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Biofuels, Palm Oil, and Food Shortages

Lee Lane

For a second time in the last ten years, global agricultural commodity prices are climbing steeply. Their rise harms millions of urban poor throughout the developing world. Many factors contribute to these price spikes and to the longer term upward price trend that they may herald. A recent speech by former President Clinton highlighted one such factor; Mr. Clinton noted that climate policies that promote biofuels divert crops from food to fuel thereby boosting food prices.

Further, though the former president did not say it, higher food prices push farms and plantations to encroach on forests, including tropical rain forests. Biomass in forests and in the soil beneath them stores carbon dioxide (CO2), a greenhouse gas. When the forests are felled, this CO2 enters the atmosphere. Thus, greater use of biofuels raises food prices; these price hikes cause food crops to encroach on forests, and forest loss emits CO2—far from the countries promoting biofuels, but still no less real.

To be sure, many factors unrelated to biofuels also cause tropical forest loss, and many ways to reverse this trend have been offered. One of them has been to limit oil palm plantations. Some environmental groups have launched campaigns to this end. In response, the World Bank has been reassessing oil palm projects, and Norway has launched a project in Indonesia that seeks in part to prevent oil palm plantations’ encroachment into forest lands.

These efforts have sparked some emotionally charged disputes. These disputes matter because how this conflict plays out will affect the lives of millions of people around the world.

Globally, palm oil is the biggest single source of very low cost edible oils and fats. Per hectare planted, oil palm trees are six to nine times more productive than rival crops, and world palm oil use has surged massively. China, India, Pakistan, and Bangladesh have become major importers; moreover, the oil palm sector has become a key source of economic growth in the producing countries of Malaysia and Indonesia. So, climate concerns must be balanced against these large consumer and producer interests. Three points may help to find the right balance.

First, the amounts of CO2 at issue, though uncertain, seem fairly modest. Land use change causes only about 10% of the total manmade emissions, and oil palm cultivation is only one part of that. In fact, it seems to be quite a small one. A brand new study of Malaysia and Indonesia, while speculating that oil palm related emissions might rise in the future, concedes that, so far, oil palm is not the dominant factor in either deforestation or the loss of CO2-rich peat swamps. This finding is consistent with meta-studies of tropical forest loss. These have found many causal factors at work; by inference, curbing the growth of oil palm plantations is likely to have only limited impact on the rate of forest loss.

Second, the workings of the global market will weaken the impact of all country-specific efforts to limit oil palm expansion. Constraints that raise the cost of producing palm oil in one place invite expanded production elsewhere. The oil palm tree is, after all, native to West Africa, and it is beginning to be cultivated in Amazonia. Alternatively, campaigns to suppress use of all palm oil would only prompt more planting of less productive oil crops. These crops, we know, would demand six to nine times more land to yield the same output. This change hardly seems likely to reduce pressure on tropical forests.

Third, halting climate change should be viewed as a means, not as an end in itself. Its proper goal is to limit the future harm that climate change might do. Thus climate policy should, certainly, seek to lessen the risk of future climate-induced food shortages. But seeking to avoid that risk at the price of causing the certainty of food shortages today would be folly.

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