Two Stupid Energy/Environment Policies That Starve Poor People

by William Yeatman on May 19, 2011

in Blog, Features

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1. Ethanol Mandates: In an effort to further “energy independence,”* major agricultural producing countries have enacted Soviet-style production quotas for ethanol, a motor fuel distilled from food.

This year, about a third of the U.S. corn crop will be used to manufacture 13 billion gallons of ethanol. By law, that will increase to 15 billion gallons every year after 2015. The European Union mandates that ethanol distilled primarily from palm oil and wheat, constitute an increasing percentage of the fuel supply, ultimately 10% by 2020.

Global ethanol production is a new and tremendous source of demand for food that has had a significant impact on the price of grains and oilseeds. According to a report commissioned by the World Bank, global demand for fuels made from food accounted for nearly 70% of the historic price spike in wheat, rice, corn, and soy during the summer 2008.

2. Rainforest Protections: Burning rainforests is an important link in the global food supply chain. In Brazil, farmers are clearing the Amazon rainforests to meet rapidly growing global demand for soybeans. In Indonesia, they slash rainforests to harvest palm oil seeds for export to Europe.

Rainforests are an important source of food supply, but they are also revered by environmentalists as symbols of ecological diversity. In late 2009, a group of wealthy countries, including Australia, France, Japan, Norway, Britain and the United States, pledged $3.5 billion over the next three years to stop the destruction of the rainforests. It’s the first installment of a proposed $25 billion.

In practice, this money will be used to pay farmers not to clear rainforests for agricultural use in developing countries. The global oils trade in particular will be affected.  Global demand for soybeans is growing 6 million tons annually, thanks primarily to China’s voracious appetite. Much of this demand has been met by cultivating rainforests. By constraining the supply of land, rainforests protections push up the price of these commodities on the global market.

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As I explain here, there will be no Malthusian famine, despite these stupid, anti-human policies

There are tremendous gains in production to be made in the developing world, especially in China and Brazil. And technological advances to improve productivity, such as biotechnology, will mean greater yields-per-acre and enhanced crops that can grow in previously inhospitable regions. In the long term, the world’s farmers will meet demand.

In the short to medium term, however, the global supply chain is going to be a problem. A natural disaster in America or in any other major food-exporting country could send the market price of food spiraling upward.

The most adversely affected by these boneheaded policies are poor people in developing world capitals that are dependent on the global grains and oilseeds market. The developing world has been urbanizing for decades, resulting in unprecedented concentrations of the poor in the world’s cities. There are no sustenance farms in urban areas; Instead, many of these cities depend on international trade for food.

*So-called “Energy Independence” is empty political rhetoric, as my colleague Iain Murray demonstrates in this paper.

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