EU to give aid to help developing countries jump on biofuel bandwagon

The European Union plans to give money to help developing countries grow energy crops rich nations want to use for transport fuel, the EU aid chief said yesterday.

Europe and the United States plan to use more low-carbon emission biofuels to reduce their dependence on imported oil and cut their contribution to global warming.

The EU will allocate part of a ¤220 million (US$300 million) foreign aid budget to offer countries investment and technical skills so they can jump on the biofuel bandwagon, EU Development Commissioner Louis Michel said. Officials were unable to give a precise figure at this time.

He said the EU was studying how sugar producers from former European colonies in Africa, the Caribbean and the Pacific, or ACP, could turn to ethanol production while other regions could grow oilseed crops.

The biofuel boom offers an answer to fears that ACP countries will lose out as the EU slashes sugar prices it kept artificially high for decades.

For more than 30 years, these countries had preferential access to rich European markets and grew crops that Europe wanted. The EU is now pushing them to turn to other crops by cutting trade tariffs for other products - and may reduce high ethanol tariffs in the future although this is likely to benefit Brazil more than other sugar exporting countries.

Michel acknowledged concerns that turning land over to energy crops might reduce food production, but said this should not hold back a "historic" opportunity to introduce new crops where there is high demand.

But nonprofit groups warn that the benefits of biofuel production - access to energy and new income - could be outweighed by rising food prices and more competition for the same land.

Even small increases in food prices could harm populations living on less than US$1 (75 euro cents) per day, International Food Policy Research Institute director Joachim von Braun said.

A report this week from Organization for Economic Cooperation and Development and the U.N. Food and Agriculture Organization warned that high prices for wheat and maize - blamed on increasing demand for biofuels - could last through the decade.

Simon Trace from development campaigner Practical Action said there still is not enough proof that using more biofuels will slow down climate change, since refining some of them drains a considerable amount of energy, canceling out environmental benefits.

"If we get this wrong, if we waste time and resources in chasing something that does not reduce climate change, we are potentially pushing millions of people into poverty," Trace said, painting a scenario where food prices go up as land is turned over to energy crops.

Officials from Senegal and the Dominican Republic cautioned that rich nations need to be involved to make sure multinational companies and farmers negotiate fair land agreements.