UN Food Summit

Lula da Silva's claim that the link between biofuels and fuel prices does not stand up is obviously rubbish. He's right that the causes of food inflation are complex but the link with biofuel is clear: while Washington suggests biofuel production is responsible for about 3% of the increase: other estimates put it as high as 30-60%.

In general, biofuels are not considered to be the prime cause of food inflation and it is right not to focus the whole debate on this single factor. However, the biofuel 'experiment' is at best a red herring, at worst a catalyst for further environmental destruction. Let's be clear: first, it has a role in causing food inflation; second, the subsidising of biodiesel is an encouragement to increase carbon emissions.

The subsidies given to the production of biofuels is greater than the cost of production of petrol or diesel. So the shift to biofuels is very expensive: for OECD members this amounts to about $15bn but only delivers 3% of liquid transport fuel. To counter future supply shortages of oil, some countries are proposing to derive 30% from biofuels, at a cost of $150bn.

Is this money well spent? Of course not!

Biofuels have very little impact on carbon emissions (13-18%). Fundamentally, the vast investment into biofuels through subsidies and tariffs - Brazilian ethanol faces tariffs of 50% in the EU - could be spent on more effective ways of reducing carbon emissions.

Of course, the whole story is not about carbon emissions either: there is a growing shortage of easily available energy. By framing the problem in this way, the response is to find alternative energy supply. There are many parties interested in maintaining the status quo: the agricultural lobby is doing very nicely from the boost to crop prices; while oil producers are enjoying the high price of oil, especially relative to the dollar.

Just a thought.
Lord Goring

Fuel taxes

Lord Turner has a point: putting a price on carbon is a crucial instrument to cut emissions. He rightly says that the emphasis should be on encouraging people to cut their fuel use, rather than easing price pressures: “There are huge opportunities for energy efficiency.”

Absolutely. One problem, however, lies in our splendid British tradition of unilateral action. Although our striking truckers earlier this week were being a little economical with the truth about relative diesel prices across the EU, it is clear that they face higher fuel costs than their continental peers. Further increasing the cost of fuel for British truckers will make it hard for them to remain competitive. Does this mean, as Lord Turner suggests, that emissions will be reduced? Not at all. In place of British truckers, who pay tax and spend their earnings in the UK, will be foreign-based drivers. There is no environmental justification for UK diesel to be taxed at 75% while in France and Germany it's taxed at 65%.

What really tickles me, though, is this comment:

“If you are worried about the impact on low-income groups of fuel prices, the response should be to intensify support for them to improve their energy efficiency, rather than say you have to give up on climate change objectives.”

So while Lord Turner can happily spend his king's ransom on private jets to exotic locations, the man on the Clapham omnibus - traditionally a Labour-voter - can stick out the next winter without heating.

Just a thought.
Lord Goring