WHEN Finance Minister Brian Cowen gave his 2007 Budget speech he reminded us that one of the ways the Government was reducing its carbon footprint was through the introduction of an excise relief scheme for biofuels.

At the time, the debate on the issue of giving up agricultural land for the production of these fuels was just taking off.

Since then the debate has grown legs and one of the main concerns is the growing evidence that the shortage of land for food production is pushing up food prices across the globe.

A recent report from the UN, which was prepared jointly by the World Food Organisation and the Organisation for Economic Co-operation and Development (OECD), showed that the switch to growing fuel crops will take land out of food production and increase the price of commodities such as sugar, maize and palm oils.

Emissions

The move to agrofuels, which is expected to marginally lower climate change emissions and reduce US and European oil dependency. And last year more than one third of the total US maize crop went to ethanol for fuel, a 48pc hike on 2005.

Brazil and China grew the crops on nearly 50m acres of land and this area could double in the 10 years the report stated.

According to Goodbody Stockbrokers economist Donal O'Leary, the knock on effect on food prices will be an issue for Ireland as much as anywhere else - especially when you consider our dependence on Britain for food imports.

"We import about 50pc of our food from Britain and food prices there are up on average five per cent per year.

"To an extent we have been shielded so far by increased competition in the retail space and the abolition of the Groceries Order but in the mid to long term is will become more of an issue for us.

"We are a price taker not a price maker because of our size internationally.

"I expect our food prices to increase over the next couple of years reflecting international trends."

While Irish Business and Employers Confederation (IBEC) supports biofuels for a mechanism of reducing Co2 emissions, it also promotes the focus on second generation biofuels.

"The increased focus on second generation biofuels, which will be made from cellulose rich non-foods will improve carbon reductions, sustainability and complement rather than compete with food production," said Donal Buckley, head of the environment unit at IBEC.

Last month, Davy Stockbrokers issued a food industry review which pointed to the the rise in agro-fuel output, weather, demand growth and low stock-to-consumption ratios fuelling the pressure on food prices.

Gains

It also showed that Irish milk output prices in April showed its first significant year-on-year gains in five years.

The report also showed that dairy commodity and protein prices have surged sharply since April 2007.

For example, the price of German skimmed milk powder in June spiked to €7.36 per kilogramme.

This is well above the long-term average on Davy's records which go back to 1991, of €4.20 per kilogramme.

According to the environmentalist George Monbiot, who is also the author of 'Heat - How to Stop the Planet From Burning', biofuels are not the only reason for food price increases but are a powerful contributor especially in relation to the price of grain.

"We have already seen significant pressures internationally in the price of grain, particularly Maize which has already resulted in drought in Mexico.

"This has the potential for a global humanitarian disaster," he added and that's with only one per cent of transport fuel coming from biofuels.

(US President George W Bush wants 24pc of US transport fuels to come from biofuels by 2017 while the European target is 10pc by 2020).

He added that an original European target to reduce carbon emissions by 120 grammes per kilometre by 2012 was reduced to 130 grammes per kilometre with the addition of the use of biofuels following lobbying by the car manufacturers in Europe.

According to Mr Monbiot, second generation biofuels have the potential to be much more sustainable.

As a result he has recommended a moratorium on grants and incentives for biofuels until we see the results of these second generation fuels which are produced from non-food feedstocks.

There are also very serious socio-economic consequences in the switch to biofuels.

While higher food prices are profitable for the mainly large-scale farmers who grow them, they threaten the economies of food-importing countries as well as the urban poor, the UN report said.

The higher food prices will also mean extra costs for livestock farmers who must be fed as well.

But the report does not consider the effect on food supplies of floods, droughts and other extreme weather linked to climate change.

The price of wheat and some other food is edging record levels after devastating weather in Australia, the running down of grain reserves in the US and drought in Africa.

Food price inflation stands at more than six per cent a year in some developing countries, said the report.

But it's not all about food prices and the economic fallout.

This is a political hot potato as much as anything else.

As Mr Monbiot put it: "It's demonstrable that the approach is cynical. Biofuels have been used as a substitute for other political action.

"For example, the scaling back of pressures on car manufacturers."

Bus firm fears green trials may damage the environment

NATIONAL Express, one of the UK's leading transport groups, said yesterday it had pulled the plug on a biofuels trial, amid fears that the "green" energy may be damaging the environment.

Following consultations with a number of environmental groups, the company suspended a trial at its UK bus operations which could have seen some of its London buses running on up to 30pc biodiesel.

National Express said it would continue to look into alternative energy initiatives, adding that while it accepted that biofuels may have a role to play in the future it would wait for issues relating to sustainability to be resolved before pressing ahead with biodiesel trials.

Chief executive Richard Bowker said: "The issue with biofuels is complex and what appears to be the green option may not actually be green after all."

The news will cast further doubt over the green credentials of the biofuels industry, following concerns that biofuel production is destroying natural habitats and ramping up the cost of food farming.

Additionally, some scientific tests have revealed that carbon emissions from the alternative energy source could be higher than from traditional oil due to the intensive farming methods needed to produce biofuel crops, such as sugar cane and rapeseed.

National Express said it remained committed to cutting carbon emissions but was looking at investing in second generation biofuels - or non-food crop fuels such as straw and woodchips - although mass production is still a number of years off.

Mr Bowker added: "Biofuels may well have a role to play in helping us reduce the emissions of greenhouse gasses arising from transport operations in the future and we are not dismissing the role they may play in the future, but based on the evidence today I think it is vital that we wait for issues relating to sustainability of supply to be resolved before we press ahead with trials of biodiesel."

Investment in biofuels has recently been seen as a good way for companies to improve their environmental image. BP has announced a new production project with alternative energy group D1 Oils, while Virgin Trains is currently trialling biodiesel. Virgin Atlantic is also set to test the fuels in planes. Biofuels are seen as a greener energy source than traditional fossil fuels and are, in theory, "carbon neutral" as carbon released when they burn was previously taken from the atmosphere when the fuel was grown.

Sarah Davies

Sources already on the market

First (1st) generation biofuels are those that are already on the market today. Typical 1st generation fuels are sugarcane ethanol, starch-based or 'corn' ethanol, biodiesel and Pure Plant Oil (PPO).

The feedstock for producting these fuels either consist of sugar, starch and oil bearing crops or animal fats that in most cases can also be used as food and feed or consist of food residues.

One of these biofuels is characterised either by its ability to be blended with petroleum-based fuels, combusted in existing internal combustion engines, and distributed through existing infrastructure, or by the use in existing alternative vehicle technology like flexible fuel vehicle (FFV) or natural gas vehicles.

There are also other niche biofuels such as biogas which have been derived by anaerobic treatment of manure and other biomass materials.

Currently nearly 50m litres of biofuels are produced annually.

Second (2nd) generation biofuels are produced from non-food feedstocks including agricultural and forest biomass with the majority of the feedstocks derived from lignocellulosic material.

These fuels can either be blended with petroleum-based fuels, combusted in existing internal combustion engines, and distributed through existing infrastructure or is dedicated to for the use in slightly adapted vehicles with internal combustion engines.

- Ailish O'Hora