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News : International Last Updated: Dec 19th, 2007 - 13:17:15

OECD report calls for end to biofuel subsidies; Food price surges and damage to the environment consequence of current policies
By Finfacts Team
Sep 11, 2007, 09:25

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The futures price of wheat hit a record high of $8.86 per bushel on the Chicago Board of Trade last Wednesday. That's more than double the September 2006 price of $4.22 a bushel, said Mary Haffenberg, a CBOT spokeswoman. The price of wheat for December delivery fell Thursday to $8.24 a bushel. The price is up by 60 percent this year.

In the US, biofuel, which is subsidised, accounts for about one-fifth of the corn crop. The lack of acreage for other crops, such as soyabeans, pushes their prices up too. Last summer, the US Department of Agriculture reported that farmers planted 19 per cent more land with corn this year than last, while soyabean acreage fell by 15 per cent.

Governments should end subsidies for biofuels, as the demand for grain for the alternative energy industry result in surging food prices and the potential destruction of natural habitats, the Organisation for Economic Co-operation and Development (OECD) will warn on Tuesday.

Last week, the United Nations’ top agriculture official warned that developing countries risk serious social unrest triggered by rising food prices .

Jacques Diouf, Director-General of the UN’s Food and Agriculture Organisation, said that surging prices for basic food imports such as wheat, corn and milk has the “potential for social tension, leading to social reactions and eventually even political problems”.

THe Financial Times in a report today, says that the OECD will say in a report to be discussed by ministers on Tuesday that politicians are rigging the market in favour of an untried technology that will have only limited impact on climate change.

“The current push to expand the use of biofuels is creating unsustainable tensions that will disrupt markets without generating significant environmental benefits,” say the authors of the study, a copy of which has been obtained by the Financial Times.

The survey says biofuels would cut energy-related emissions by 3 per cent at most. This benefit would come at a huge cost, which would swiftly make them unpopular among taxpayers.

The FT says that the study estimates the US alone spends $7bn (€5bn) a year helping make ethanol, with each tonne of carbon dioxide avoided costing more than $500. In the EU, it can be almost 10 times that.

It says biofuels could lead to some damage to the environment. “As long as environmental values are not adequately priced in the market, there will be powerful incentives to replace natural eco-systems such as forests, wetlands and pasture with dedicated bio-energy crops,” it says.

The FT says that the report recommends governments phase out biofuel subsidies, using “technology-neutral” carbon taxes instead to allow the market to find the most efficient ways of reducing greenhouse gases.

”Such policies will more effectively stimulate regulatory and market incentives for efficient technologies,” it said.

© Copyright 2007 by Finfacts.com

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