Biofuels made from crops like canola, corn and soybeans were supposed to help fight global warming and be a viable alternative to fossil fuels. Instead, they are contributing to climate change and putting even more pressure on soaring food prices. Oops.
In the US, one quarter of corn goes to biofuels, and subsidized farmers like it that way. As do fertiliser companies like Potash (POT), which have ridden the commodity boom to several years of extraordinary performance.
But Europe is now wisely reconsidering its position in the face of new evidence that biofuels do more harm than good. Potash investors should hope that this doesn’t become a trend (NYT):
European officials proposed scaling back drastically on their goal of increasing Europe’s use of biofuels, a major about-face on a central environmental and energy issue.
Until recently, European governments had sought to lead the rest of the world in the use of biofuels, aiming to derive 10 per cent of Europe’s transportation fuels from biofuels by 2020. But the allure has dimmed amid growing evidence that the kind of goals proposed by the European Union are contributing to deforestation, which speeds climate change, and helping force up food prices….
A major reason is that over the last 18 months, studies have shown that the current generation of biofuels — reliant on food crops like canola, corn and soybeans — helps drive up food prices by using agricultural land, as well as aggravating deforestation, and may be worse for the climate than conventional oil once the cost of production and transport are taken into account