the same PR firm as the PRC.

If there’s a silver lining to the disastrous flooding in the US mid-west, then this might be it.  As prices for corn go through the roof, the impacts of diverting so much of it to ethanol production – expectations before the flooding were of fully a third of this year’s crop -  are leading to an increasingly determined push-back from the US food industry.

Of course, the effects of corn-based ethanol on food prices aren’t exactly a newsflash: Mexico City saw riots on this very subject back in February 2007, well before food prices had reached the top of the global agenda.  But the extreme weather event that the US midwest is now experiencing shifts the intensity of debates up by at least two gears.

At present, the FT reports, US biofuel rules require 9 billion gallons of biofuels to be blended into transport fuels this year – mostly with corn-based ethanol.  But the US Environmental Protection Agency can – if it chooses – waive the requirement.  Texas has asked it to do just that – and food producers, as they watch their costs rocket – are asking it to do the same nationally.  As one food company chief puts it, “it is not fair to expect us to compete with a government-subsidised market”. It’s a fair point.

As readers will already be aware, the importance of corn to the US food economy goes far, far beyond cornflakes and tins of Green Giant sweetcorn.  If you haven’t already done so, read Tim Flannery’s excellent NYRB article from last summer entitled “We’re living on corn!” – he’s not kidding:

[Michael] Pollan gives us the example of the chicken nugget, which he says “piles corn upon corn: what chicken it contains consists of corn” (because the chickens are corn-fed), as does “the modified corn starch that glues the thing together, the corn flour in the batter that coats it, and the corn oil in which it gets fried. Much less obviously, the leavenings and lecithin, the mono-, di-, and triglycerides, the attractive golden coloring, and even the citric acid that keeps the nugget ‘fresh’ can all be derived from corn.

So dominant has this giant grass become that of the 45,000-odd items in American supermarkets, more than one quarter contain corn. Disposable diapers, trash bags, toothpaste, charcoal briquettes, matches, batteries, and even the shine on the covers of magazines all contain corn. In America, all meat is also ultimately corn: chickens, turkeys, pigs, and even cows (which would be far healthier and happier eating grass) are forced into eating corn, as are, increasingly, carnivores such as salmon.

If you doubt the ubiquity of corn you can take a chemical test. It turns out that corn has a peculiar carbon structure which can be traced in everything that consumes it. Compare a hair sample from an American and a tortilla-eating Mexican and you’ll discover that the American contains a far larger proportion of corn-type carbon. “We North Americans look like corn chips with legs,” says one of the researchers who conducts such tests.

And of course, turning food into fuel is only half the story: for America’s love affair with corn is also the tale of turning fuel into food – on a truly epic scale. In the US, according to academics David Pimentel and Mario Giampietro, even back in 1994 the equivalent of 400 gallons of oil was expended each year to feed each US citizen.  Meanwhile, another study - this time of Canadian farms – gives an idea of how this energy use breaks down:

- 31%: manufacture of inorganic fertiliser

- 19%: operating field machinery

- 16%: transportation

- 13%: irrigation

- 8%: raising livestock (not including feed)

- 5%: crop drying

- 5%: pesticide production

 Now, you may be wondering: if it takes this much energy to produce corn, how can it make sense then to use that corn as an energy source?  Wouldn’t that seem, not to put too fine a point on it, wantonly defiant of the laws of thermodynamics?  Alas, it would.  Indeed, studies show that the energy-returned-on-energy-invested (EROEI) of corn is actually negative: corn ethanol requires 29 per cent more energy to grow than what you can get out of it.

Rewind!  One more time: corn ethanol requires 29 per cent more energy to grow than what you can get out of it.  You may have seen some pretty mad subsidies in your time, but I’ll wager that none tops this; watching America tie itself in knots thus, one can’t help but feel an awestruck respect for the thunderous public affairs capacity of the US farm lobby.

Still, as we watch the US farm lobby and the US food lobby start to join battle, one might reflect that neither is clearly doing many favours for the public interest.  Corn-based ethanol may be an obviously stupid policy.  But it’s hard to see a diet as rich in red meat, saturated fat and processed food (all derived from corn) as is America’s, as being much more sensible – especially given that the globalisation of that diet is the number one driver of rising global food prices.