Author: Luis Alberto Moreno

Source: Des Moines Register 

For industrialized countries with temperate climates and limited quantities of available farmland, these positions are understandable. Biofuels in the North are generally derived from feedstocks such as corn and rapeseed that have low energy efficiency and require expensive inputs. And since most arable land in the North is already under cultivation, biofuels are likely to compete with food crops if expansion continues.

But these constraints simply do not apply to many developing countries with tropical climates and underutilized agricultural resources. In the South, most biofuels come from energy-efficient feedstocks such as sugar cane and palm oil (sugar cane yields up to eight units of energy for every unit used in cultivation, compared to 1.3 units for corn). Land and water resources are abundant. Nearly 90 percent of Latin America's territory, for example, is in humid or semi-humid climates, and by some estimates only 20 percent of that region's arable land is under cultivation.

As a result, biofuel production in developing countries is far less likely to compete with food. In Brazil, the area now dedicated to ethanol is 60 times smaller than the total stock of pastureland. Even if 100 percent of the country's gasoline consumption were to be substituted with cane ethanol, the land required to grow it would still be around half of what Brazil now devotes to corn.

Small developing countries that are heavily dependent on imported fossil fuels have especially compelling reasons to invest in biofuels. Guyana, for example, relies on imported oil to generate all of its electricity. Yet sugar producers, who account for around 9 percent of the country's gross domestic product, are able to meet their power needs using generators that burn bagasse (plant waste) left over during the production process.

These producers use old and comparatively inefficient equipment to co-generate electricity. The Inter-American Development Bank estimates if they were to switch to the latest techniques and upgrade to high-pressure boilers, Guyana's sugar producers could supply up to half of the country's total electricity needs - without planting any additional cane. Should Guyana use some of its abundant land to expand sugar-cane production, it could produce enough ethanol to meet all its transportation needs, co-generate enough electricity to power its entire grid and still export excess ethanol.

Clearly, the cost-benefit ratio of producing biofuels in the tropics is far more advantageous than in the industrialized North. Instead of issuing blanket condemnations of biofuels, the international community should find complimentary and productive ways to exploit these differences.

One obvious option is to eliminate all tariffs on biofuel imports. Though such imports could meet only a tiny fraction of the industrial world's fuel needs, they would help to jump-start biofuel production in poor countries, bringing much-needed investment and jobs to rural areas and laying the groundwork for domestic biofuel industries. Many of these areas are among the principal sources of illegal immigration to the United States and Europe.

Free trade in biofuels would also be good for ethanol producers in Iowa. By diversifying supply and rewarding efficient producers, it would create a global commodity market in biofuels that would in turn encourage greater consumption and demand. Most importantly, such a market would disarm critics who claim U.S. biofuel producers cannot exist without subsidies.

In exchange for eliminating barriers to biofuels, industrialized countries could demand tariff-free access for technology, chemicals and machinery in the renewable-energy and energy-efficiency sectors. Products such as solar cells, wind turbines and energy-saving building components could thus find larger markets in Africa, Latin America and Asia.

The North needs biofuels but has a limited capacity to produce them domestically. The South has land, climate and abundant rural labor, but lacks investment capital and technology. A broadly defined "Sustainable Energy Trade Regime" would acknowledge this reality and harness market forces to help tackle one of the greatest challenges of our time.

Luis Alberto Moreno is president of the Inter-American Development Bank.