Saturday, November 22, 2008

Ghana goes biofuel despite evidence of effects on food prices


By Emmanuel K. Dogbevi

Ghana is set to begin biofuel production very soon, despite mounting evidence of biofuels' effects on the current global food crisis.

Two weeks ago, the government of Ghana gave approval for a Norwegian biofuels firm ScanFuel to start production early 2009. The company’s Chief Executive Officer (CEO), Thor Hesselberg said on Friday November 21, 2008 that the company is expected to produce 5000 barrels per day of crude oil equivalent by 2015.

According to reports the ScanFuel’s operation is located outside Kumasi in the Ashanti region. ScanFuel will initially cultivate Jatropha seeds, considered high oil-yielding on 10,000 hectares of land.

The company which has a Ghanaian subsidiary, ScanFuel Ghana Ltd says the Ghanaian unit has contracted about 400,000 hectares of land, with up to 60 percent reserved for biofuel production, "not less" than 30 percent for food production and the remainder for biodiversity buffer zones.

The development is curious, particularly so, when it is happening in a developing and agriculture based country like Ghana.

And that is notwithstanding the fact that it has now been established that the production of biofuel is a major contributor to the current worsening global food crisis.

Indeed, the use of productive agriculture land for the production of crops for ethanol has been identified as a factor that is pushing world food prices up to 75%.

Other factors identified for the crisis include growing populations, shortfall in production, high demand for animal feed and consumption patterns. Climate change and rainfall patterns have also been blamed.

Sir James Wolfensohn, former President of the World Bank has identified “a growing middle class in India and China” is one of the factors that have contributed to the food crisis.

This emerging middle class he said demand more food and more resources which are all driving food and fuel prices up.

The middle class in India and China he said is expected to grow to about 1.5 billion in the next 15 years.

The Guardian newspaper in London in July 2008 published a leaked World Bank report which says biofuels have forced global food prices up by 75% - far more than previously estimated. Indeed, the report is a sharp contradiction of the US government’s claims that biofuel contributes less than 3% to the food crisis.

According to the Guardian, the unpublished report, authored by Don Mitchell, a senior economist at the World Bank, is a detailed, month-by-month analysis of the surge in food prices, and allows much closer examination of the link between biofuels and food supply. There are even suspicions that the report which was completed in April has not yet being published to avoid embarrassing the US government.

The Guardian report says since April, all petrol and diesel in Britain has had to include 2.5% from biofuels. The EU has been considering raising that target to 10% by 2020, but is faced with mounting evidence that that will only push food prices higher.

Early in May this year, the UN’s top adviser on food security, Olivier de Schutter made a scathing criticism against the investments that are being made in biofuel by some countries. In an interview with the BBC, he described the investment in biofuel as “irresponsible” and a “crime against humanity.” He went ahead to call for an immediate freeze of the policy and asked for restrain on investors whose speculation he says is driving food prices higher.

Ghana has not been left out in the biofuel scramble. The country is eagerly investing in biofuel with the help of Brazil, the world’s leading biofuel producing country.

While in Ghana for the United Nations Conference on Trade and Development (UNCTAD XII) meeting in April, 2008, Brazilian President Luiz Inacio Lula da Silva signed an agreement with the Ghana government to grow sugarcane for bio-ethanol in Ghana. During the signing ceremony, da Silva said, "in Ghana we are developing a project that will result in growing 27,000 hectares (of sugarcane) for the production of 150 million litres of ethanol per year that are destined for the Swedish market."

President da Silva who is encouraging farmers in his country to grow biofuels including sugarcane, castor beans and corn, instead of traditional food crops, says rising fuel prices and not biofuels are responsible for the high cost of food.

The World Bank report meanwhile pointed out that biofuels derived from sugarcane, which Brazil specializes in, have not had any dramatic impact on food prices.

At a World Bank Dialogue Series recently in Accra, Ghana, Arnold McIntyre of the IMF said countries are turning to biofuels in response to current global fuel crisis, adding that by 2005, the US overtook Brazil as the largest producer of ethanol. In the EU, he said, Germany is the largest producer of biofuel.

He moreover said, biofuel production in the US which is corn based, is less cost effective than the sugarcane based in Brazil. He also called for policy change to address biofuel production and suggested that it is necessary to do more research in second generation biofuel production.

Ghana, a developing country, which has about 70% of its population in the rural areas involved in agriculture, ironically imports over 40% of its food needs.

Another interesting angle to Ghana’s agriculture dilemma is the fact that while agriculture contributes nearly 40% to the country’s GDP, only 10% of the national budget is allocated to the sector.

Ghana has the capability to lead a ‘green revolution’ in Africa, in this critical moment, but sadly not much is being done to shore up the agriculture sector. Only about 16% of Ghana’s arable land is used for farming.

And the prices of food have more than doubled in Ghana since the crisis.

Ghanaian food crop farmers need support in the forms of investments in inputs, fertilizer, training and access to markets. These could potentially boost agriculture in the country and contribute to job creation and economic growth.

This unrestrained interest in biofuels should be viewed against the background of Ghana’s struggling agriculture industry, or else the country could be heading to an unknown destination, which consequences could be socially and economically painful.

2 comments:

mus302 said...

The World Bank report that you mention attributed the effects of speculation in commodities to biofuels. Doesn't the fact that commodity prices have dropped by about 50% since that report came out while ethanol production has continued to increase suggest that they might have been wrong?

Also you might note that at the moment some consider there to be glut of feed grains on the market.

And jatropha is an inedible plant so as long as it isn't grown on land currently used for food production there really shouldn't be a food versus fuel issue with it.

Emmanuel K. Dogbevi said...

Thanks for your observation mus302.

I guess it is good that we continue the debate on the food versus biofuel issue, because nothing is full proof.

I think however, that we should not lose sight of the fact that Ghana's economy depends largely on agriculture. And agriculture has suffered neglect for so long.

Therefore, if investments are going into biofuels, it is necessary to draw attention to agriculture, which is the mainstay of the country's economy. It employs nearly 70% of the population, and contributes over 40% to the country's GDP.

If the delicate balance of developing agriculture for food production and developing the biofuels sector can be achieved, that is all well and good, but if investments, including arable land and other resources would go into biofuels to the detriment of the agriculture sector, then we have to think again, because the food crisis is not over yet.