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PARIS—Governments of the world's biggest economies should drop their national subsidies and other policies supporting production or consumption of first-generation biofuels because these contribute to food price hikes while not achieving stated environmental goals, according to a report released June 10 by the Organization for Economic Cooperation and Development, the World Bank, and eight other international organizations.
The groups produced the report, Price Volatility in Food and Agricultural Markets: Policy Responses, at the request of the Group of 20 countries, which account for some 85 percent of global economic output.
G-20 agriculture ministers are scheduled to meet June 22-23 in Paris to consider policy responses to commodity price volatility, including for food crops, which France has made a priority of its 2011 presidency of the group.
The report said: “Subsidies to first-generation biofuel production lower biofuel production costs and, therefore, increase the dependence of crop prices on the price of oil. Such policies warrant reconsideration.”
Furthermore, “trade restrictions by favoring domestic sources of raw material for biofuels do not maximize expected environmental benefits,” in particular, reduction of carbon dioxide emissions, it said. The report made several recommendations for agricultural, environmental, and trade policy changes.
The report said that between 2000 and 2009, global output of bioethanol quadrupled and production of biodiesel increased tenfold, pushed by government support policies in wealthy countries.
First-generation biofuels are produced mainly from food crops. The report said that from 2007 to 2009, these biofuels accounted for 20 percent of sugar cane use, 9 percent of use for both oilseeds and coarse grains, and 4 percent for sugar beet use.
“With such weights of biofuels in the supply-demand balance for the products concerned, it is not surprising that world market prices of these products, and their substitutes, are substantially higher than they would be if no biofuels were produced,” the report said.
In addition to ending subsidies, the report recommended speeding scientific research on so-called second-generation feedstock as well as other ways to reduce carbon dioxide emissions and improve energy and food sustainability and security. Second-generation biofuels are mainly produced from nonfood, cellulosic sources and provide greater greenhouse gas savings than standard fuels and most first-generation biofuels.
The report also recommended opening international markets so that renewable fuels and feedstocks can be produced where it is economically, environmentally, and socially feasible to do so and can be traded more freely.
Other organizations involved in the report included the World Food Program and World Trade Organization.
By Rick Mitchell
The report, Price Volatility in Food and Agricultural Markets: Policy Responses, is available at http://www.oecd.org/dataoecd/40/34/48152638.pdf .
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