Two pieces of news from Tuesday 26 February. A UK investment fund is trying to raise £330m to build two large biofuels plants on the eastern coast of England. And the price of wheat rises to a new high of over $12 per US bushel in Minneapolis (over £220 per tonne) as worldwide shortages force prices ever upwards.
These two news stories are intimately connected. The biofuels plants will use wheat as their feedstock. Valuable grains will be distilled to produce what is, in effect, industrial alcohol to be used to power the cars of the European Union. When constructed, the UK plants will use about 1.1m tonnes of wheat a year, about 7% of the UK’s total production, helping to tighten food supplies yet further. This is madness, utter madness.
About 20% of the world’s calorie intake comes from wheat. When wheat prices rise, the price of bread in UK supermarkets increases by a few pence. But in a poor country dependent on wheat, the headlong escalation of prices – which have doubled during the last two months – causes hunger. The UN’s World Food Programme, which assists in the feeding of many millions around the world, is already talking of reducing the meagre rations and pushing people closer to starvation. Worried by the threat to the food supplies of their own people, some of the world’s major wheat producing countries are introducing bans on grain exports.
This is unimportant to the investors in the new biofuels plants. They will get rates of return of 40% per year, largely driven by the subsidies the UK offers to biofuels. And whatever happens to the price of wheat, they know that they have a guaranteed market. EU legislation requires all motor fuels to contain 5% biofuels by 2010. Although the proposed new plants will take about 7% of the UK’s wheat crop, the refineries will only provide less than 2% of our total need for fuel. So there is no prospect of the market being flooded.
Why did the EU introduce this policy (and why did the US do similarly)? The objective was to reduce carbon emissions from transport and, second, to improve the security of energy supplies. As environmentalists have been saying for five years now, the EU policy achieves neither of these objectives.
Biofuels made from wheat grown in the UK do not reduce global warming emissions by much. Even on the best wheat-lands, high yields are dependent on the application of 200kg of artificial fertiliser per hectare. This fertiliser takes huge amounts of natural gas to make. And when it breaks down in the field, it gives off a small amount of nitrous oxide, a far worse global warming gas than carbon dioxide. Recent research carried out by Paul Crutzen, a Nobel prize-winner, suggests that we have significantly under-estimated the amount of nitrous oxide arising from the use of artificial fertilisers. The process of growing wheat also uses copious amounts of energy in ploughing the fields, adding the pesticides and then drying the grain. Finally, when the wheat gets to the refinery, large amounts of heat are applied to break down the grains into sugars, from which alcohol is eventually distilled. Debate continues to rage on the impact of biofuels on carbon emissions, but no one doubts that UK wheat offers very limited savings over simply refining oil into petrol.
This doesn’t deter the promoters of the new biofuel plants. They say that using UK wheat to make alcohol generates a ‘107%’ reduction in greenhouse gas emissions, compared to petrol. This is a truly outrageous claim. In effect, they are saying that their plants will be carbon negative. Although it is conceivable that alcohol made from Brazilian sugar cane might achieve carbon neutrality, no sensible financier could possibly make this claim about a heavily fertilised UK crop. Even the owners of the only other large-scale wheat-into-petrol plant made a more modest claim of 40% savings when they announced their plans. When I spoke to the chief executive of another biofuels company a few months ago, he said that carbon savings could only ever be in the low single digits from using UK wheat.
What about energy security, the second justification for the legislative requirement to use biofuels? If we turned all our farmlands over to biofuels, we would slightly reduce the oil import bill. But we would be entirely dependent on foreign sources of food. This strikes most people as a deeply unsettling policy.
But this is not the most important point. Using scarce food to make petrol is causing food shortages around the world. It isn’t the SUV drivers that are paying the price – they will hardly notice. It is the very poorest who are suffering. And our capacity to increase the threat of starvation is almost infinite. Each of us uses about 2,000 calories of food a day. But UK drivers use the equivalent of 40,000 calories – twenty times more – to power our vehicles. If our deeply misguided policies let rich drivers compete for food supplies with the poor of Africa, we already know who is going to win. The EU biofuels policy is grossly immoral and must be abandoned.