As policymakers the world over are struggling to cope with skyrocketing food prices, the World Bank says it is the biofuels that have forced global food prices up by as much as 75% — far more than previously estimated.
The confidential report leaked by an internationally-respected economist at a global financial institution to the Guardian
newspaper rubbishes the U.S. government's claims that plant-derived fuels contribute less than 3% to food-price rises.
President George W Bush had claimed that it was the increasing consumption in emerging economies that was responsible for the current crisis.
But the World Bank repudiates him comprehensively. It asserts, with enough supporting data, "Rapid income growth in developing countries has not led to large increases in global grain consumption and was not a major factor responsible for the large price increases."
Also successive droughts in Australia have had only a marginal impact. On the other hand it is the EU and US drive for biofuels has had by far the biggest impact on food supply and prices.
"Without the increase in biofuels, global wheat and maize stocks would not have declined appreciably and price increases due to other factors would have been moderate," says the report. The basket of food prices examined in the study rose by 140% between 2002 and this February.
The report estimates that higher energy and fertilizer prices accounted for an increase of only 15%, while biofuels have been responsible for a 75% jump over that period.
The report argues that production of biofuels has distorted food markets in three main ways. First, it has diverted grain away from food for fuel, with over a third of US corn now used to produce ethanol and about half of vegetable oils in the EU going towards the production of biodiesel. Second, farmers have been encouraged to set land aside for biofuel production. Third, it has sparked financial speculation in grains, driving prices up higher.
Supporters of biofuels argue that they are a greener alternative to relying on oil and other fossil fuels, but even that claim has been disputed by some experts, who argue that it does not apply to U.S. production of ethanol from plants.
The World Bank report comes at a critical point in the world's negotiations on biofuels policy as leaders of the G8 industrialized countries prepare to meet next week in Hokkaido, Japan, where they will discuss the food crisis and come under intense lobbying from campaigners calling for a moratorium on the use of plant-derived fuels.
Rising food prices have pushed 100 million people worldwide below the poverty line, estimates the World Bank, and have sparked riots from Bangladesh to Egypt. Government ministers have described higher food and fuel prices as "the first real economic crisis of globalization".
"Political leaders seem intent on suppressing and ignoring the strong evidence that biofuels are a major factor in recent food price rises," Robert Bailey, policy adviser at Oxfam told the Guardian. "It is imperative that we have the full picture. While politicians concentrate on keeping industry lobbies happy, people in poor countries cannot afford enough to eat."