Today, ActionAid published its latest report 'Biofuelling World Food Prices' in the Run up to the G20 meeting in Mexico.
It draws on research that we commissioned from the Institute for European Environmental Policy. Because the vast majority of biofuels are made from food crops such as maize, wheat, sugar and vegetable oils and oil seeds, it reveals that biofuel targets set by the EU will lead directly to an increase in the prices of key agricultural commodities worldwide by 2020. And – while consumers around the world will see some increases in their food-related expenditure – it will be people living in developing countries who will suffer the most.
Take the example of Alicket Masenda in Malawi. The surges in world prices during the food crisis of 2007/8 led to large increases in domestic prices by nearly 30% in one year. Alicket is a widow and has seven children. In the past she had had enough crops to feed herself and her family but in 2008 she had nothing. She was doing casual labour washing clothes to make money to buy maize. Rising food prices made this much harder. “I am affected by the rising food price because I don't have any income and can't buy anything. The children have had no food since the morning."
The G20 is important because it brings together 19 countries plus the European Union to cooperate on an international economic and financial agenda. The G20 arose out of the financial crisis of the 1990s, and the desire to include additional countries in the global discussions that affected them. The current chair of the G20 is Mexico. And food security has been a central theme of G20 discussions since the onset of the 2007/2008 food crisis.
Only a year ago, 10 international institutions – including the World Bank, many agencies of the United Nations, the WTO and the IMF – acknowledged in a report for the G20 that biofuels played a significant role in recent food prices rises and volatility. Similar conclusions have been drawn by the High Level Expert Panel of the UN Committee on World Food Security and in reports for the European Commission.
There is almost universal acceptance that biofuels will increase food prices going forward; the question is by how much. The IEEP report found that by 2020 EU biodiesel use could push oil seed prices up by as much as 20%, and vegetable oils up by as much as 36%. Meanwhile, EU ethanol use could, according to some models, lift wheat prices by as much as 13%, maize (corn) prices by as much as 22% and sugar by as much as 21%.
ActionAid believes that these figures are probably on the conservative side because of the way the models were constructed. But as importantly, EU biofuel policies do not operate in isolation; EU price increases are compounded by biofuel use elsewhere such as US corn ethanol.
The US is by far the biggest producer of corn ethanol. The US biofuel industry uses more than 40% of domestically produced corn, equivalent to approximately 15% of global corn production. In one report that looked at global biofuel use, this revealed that biofuels alone will increase cereal prices on average by about 35% and other crops by about 27% by 2020.
But there is another reason for conducting this research. By the end of 2012, the European Commission must report on the social impacts of its own biofuel policies on food prices and the impact this has on people, particularly in developing countries. ActionAid believes that the evidence is already compelling that biofuel policies are having a very negative impact on poor people, not just on food prices but also land grabbing and the displacement of people. The EU together with the G20 countries – which includes the US – should remove harmful biofuel targets in order for real progress to be made to improve world food security.