The debate over biofuels has heated up on both sides of the Atlantic in recent weeks, with the current prime biofuel - ethanol made from corn - now being blamed as a contributing factor to the dramatic rise in the price of food around the world.

Until recently, it was seen by many as a silver bullet for cutting dependence on oil, thus helping energy security and reducing greenhouse gas emissions. Not everyone agreed with the idea. In the winter 2006 issue of European Affairs, John Ritch, head of the World Nuclear Association, pointed out that it remains to be seen whether “biofuels” actually constitute a long-term contribution to a sustainable strategy for clean energy. In the climate crisis, a not insignificant factor is the shrinkage of “carbon sinks” as the world’s forests get converted to farm land. So the limited amount of farmland is a constraint. And “clearing woods to plant these crops actually heightens our vulnerability to amassing more greenhouse gases in the atmosphere,” he wrote two years ago.

Now, the impact in terms of displacing food crops to raise ethanol has emerged as another, more immediate drawback for biofuels. In the U.S., for example, Congress increased incentives for ethanol production designed to raise output from seven billion gallons a year to 36 billion by 2022, with 15 billion of that coming from corn. The remainder will be derived from “next generation” sources such as prairie grasses and wood chips, but it could be years before this advanced ethanol will be available on a commercial scale. This mandated, subsidized biofuel uses corn as its main foodstock and last year absorbed a quarter of the U.S. corn harvest. When combined with surging demand for corn abroad fueled in part by the cheap dollar, the effect has been to displace other crops, reducing their supply and raising prices for other foods from bread to beef that depend on wheat. By next year, as much as one-third of U.S. corn production is expected to go into ethanol.

Another source of consternation (and transatlantic frictions) are biodiesel-production subsidies in the European Union and in the United States. The U.S. government provides a $1 subsidy for every gallon of biodiesel that is blended in the U.S. for export. Europeans complain that this has given American producers an unfair advantage in EU markets, where “artificially cheap” American products are putting EU producers out of business. Many European nations and the EU also provide somewhat less generous subsidies to biofuel producers, but there has been pressure for them to eliminate such support. Some have said that a high demand for biofuels in Europe has made subsidies unnecessary.

This subsidy was intended to help the American biodiesel industry, but it seems that foreign companies have discovered a way to take advantage as well. Biofuel producers from Europe and elsewhere ship their biodiesel to the U.S., where they add a “splash” of regular diesel, qualifying their product for American subsidies. The fuel is then shipped back to Europe for sale, where it is also eligible for EU subsidies. This loophole, which has been a cause of public complaints since late last year, ironically results in even higher carbon emissions from the back-and-forth transatlantic shipments.

Another objection to biofuels among environmentalists is the high demand for water at big ethanol-production facilities. This has added to strains on the water table in Florida and other localities in the U.S. There are growing concerns, too, that ethanol was oversold as a product that would reduce greenhouse gases. Some new U.S. ethanol plants are powered by coal, and truck corn from hundreds of miles away, gobbling up fossil fuels. Acreage displaced for energy crops here may be replaced by plowing virgin lands in Africa and South America, causing major releases of carbon. And although corn ethanol plants that are built after next January 1 will have to show they are reducing carbon, most plants needed to meet the 15 billion gallon mandate will already have been built by then.

The new attention to ethanol’s downside has prompted statements in Congress about rolling back federal support for biofuel production in the face of rising food prices. House Majority Leader Steny Hoyer suggested on May 1 that he favored moves in this direction. At the urging of the livestock, poultry and hog industry, the governor of Texas and 28 Senators have asked the administrator of the Environmental Protection Agency to set aside ethanol requirements at least temporarily to help ease corn prices. The New York Times published an editorial on Sunday calling on Congress to roll back subsidies and rethink its support of ethanol. But the ethanol boom has brought windfall profits to farm states, so there are doubts about whether this policy can be changed fast, especially in an election year.

In the EU, fingers are being pointed at the U.S. on this issue. EU trade commissioner Peter Mandelson did so in an op-ed published in the Guardian (UK). “We can already see that large-scale biofuel production, especially in the U.S., may be one of the factors pushing up food prices,” he wrote. “The race to grow maize for ethanol subsidies in the U.S. reduces the supply of food crops on world markets and drives up the cost of this important staple.” (”Maize” is the grain that Americans call “corn.”) Despite the EU’s mandate that biofuels account for ten percent of transport fuel by 2020, Mandelson argued that European biofuel production is having “only a minimal effect” on food prices.

Amid these recriminations, there is talk in the EU of scrapping biofuel subsidy programs, Already, these is increased pressure on EU officials to lower or abandon the ten percent target, especially in Germany where at least one-tenth of the nation’s cars do not have engines adapted to run with a significant admixture of ethanol. In the UK, all petrol and diesel sold at pumps is now required to contain at least 2.5% biofuels. But Prime Minister Gordon Brown signaled a retreat from biofuels last month, acknowledging the global food crisis and saying that Britain must be “more selective” in its support for biofuels.

See Also:
Editorial: Rethinking Ethanol, New York Times, 11 May 2008
Nuclear Rising on Both Sides of the Atlantic, European Affairs, Winter 2006
U.S. Biodiesel Subsidies Anger Europeans, National Public Radio, 10 April 2008
Biofuels: EU plans to scrap ‘needless’ farmer aid, Business Report, 15 April 2008
Demands for crackdown on biofuels scam, The Guardian (UK), 1 April 2008
Biofuel Boondoggle: US Subsidy Aids Europe’s Drivers, Christian Science Monitor, 8 June 2007
Congress’ ethanol affair is cooling, Washington Times, 1 May 2008
Op-Ed: Keeping the Crop in Hand, The Guardian (UK), 29 April 2008
Pressure Grows on EU to Abandon Biofuels, Der Spiegel, 16 April 2008
Petrol must now include biofuels, BBC News, 15 April 2008
Brown’s biofuels caution welcomed, BBC News, 22 April 2008

Correction: This post was edited on May 13 to better reflect the different subsidies allocated for biodiesel and ethanol.

Parliament’s Marek Siwiec does Q&A with European Affairs

Marek Siwiec, 53, is a Polish politician who is a vice-president of the European Parliament, where he belongs to the European Socialists faction. Between 1997 and 2004, he was the chief of the Polish National Security Office under President Aleksander Kwasniewski, a key international policy post in the presidency. Siwiec visited Washington in May with a delegation of the European Parliament and spoke with European Affairs during a brief Q&A session.

Q: How well does Washington understand trends in the European Union?

A: Like any superpower, the United States has a tendency of over-simplify foreign problems. It tends to ignore trends that emerge quietly, without dramatic developments that compel attention among U.S. policy-making elites. This applies to the EU, which is still not well understood in Washington.

Q: What do U.S. policy-makers grasp?

A: Americans understand the Schengen accord and our customs union because they are familiar with free travel and free trade. But they often don’t understand our approach to juridical issues or internal-security problems. The EU cannot really be understood by comparisons with any other system.

Q: Is this damaging?

A: U.S. policy-makers still tend to operate with the cold war era’s reflex of preferring to build bilateral policies with each individual European country. Take the visa-waiver question: the regime should be the same for all EU member states in the EU but it isn’t. Of course, it doesn’t help that we in the EU have not managed to develop a cohesive foreign policy of our own yet.

Q: Do you see any positive trend?

A: Transatlantic trade and direct investment are spectacularly large, so the EU and U.S. have a responsibility to work together on a broad range of global policies. I counted eight or nine European Commissioners who have given speeches in Washington in the last few months talking about cooperation on a whole list of subjects: justice, anti-trust, accounting standards, economy, environment, open skies and so on. Very slowly, the EU is gaining credibility in Washington.

Q: How is the Parliament evolving?

A: It is not yet the legislative body it is supposed to be, but it is changing. It started as little more than “democratic window-dressing.” Many parliamentarians were people who had not been very successful politically in their own countries. That’s changed: now there is two-way traffic between being an MEP and a foreign minister or vice-premier in a national government.

Q: Is this change affecting your role?

A: The parliament has a dramatically more energetic role, and it is actively looking for policy areas where it can make an effective difference. Right now, we’re involved in roughly 40 areas of EU policy, but once the Lisbon treaty takes effect, that number will more than double, to about 90.

Q: What about your impact?

A: We are getting more powers. Recently, we forced multinational phone companies to reduce roaming charges for their mobile-phone subscribers in Europe – a change that affected several hundred million people in their daily lives. There was no other institutional set-up ready to tackle this problem, so we did. Looking ahead, I expect to see the parliament doing more and more of this sort to thing, in being responsible to the voters who now put us into office by direct elections.

Q: What sort of issues do you have in mind?

A: Look for us to be increasingly active on questions that interest the European electorate: human rights, environment, consumer issues – a whole range of these questions. Take the example of the U.S. program to operate secret “rendition” flights through airfields in Europe. No government involved in this practice has acknowledged publicly what happened. We took it on with parliamentary methods. In trying to push into such an area protected with high-level laws and secrecy, we had only limited success. But something important happened. I am convinced that as a result of our efforts such things will not happen again in the future.

Q: What did the matter tell us about the parliament?

A: It showed we had enough courage to tackle such a sensitive issue, and it was an important sign of our special role. The European Commission gets its mandate from the EU’s Council of Ministers, which represents the governments of the member states. That set-up implies some limits on what those bodies are going to do. In contrast, the parliament can operate outside that mandate of governments because we are the voice of the people. It was a milestone when the parliament succeeded in putting enough pressure on the Commission to block the appointment of an Italian nominated to be a Commissioner and get him replaced. (Incidentally, the successor, Franco Frattini, has just gone back to Italy as a cabinet minister in the new government.)

Q: What is the biggest change you think the parliament should push?

A: The Parliament has enough status to help bring about constructive discussion about big changes in the Common Agricultural Policy. The time has come. Those subsidies usefully maintained our agriculture when crop prices were low. Now food prices have risen enough for farmers to stay in business, comfortably, on a free-market basis. We need to start making the point that the money spent on price supports should go on other forms of help to farmers. Right now. There is a big “civilization gap” between rural and urban areas in many of our countries – for example, in Poland. We have large populations living far away from access to culture, health care and many other benefits. So I would say, “dear farmer, let’s talk about spending the money not on your potatoes but on other things that can benefit you in other ways.”

Q: Looking outside the EU’s borders, what foreign issues are on the front burner in the parliament?

A: Like other EU institutions, we’re trying to assess some broad international geopolitical issues such as the Middle East problem. One of the reasons for my visit here to Washington is to address the American Jewish Congress on the 60th anniversary of Israel’s foundation. Right now, Washington is trying to establish a balance sheet for its eight years in office, and it’s a complicated question in the Middle East. But taken from the angle of Israel’s security, I think the outcome has been negative. Many new phenomena have emerged: Hama’s control in the Gaza Strip, Hezbollah gains in Lebanon. This cannot be blamed entirely on Washington, I think, but things are moving in a bad direction and the lame-duck administration cannot do much. So the question is: Where was the mistake? What policy changes are needed? Can the EU change its future role? It is not the right time – and should not be the time – for Washington to try any spectacular action, so the EU should try to be present in a way that encourages positive trends in the region (precisely the trends that are not dominant right now). I think we can see that our approach to exporting democracy can backfire by bringing to power factions – like Hamas – that gain a mandate for their dangerous regime. Above all, the EU has to have ambitions to become not just a payer but a player.

Q: How can the EU ever have political leverage in an area where one side of the conflict, Israel, mistrusts you?

A: We have to get beyond a situation where our policy is being set by CNN and other television networks that constantly focus on showing violence and often violence shown as attacks on Palestinian civilians. We have to think more carefully about defining our long-term vision for this part of the world. We need to convince our societies to focus on the need for long-term stable peace in the region. I think a particularly helpful contribution is coming from the so-called “new Europe,” where countries, particularly Poland, are friendly toward Israel. It’s time for Europe to stop thinking of Israel just as a troublemaker and start to recognize Israel as a democracy that can be an attractive partner for us in many ways. For this, we need to move beyond a pattern that consists only of commemorating the holocaust and the rest of the past and move toward a vision of Israel and Europe in the 21st century. When Poland got back its freedom 20 years ago, we discovered some ugly truths about our past and Polish people’s relations with Jews. We faced these difficult facts and had tough discussions among ourselves coming to terms with them. We had the freedom to do it, and the truth we now come to hold has reinforced our authentic freedom. This new situation could give us a new attitude in the Middle East.

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* Answers have been edited for clarity.