A milestone on the road to green fuel

Biofuels: saviours of the planet or a green con?

The question comes into sharper focus as BP, Du Pont and the ABF subsidiary British Sugar announce a £200m bioethanol plant.

The investment, in which BP and British Sugar would each hold 45 per cent with DuPont owning the remaining 10 per cent, will be built on BP's chemicals site in Hull. Due in 2009, it will produce some 420 million litres of bioethanol a year (derived from wheat): about a third of the UK's demand. Although minuscule (less than 1 per cent of sales), that demand will be stimulated by the Government's Renewable Transport Fuel Obligation, which means that, by 2010, 5 per cent of fuel sold on forecourts should be biofuels. (Ministers expect this will save 1 million tonnes of carbon dioxide a year, the equivalent of taking 1 million cars off the road.)

In the future a more car friendly fuel, biobutanol, could be produced.

The European Union too wants to see more biofuels: 10 per cent of the total by 2020. The White House aims to double the use of biofuels by 2012, with substantial subsidies. Countries such as Thailand, China, Malawi and Colombia are mandating the use of biofuels. According to the United Nations, global production of biofuels has doubled in five years and will "likely double again" by 2011.

So, given the high price of oil and such encouragements, the outlook for biofuels ought to be bright. Indeed, the principle behind biofuels is attractive. Fossil fuels are unsustainable and produce greenhouse gases and foster climate change. Crops, or "feedstock" for biofuel plants are sustainable and, arguably, close to carbon neutral, because the carbon dioxide emitted when biofuels are burnt is absorbed by the crops being grown to replace them.

A small outlay to adapt fuel stations and car fuel systems is all that is needed to make such a step change. The entire 120-year long investment sunk into internal combustion technology could be saved. Vast levies to improve public transport would be avoided.

The first steps on the road to this potentially brighter future are already being taken. Modest amounts of biofuels, 5 per cent or so, can be blended with petrol and diesel with no ill-effects on engines or driving enjoyment. Such fuels can already be found, although purer bioethanol mixes ("E85" - 85 per cent ethanol to 15 per cent petrol) are sold in few places and you need a car designed to run on them. (Morrisons stores in East Anglia and Somerset and a Ford or a Saab, if you're thinking about switching).

Saab, a company with a reputation as a pioneer in this field, claim a saving in CO2 emissions as high as 67 per cent, though there is no internationally accepted standard for measuring "well to wheel" emissions, taking into account the costs of transporting and converting feedstocks and the fact that bioethanol, for example, delivers lower mpg than petrol. (One big problem with biofuels is that their slightly lower cost is more than offset by the higher price of biofuel cars and their inferior fuel economy.)

While Western nations and oil companies are eyeing up the strategic benefits of a shift to biofuels, reducing their exposure to the vagaries of the Middle East and unpredictable personalities such as President Hugo Chavez of Venezuela, the poorest nations in the world could also be liberated. A recent UN report pointed this up: "Oil imports now consume a large and unsustainable share of the meagre foreign exchange earnings of many poor nations, in some cases offsetting any gains from recent foreign debt elimination agreements. In some countries the foreign exchange drain from recent high oil process was five times the gain form recent debt relief."

President Abdoulaye Wade of Senegal has described Africa's current oil crisis as "an unfolding catastrophe that could set back efforts to reduce poverty and promote economic development for years".

Yet there are also well-advertised difficulties. The amount of corn used to make ethanol in America has tripled since 2000; Ethanol distilleries take a fifth of the US corn crop now. Research by Goldman Sachs has suggested that the price of biofuels (per unit of energy) has risen to that of petrol, and the price of corn and crude oil, the main feedstocks for the two, have converged. This is so-called "agflation".

Yet it is a complex picture. Western food surpluses have long depressed Third World incomes. And while there have been food riots in Mexico and there is pricier pork in Chinese butchers' windows, Mexican and Chinese agricultural producers are likely to be winners. The urban poor - including those in the West - will be the likely victims.

Using fossil fuels to make ethanol also mitigates many of the gains. Most seriously, palm oil for biodiesel has been concentrated in areas that used to be rainforest, with serious effects on biodiversity and the climate change.

Then again an indigenous crop such as jatropha provides poor communities in Africa and Asia everything from shelter and cheaply generated electricity to soap and diesel substitute - a realistic green answer to the intense pressure on local environments.

Short-term, the answer to the "food vs fuel" debate is that the world needs to make tough choices: fossil fuel burning accounts for 75 to 85 per cent of global CO2 emissions; deforestation accounts for 15 to 25 per cent, so we can see where the imperative lies.

The good news is that "second generation" and more innovative biofuels - on a 10-year timescale - pose less tough choices. Biofuels derived from straw, timber, manure, rice husks, agriwaste of any description, even sewage and methane from landfill waste - all could play a part with little detriment to food prices or rainforests. They also tend to be more fuel-efficient and cleaner; the US government claims a 91 per cent reduction in CO2 emissions. Add in hybrid technology in cars, higher agricultural productivity (Malthus was wrong, after all), and suddenly carbon neutrality seems almost achievable.

If our mighty auto and oil industries bend themselves to that task, then the future can be bright, green and profitable.