“A great book which should wake up humankind!” –Klaus Schwab, World Economic Forum
Chapter 2. Population Pressure: Land and Water: Cars and People Compete for Grain
At a time when excessive pressures on the earth’s land and water resources are of growing concern, there is a massive new demand emerging for cropland to produce fuel for cars—one that threatens world food security. Although this situation had been developing for a few decades, it was not until Hurricane Katrina in 2005, when oil prices jumped above $60 a barrel and U.S. gasoline prices climbed to $3 a gallon, that the situation came into focus. Suddenly investments in U.S. corn-based ethanol distilleries became hugely profitable, unleashing an investment frenzy that will convert one fourth of the 2009 U.S. grain harvest into fuel for cars. 76
The United States quickly came to dominate the crop-based production of fuel for cars. In 2005, it eclipsed Brazil, formerly the world’s leading ethanol producer. In Europe, where the emphasis is on producing biodiesel, mostly from rapeseed, some 2.1 billion gallons were set to be produced in 2009. To meet its biodiesel goal, the European Union, under cropland constraints, is increasingly turning to palm oil imported from Indonesia and Malaysia, a trend that depends on clearing rainforests for oil palm plantations. 77
The price of grain is now tied to the price of oil. Historically the food and energy economies were separate, but now with the massive U.S. capacity to convert grain into ethanol, that is changing. In this new situation, when the price of oil climbs, the world price of grain moves up toward its oil-equivalent value. If the fuel value of grain exceeds its food value, the market will simply move the commodity into the energy economy. If the price of oil jumps to $100 a barrel, the price of grain will follow it upward. If oil goes to $200, grain will follow.
From 1990 to 2005, world grain consumption, driven largely by population growth and rising consumption of grain-based animal products, climbed by an average of 21 million tons per year. Then came the explosion in grain used in U.S. ethanol distilleries, which jumped from 54 million tons in 2006 to 95 million tons in 2008. This 41-million-ton jump doubled the annual growth in world demand for grain almost overnight, helping to triple world prices for wheat, rice, corn, and soybeans from mid-2006 to mid-2008. A World Bank analyst attributes 70 percent of the food price rise to this diversion of food to produce fuel for cars. Since then prices have subsided somewhat as a result of the global economic downturn, but as of mid-2009 they are still well above historical levels. 78
From an agricultural vantage point, the world’s appetite for crop-based fuels is insatiable. The grain required to fill an SUV’s 25-gallon tank with ethanol just once will feed one person for a whole year. If the entire U.S. grain harvest were to be converted to ethanol, it would satisfy at most 18 percent of U.S. automotive fuel needs. 79
Projections by Professors C. Ford Runge and Benjamin Senauer of the University of Minnesota in 2003 showed the number of hungry and malnourished people decreasing steadily to 2025. But their early 2007 update of these projections, which took into account the biofuel effect on world food prices, showed the number climbing rapidly in the years ahead. Millions of people living on the lower rungs of the global economic ladder, who are barely hanging on, are losing their grip and beginning to fall off. 80
Since the budgets of international food aid agencies are set well in advance, a rise in food prices shrinks food assistance. The WFP, which is now supplying emergency food aid to more than 30 countries, cut shipments as prices soared. Hunger is on the rise, with 18,000 children dying each day from hunger and related illnesses. 81
The emerging competition between the owners of the world’s 910 million automobiles and the 2 billion poorest people is taking the world into uncharted territory. Suddenly the world is facing an epic moral and political issue: Should grain be used to fuel cars or feed people? The average income of the world’s automobile owners is roughly $30,000 a year; the 2 billion poorest people earn on average less than $3,000 a year. The market says, let’s fuel the cars. 82
For every additional acre planted to corn to produce fuel, an acre of land must be cleared for cropping elsewhere. But there is little new land to be brought under the plow unless it comes from clearing tropical rainforests in the Amazon and Congo basins and in Indonesia or from clearing land in the Brazilian cerrado. Unfortunately, this has heavy environmental costs: a massive release of sequestered carbon, the loss of plant and animal species, and increased rainfall runoff and soil erosion.
While it makes little sense to use food crops to fuel cars if it drives up food prices, there is the option of producing automotive fuel from fast-growing trees, switchgrass, prairie grass mixtures, or other cellulosic materials, which can be grown on wasteland. The technologies to convert these cellulosic materials into ethanol exist, but the cost of producing cellulosic ethanol is close to double that of grain-based ethanol. Whether it will ever be cost-competitive with ethanol from grain is unclear. 83
There are alternatives to this grim scenario. The decision in May 2009 to raise U.S. auto fuel efficiency standards 40 percent by 2016 will reduce U.S. dependence on oil far more than converting the country’s entire grain harvest into ethanol could. The next step is a comprehensive shift to gas-electric plug-in hybrid cars that can be recharged at night, allowing most short-distance driving—daily commuting and grocery shopping, for example—to be done with electricity. 84
As the leading grain exporter and ethanol producer, the United States is in the driver’s seat. It needs to make sure that efforts to reduce its heavy dependence on imported oil do not create a far more serious problem: chaos in the world food economy. The choice is between a future of rising world food prices, spreading hunger, and growing political instability and one of more stable food prices, sharply reduced dependence on oil, and much lower carbon emissions. 85
76. F.O. Licht, “Too Much Too Soon? World Ethanol Production to Break Another Record in 2005,” World Ethanol and Biofuels Report, vol. 3, no. 20 (21 June 2005), pp. 429–35; U.S. Department of Energy (DOE), “World Crude Oil Prices,” and “U.S. All Grades All Formulations Retail Gasoline Prices,” at tonto.eia.doe.gov, viewed 31 July 2007; USDA, Production, Supply and Distribution, electronic database, at www.fas.usda.gov/psdonline, updated 12 May 2009; USDA, Feedgrains Database, electronic database at www.ers.usda.gov/Data/feedgrains, updated 19 May 2009.
77. F.O. Licht, “World Fuel Ethanol Production,” World Ethanol and Biofuels Report, vol. 7, no. 18 (26 May 2009), p. 365; “Biodiesel: World Production, by Country,” table in F.O. Licht, World Ethanol and Biofuels Report, vol. 7, no. 14 (26 March 2009), p. 288; “EU Ministers Agree Biofuel Target,” BBC News, 15 February 2007.
78. USDA, Production, Supply and Distribution, op. cit. note 76; corn for ethanol from USDA, Feedgrains Database, op. cit. note 76; historical wheat, corn, and soybean prices are Chicago Board of Trade futures data from TFC Commodity Charts, “Grain & Oilseed Commodities Futures,” at futures.tradingcharts.com/grains_oilseeds.html, viewed 16 January 2009; current wheat, corn, and soybean prices are Chicago Board of Trade futures data from CME Group, “Commodity Products,” various dates, at www.cmegroup.com; rice prices from Nathan Childs and Katherine Baldwin, Rice Outlook (Washington, DC: USDA, Economic Research Service, 11 June 2009), p. 26; Donald Mitchell, A Note on Rising Food Prices, Policy Research Working Paper 4682 (Washington, DC: World Bank Development Prospects Group, July 2008), pp. 16–17.
79. Lester R. Brown, “Distillery Demand for Grain to Fuel Cars Vastly Understated: World May be Facing Highest Grain Prices in History,” Eco-Economy Update (Washington, DC: Earth Policy Institute, 4 January 2007); corn ethanol conversion is author’s estimate, based on Keith Collins, chief economist, USDA, statement before the U.S. Senate Committee on Environment and Public Works, 6 September 2006, p. 8; energy content of ethanol relative to gasoline from Oak Ridge National Laboratory (ORNL), “Bioenergy Conversion Factors,” at bioenergy.ornl.gov/papers/misc/energy_conv.html, viewed 3 August 2007; U.S. gasoline consumption from “Table 10. Energy Consumption by Sector and Source: Total United States,” in DOE, Energy Information Administration, “Supplemental Tables to the Annual Energy Outlook 2009,” at www.eia.doe.gov/oiaf/aeo/supplement/supref.html, updated March 2009; USDA, op. cit. note 2.
80. C. Ford Runge and Benjamin Senauer, “How Biofuels Could Starve the Poor,” Foreign Affairs, May/June 2007.
81. Celia W. Dugger, “As Prices Soar, U.S. Food Aid Buys Less,” New York Times, 29 September 2007; WFP, “Our Work: Operations List,” at www.wfp.org/operations, viewed 9 June 2009; Edith M. Lederer, “U.N.: Hunger Kills 18,000 Kids Each Day,” Associated Press, 17 February 2007.
82. Ward’s Automotive Group, World Motor Vehicle Data 2008 (Southfield, MI: 2008), pp. 239–42; income calculations from “Gross National Income Per Capita 2007, Atlas Method and PPP,” table in World Bank, “Data—Quick Reference Tables,” at siteresources.worldbank.org, updated 24 April 2009, and from U.N. Population Division, op. cit. note 8.
83. Patrick Barta, “Jatropha Plant Gains Steam in Global Race for Biofuels,” Wall Street Journal, 24 August 2007; “Shell Boosts Stake in Iogen Cellulosic Ethanol,” Reuters, 15 July 2008; FAO, State of Food and Agriculture 2008 (Rome: 2008), p. 47.
84. The White House, “Remarks by the President on National Fuel Efficiency Standards,” transcript (Washington, DC: Office of the Press Secretary, 19 May 2009); John M. Broder, “Obama to Toughen Rules on Emissions and Mileage,” New York Times, 19 May 2009; corn ethanol conversion is author’s estimate, based on Collins, op. cit. note 79, p. 8; energy content of ethanol relative to gasoline from ORNL, op. cit. note 79; U.S. gasoline consumption from “Table 10. Energy Consumption by Sector and Source: Total United States,” in DOE, op. cit. note 79; USDA, op. cit. note 2; CalCars, “All About Plug-In Hybrids,” at www.calcars.org, viewed 9 June 2009.
85. USDA, op. cit. note 2; F.O. Licht, “World Fuel Ethanol Production,” op. cit. note 77, p. 365.
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