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Food vs fuel: It's time for a rethink, feel experts
June, 03rd 2008

Well-known economists warned that the developed block such as the US and the EU would need to rethink their biofuel policy in order to restrain global food prices that soared in recent months.

"The food crisis has proved that people who thought that biofuels were a source of huge energy efficiency were wrong," says Chris Green, professor of economics at McGill University, Canada.

 Mr Green was speaking on the sidelines of the Copenhagen Consensus 2008 (CC). Both the US and the EU have set targets of using bio-fuel mix of 25% and 20% by 2020, respectively.

Definitely, there are various reasons which have led to the current food crisis but economists agree that the diversion of farmland from producing crops to bio-fuels is amongst the more significant ones.

This shift can be traced back to excessive climate change scare and achieving energy efficiency. "In the first place, they should have never set such targets. I diverge substantially from the claims of IPCC WG III, which conclude that technologies needed to stabilise emissions are currently available or under development," said Mr Green.

Experts believe that using bio-fuels to achieve energy efficiency is a short-term solution and it isnt going to work. In his report, tabled at the CC, Mr Green stated, "In my view, the belief that the requisite technology is available and adequate to the challenge (IPCC, 2001) has badly distorted climate policy for more than a decade. It has not only contributed to virtually single-minded focus on near-term mitigation, but mitigation achieved by mandating emission-reduction targets. The commitments made not only lack credibility, but promote costly and ultimately futile attempts to achieve them."

 Not that the short-term mitigation targets have shown results either. Considering the ethanol production in US, the overall CO2 balance has not reduced. Its only increasing. The US doesnt want to be energy-sufficient, it only wants to be energy-independent compared to the Middle East, said Francois Bourguignon, Director of Paris School of Economics and former chief economist of the World Bank. Mr Bourguignon is a member of the expert panel at CC.

While the US has passed the blame to the growth in India and China for the food crisis, experts believe that isnt a wise argument. There is nothing wrong with people consuming more in India and China, says Jagdish Bhagwati, University Professor at Columbia University.

Moreover, the fact that the consumption in India and China, specifically of meat, has increased is one of the less important reasons for the food crisis.

Mr Bhagwati believes that it is a combination of various other factors that has led to the crisis, most important being the shifting of crops from corn to bio-fuels, the drought in Australia and increase in consumption in India and China. Another factor is that the dollar is very weak so no currency seems like a big winner in times to come. As a result, people are moving from currency to commodities, said Mr Bhagwati.

In fact, Mr Bhagwati believed that Indias decision to ban rice exports was the right solution in the short term. Compared to GATT, its successor, the WTO, has no restrictions on export taxes. I believe the finance minister of India, Mr P Chidambaram, has taken the right step. However, export control is only a temporary solution, which is not advisable in the long run, he added.

Copenhagen Consensus 2008 is a project, where 40 international and prominent economists, including five nobel laureates are analysing and identifying the best solutions to 10 of the worlds biggest challenges. On May 30, the final prioritised list with the most effective solutions was announced.

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