You practically can’t read a newspaper or news magazine without someone condemning the use of corn as an alternative fuel source these days. And who wouldn’t. The ethanol boom has driven the price of corn up, which in turn makes everything that uses corn go up in price. Corn is in a lot of products.

Why are we investing so much in corn-based fuel?

I think the answer is fear. Fear of rising oil prices. Fear of global warming. Fear of our dependency on foreign oil.

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Are biofuel mandates and tax credits such a good idea? It may be wise to learn from the EU’s experience…

After passage of the new Renewable Fuel Standard (RFS) late last year (see earlier post), which mandates production of 15 billion gallons of corn-grain ethanol by by 2015, many of us are left contemplating the vast implications for US industry, not to mention commodity prices, auto manufacturing, and the greater course of biofuel research and development.

Rewind to 2003, when the European Union (EU) passed a biofuel directive requiring 5.75% of transport energy to come from biofuels by 2010, increasing to 20% by 2020. When paired with tax credits for biodiesel production, business boomed, at least for a while:

Mirroring the U.S. experience with ethanol, European companies rushed to make biodiesel out of a range of things, including rapeseed crops and used McDonald’s frying oil. Low raw-material costs and generous tax breaks meant margins were high. By last year, Europe’s annual capacity to make the fuel had climbed to 10 million metric tons from two million tons in 2003.

As with ethanol in the U.S., though, Europe now has a glut of biodiesel. The world consumed only nine million tons of biodiesel last year. Europe’s producers found buyers for just five million tons. The industry is in trouble, under pressure from soaring costs, disappearing tax breaks, less-costly imports and waning public support.

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Adana is the nation’s fourth largest city and the centre for the Turkish cotton and textile industries. In this case the American cotton is sent to a factory where it is spun and used to make towels. Great attention is paid to ensure high quality, oh-so-soft and fluffy towels to attract the Turkish shopper… or rather, the American shopper. The towels are packaged and sent to the United States on another container ship. This is crazy!

There are of course the energy and CO2 emissions involved in this to and from tango across the ocean. But even if we put aside such issues in the name of international trade, it cannot be denied that the system is absurd, especially given the fact that Turkey is one of the top ten cotton producers in the world.

The story of the roving Georgian cotton was recently told on national French television, forming one chapter in the larger chronicle of one container ship’s circumnavigation of the globe. It reminded me of another story, that of the traveling tomatoes told in We Feed the World (2005), a film by Austrian director Erwin Wagenhofer. Spanish tomatoes, ripened under the warm southern sun, have long supplied northern European markets. I was an occasional consumer, preferring the Spanish variety to the other widely available option, the tasteless variety grown in rainy Holland. Note: I was, for as it turns out, those tomatoes are not at all sun-ripened.

As shown in Wagenhofer’s film, in southern Spain tomatoes and other vegetables are grown in greenhouses, greenhouses as far as the eye can see and beyond. And not a tree to be found. They are grown using an artificial (read inefficient), irrigation system manned by workers from North and West Africa. The men work long hours and live in makeshift shacks in between the greenhouses. A large percentage of the produce from southern Spain is transported by truck to northern Europe, and a certain percentage is sent to different countries in Africa. Even with the higher production costs in Europe plus the transportation costs, the Spanish tomatoes are sold in Africa at cheaper prices than locally grown tomatoes. Absurd.

Why such absurdities in world trade? Much of the answer lies in subsidies. The devastating effects of first-world subsidized agriculture on markets in the developing world are well known. Subsidized produce is artificially competitive, encourages an increase in production and pushes international market prices down. Local farmers in developing countries cannot compete, and are forced out of business and into poverty. Yet the developed world continues to subsidize its agriculture. Disagreements over reducing subsidies in general and export subsidies in particular, have threatened to jeopardize several rounds of international trade talks over the past years. Both the European Union and the United States remain reluctant to renounce their protectionist measures.

Of course not all subsidies should be abolished. As said a few months ago during a discussion here on Green Options about the US Farm Bill, subsidies should not be paid to the barons of unfair unsustainable trade, the mega agribusinesses, but should fund local organic outfits, thereby encouraging the shift to green sustainable agriculture.

We Feed the World

World Trade Organization

Oxfam on Cotton Subsidies

UN Food and Agriculture Organization