Green fuels will save the earth - or not

By Nao Nakanishi - Analysis

HONG KONG (Reuters) - The earth is too small to accommodate all the biofuels projects envisioned for the globe, and this raises doubts whether green fuels will ever play a big role in weaning the world off crude oil.

The idea of producing an endless supply of inexpensive fuel from what sprouts from the soil seemed almost too good to be true for a world worried about global warming, caused in part by the burning of fossil fuels.

And perhaps it is. It has become increasingly clear that it will not be possible to grow enough crops to cover global demand for food and fuel, especially as water is becoming scarce and pressure is mounting from the environmental lobby to conserve tropical rainforests and wildlife.

Over the past year, a biofuel boom worldwide has already sharply boosted agricultural prices, sparking worries over food supply as the world's population continues to grow.

David Jackson, an analyst at LMC International Ltd in London, calculated that the world would need an additional 100 million hectares of farmland if all countries were to blend 5 percent of biofuels into the cars --- as many envisage by 2015.

The required land, about half the size of Indonesia, would match roughly the total additional land available for farming on earth, including remote areas of Africa or Brazil.

"There's no perfect solution for ethanol or biodiesel from food crops, or from agriculture," Jackson told Reuters. "In total the amount of land available is roughly 100 million hectares worldwide ... But that's not all going to be developed."

The analysts said that while sugar was the most land-efficient feedstock for ethanol, it needed plenty of water.

It would take several years before the commercial use of the next generation technology, which would turn agricultural waste into fuel ethanol, they said.

For biodiesel, there is also no alternative feedstock to edible oils, such as palm oil or soyoil, in the foreseeable future, despite an enthusiasm for non-edible oils from oilseed plants like jatropha in countries such as India and China.

DREAM OR NIGHTMARE?

Another reason why the green dream is fading lies with the rocky economics of biofuel.

Oil prices have soared 40 percent this year but once-lowly palm oil has jumped by two-thirds. So now palm oil costs an astonishing $735 a tonne, making crude a bargain at about $593 a tonne.

Even in the United States, the world's top ethanol producer where the government provides generous subsidies, profits are squeezed at biofuel plants by high corn costs and low ethanol prices.

In Southeast Asia, home to the world's top producers of palm oil -- the most land-efficient vegetable oil -- many biodiesel projects have been also put on backburner due to the poor returns.