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Politicians will put the focus on biofuels

Daily Telegraph

When President Obama descends on Copenhagen for the United Nations Convention on Climate Change today, he will not be chugging along the city streets in his usual gas-guzzling armoured Cadillac known as the Beast.

By Garry White and Rowena Mason
Published: 5:36PM GMT 06 Dec 2009

Predictably, the organisers of the summit have sorted out a fleet of 150 limousines running on fuel made from algae, bioethanol and hydrogen for the most important delegates. Everyone else will be expected to hop on the bus.

Mass green tokenism is going to be rife for the 12 days of the conference, before political leaders return with relief to their bottled water and big steaks. But beyond the short-term publicity stunts and environmental posturing, the politicians are going to be making decisions that fundamentally reconfigure the way humans use natural resources over the next 40 years.

The triumphant commodities are likely to be biofuels. Oil is out of favour, coal is ostracised until someone can find a way to clean it up and gas is repeatedly referred to as a “bridging” solution until lower-carbon sources of energy can be found. As the developing world rapidly expands, consumption of traditional fossil fuel is still expected to creep up, but the potential of biofuels to start edging into their market will be enormous.

Transport has always been the sector lagging behind in the world’s efforts to tackle carbon dioxide emissions. Since targets for the developed world were set in Kyoto and Europe imposed a carbon trading system, the power generation sector has begun its transition from fossil fuels towards nuclear and renewable. But still less than 0.1pc of the UK’s 26m cars are electric and the sector remains exempt from the trading system.

The lack of emphasis on transport emissions is about to change. Over the weekend, United Nations officials indicated to Brazil that they would include biofuels in the offsetting regime between the developed and developing world, called the Clean Development Mechanism (CDM). Carbon trading in Europe is simply a system where utilities and heavy industry are given permits to emit carbon dioxide, which they can then trade on the open market – buying up more or selling off spares in a mechanism meant to penalise heavy polluters and reward those who cut their emissions.

The entry of biofuels into the system is likely to induce Brazil to increase its sugar production, which is already booming in South America. Around half of Brazil’s cars already run on ethanol, with more than 90pc of new vehicles prepared to run on the green substance.

Sugar cane-derived ethanol, cutting up to 90pc of the carbon emissions of petrol, is much more efficient than corn-produced ethanol popular in parts of the US, where some states have mandated that 10pc of all transport must be run on biofuels.

In Europe, progress towards biofuels has been slow, with few cars running on ethanol available.

However, the European Union has set a goal for 10pc of all petrol and diesel sales to be biofuel by 2020 – with Brazil the likely supplier.

Toby Cohen, head of research at Czarnikow, the commodity trader, said: “Brazil alone has enough land to provide 10pc of global demand for gasoline needs but a lot of investment will be needed to increase production.”

The group has seen its ethanol volumes triple since it first began trading the commodity in 2005, facilitating its export from Brazil to Europe and other parts of the world.

But ethanol is not without its significant problems, with some prominent scientists calling for a moratorium on more production.

Large amounts of arable land are required, raising issues about competition with food production, creating price inflation and the carbon dioxide emissions of the whole production cycle, through deforestation.

As a result, companies such as BP and Royal Dutch Shell, which have bailed out of some unproductive renewable energy sources, are directing most of their environmental attention towards next-generation biofuels designed to alleviate these problems.

Shell, for example, is experimenting with cellulosic ethanol made from plant waste such as straw and wood chips and biodiesel made from algae, which can be grown in the sea.

However, technologically advanced versions are unlikely to be widespread for another 10 years at least.

So, with the UN poised to give an immediate boost to the prospects of bioethanol at Copenhagen, the challenge for Brazil and the other major producers such as the US will be to enhance crop yields to ensure that the fuels are helpful rather than a hindrance to the environment – after all, that is the whole point of the green exercise. RM

World’s poor at risk from speculation

Robert Zoellick, president of the World Bank, said on Friday that a surfeit of cash in global markets combined with low interest rates is causing investors to pump money into commodity markets, risking another bubble in food prices that could hit the world’s poor.

“I am somewhat concerned with a lot of liquidity in global markets,” Mr Zoellick said. “You could see additional moves towards the agricultural commodities sector, if there were perceptions of market shortages,” he added.

Food inflation in India in the year to November 21 was 17.47pc, with the price of staples such as pulses up 37pc. Rice, wheat and fruit prices rose by 10pc over the year. GW

US live cattle

On Thursday, US February live cattle futures plunged to a new contract low after the US Department of Agriculture said that net sales of beef totalled 7,500 tonnes last week, down from 8,300 tonnes in the previous week.

Consumer demand for beef remains low due to high unemployment and cost-conscious consumers switching to cheaper meats such as pork. Prices for hogs and pork bellies continue to recover from their swine-flu induced lows. GW

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