Surprisingly, venture capitalists are putting their money where their mouths haven’t been, for the most part — by investing in what are supposedly ‘green’ technologies. Led by California-based Vinod Khosla — who made a fortune as a founder of Sun Microsystems — at least four rupee-billionaires are making a stake in bio-fuels in India, which are seen as the ‘free world’s’ answer for fuelling cars in an era of spiralling oil prices. At a Delhi Summit on Sustainable Development a couple of years ago, Khosla made a strong pitch for such fuels, stressing the need to reduce reliance on ‘unstable’ oil producers like Sudan and Nigeria (though he was curiously silent about Saudi Arabia).
There are two kinds of bio-fuels in the world. Ethanol, which is produced in large quantities, is made from corn or sugarcane. Bio-diesel is made from a wide range of biomass like oilseeds, wood and farm wastes. Taking their cue from Brazil and the concessions the US government is extending to ethanol producers, Indian financiers are investing in bio-fuel equipment companies like Praj Industries in Pune and Nandan Biometrics in Hyderabad. They are also investing in start-up bio-fuel companies, in the expectation that these will prosper in the years ahead.
The government is also supporting bio-fuels. Four years ago, the Petroleum Ministry had compelled nine states to sell a petrol blend with 5 per cent ethanol. But this initiative had to be postponed due to a sugar shortage following two successive crop failures. The Planning Commission’s Bio-fuels Mission plans to supply a fifth of the diesel from this alternative source by 2012, which appears too ambitious, considering that diesel powers eight out of every ten vehicles in India.
Automobile manufacturers have also got into the act. Daimler-Chrysler India has conducted road trials for its bio-diesel cars, while Mahindra & Mahindra has done likewise for commercial vehicles. Tata buses have been running on bio-diesel and Reliance has bought large areas to plant jatropha, the ‘wonder weed’, seeds of which yield bio-diesel. Since jatropha can grow on degraded land, everyone in the bio-fuels business sees this as a win-win solution, nothing less than the greening of India.
But several caveats are in order. Two US economists have already fired a salvo in a recent issue of the Foreign Affairs. In an article ‘How bio-fuels could starve the poor’, they cite how President George W. Bush, by no means a green warrior, in his last State of the Union address, wants to quadruple the production of renewable car fuels by 2017. The problem is that while Brazil, which in 2005 was the world’s leading ethanol producer, uses cane, the US uses corn, which is a staple food in many countries. Indeed, the US produces 40 per cent of the world’s corn and accounts for half the total exports. It is estimated that the ethanol needed to fill an SUV’s fuel tank just once requires corn that can feed a person for a whole year. According to Lester Brown, the founder of the Worldwatch Institute in Washington, the increased global demand for grain in 2006 was 20 million tonnes. But 14 million went for ethanol, leaving only six million to feed the world.
Last year, the price of flour in Mexico for tortillas — the equivalent of chapatis — doubled: 80 per cent of this flour is imported from the US. According to the International Food Policy Research Institute (IFPRI) in Washington, this ‘cornucopia’ will raise global corn prices by a fifth by 2010 and 41 per cent by 2020. The price of cassava, which is consumed by the poorest in sub-Saharan Africa, Asia and Latin America, will rise by a third and 135 per cent by the same two deadlines. The prices of oilseeds, which include soybean, rape and sunflower, are similarly expected to rise precipitously. The World Bank cites when world prices of food staples rise by 1 per cent, the calorie consumption of the world’s poor declines by 0.5 per cent. The institute estimates that the insatiable thirst for automobile fuel can drive 600 million more people to hunger by 2025, making nonsense of the UN Millennium Development Goals set for a decade earlier.
The two Foreign Affairs contributors are no critics of the market, but point out how the ethanol industry is subsidised by the US government. In 2005, corn producers received nearly $ 9 billion directly. The government extends a tax credit of 51 cents per gallon of ethanol. The European Union, which produced 80 per cent of the world’s bio-diesel in 2005, mainly from rapeseed and sunflower, also subsidises this fuel, as well as ethanol made from a combination of sugar beets and wheat. The authors argue that the bio-fuels market is distorted by politics and the interests of a few large companies. For example, former US Vice-President Hubert Humphrey championed the cause of Archer Daniels Midland Co., the largest ethanol producer in the US, when he was a Minnesota senator.
There are two other considerations that go against bio-fuels. Despite all the subsidies and other benefits extended to the industry in the US, even if its entire corn crop was diverted to cars, it would only replace 12 per cent of current gasoline consumption in that country. Hence, its climate change benefits are by no means as great as its proponents make out. The total energy needed to produce these alternative fuels is only slightly less than the energy they deliver, though better than the negative ‘net energy’ of petrol and diesel. Bio-diesel also emits nitrogen oxide, which is a greenhouse gas. And the pollution from industrial-size plantations of corn and soybeans is already well documented.
Many of these criticisms may not appear to apply to the cultivation of jatropha on degraded land. If small farmers grew this plant, this would hold true. However, as the moves by Reliance indicate, industry will always opt for large-scale cultivation, which not only deprives the poorest of their common property resources but also is environmentally damaging, since it will employ scarce water and pesticides. As it is, the consumption of pulses is declining in this country, and the conversion of large tracts for automobile fuel, rather than for food or cooking fuel, will impoverish the poor further.
Most of all, if combating climate change is a self-professed priority in the drive to produce bio-fuels, what about the mania for using motorised transport, which the use of this alternative fuel encourages? Close on the heels of the Rs 1 lakh car being manufactured by the Tatas, foreign auto makers are making a beeline for the Indian market with cars worth around that much. This may be a bonanza for the middle-class, but what will it do to emissions, which are already well over every limit?
Environmentalists like Lester Brown and Jonathan Lash of the World Resources Institute in Washington believe that hybrid automobiles, which switch from petrol to electricity, are the answer for the future. But if everyone has even a fully electric car, there is going to be such mayhem on the roads, particularly in congested cities in developing countries, that no one will be able to go anywhere. Cars also deprive the oldest and younger sections of the population — the latter is disproportionately large in this country — from using this means of transport and are thus inherently anti-social.
Darryl D’Monte is the founder President of the International
Federation of Environmental
Journalists. He is the author of Temples or Tombs? Industry versus Environment: Three Controversies