World Bank urges benefit assessment of bio-fuel

ASHOK B SHARMA
Posted: Monday, Feb 18, 2008 at 2354 hrs IST
Updated: Monday, Feb 18, 2008 at 0013 hrs IST

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New Delhi, Feb 17: The World Bank, admitting the competition between food and fuel crops for land and water, has asked the national governments to carefully assess economic, environmental, and social benefits and the potential to enhance energy security.

In its World Development Report-2008, it said: “The challenge for developing country governments is to avoid supporting bio-fuels through distortionary incentives that might displace alternative activities with higher returns - and to implement regulations and devise certification system to reduce environmental risks.”

It suggested that the potential environmental risks from large scale bio-fuels production can be reduced through certification schemes for measuring environmentalaspects.

It suggested a Green Bio-fuels Index of GHG reductions.

The World Bank quoted that according to some available estimates, current bio-fuel polices the world over, can lead to a five-fold increase of the share of bio-fuels in global transport energy consumption - from 1% today to around 5% to 6% by 2020.

“The grain required to fill the tank of a sports utility vehicle with ethanol (240 kg of maize for 100 litre ethanol) could feed one person for a year, so competition between food and fuel is real,” the World Bank report said. It added that future bio-fuel technology may rely on dedicated energy crops and agricultural and timber wastes instead of food crops.

“Technology to break cellulose into sugars distilled to produce ethanol or gasify biomass is not yet commercially viable - and will not be for several years. And some competition for land and water between dedicated energy crops and food crops will likely remain,” the report said.

It further said that second generation bio-fuels using cellulosic technologies were likely to require even larger economies of scale, with investment costs in hundreds of millions of dollars just to build one plant.

The report admitted that in industrial countries and till recently in Brazil, bio-fuel programmes were supported by high protective tariffs and large subsidies. These policies have caused land conversion away from food and led to an upward pressure on global food prices, severely affecting poor consumers.

With a view to make bio-fuels compete with gasoline, industrial countries gave massive support and subsidies. According to recent estimates, more than 200 support measures costing around $5.5-7.3 billion a year in the US amount to $0.38-0.49 per litre of petroleum equivalent for ethanol and $0.45-0.57 for bio-diesel.

In this context, the World Bank report questions - Are bio-fuels economically viable without subsidies and protection? It answers: “The breakeven price for a given bio-fuel to become economical is a function of several parameters. The most important determining factors are the cost of oil and the cost of the feedstock, which constitute more than half of today’s production costs.

Other often more cost-effective ways of delivering environmental and social benefits need to be considered, especially through improvements in fuel efficiency.”