Food prices would soar in biofuels switch, says Unilever

Aug 7, 2006

The Times August 07, 2006 Food prices would soar in biofuels switch, says Unilever By Carl Mortished, International Business Editor BRITAIN faces soaring food prices, a shortage of staple foods and declining public health if the Government pushes ahead with plans to promote the use of biofuels, the UK’s biggest food producer has given warning. Unilever fears that Europe-wide plans for a huge increase in use of vegetable oils, such as rapeseed and palm oil, in the manufacture of road fuels will have dramatic consequences, driving up the cost of foods such as margarine and leading consumers to switch to less healthy animal fats. Huge efforts are being made to promote biodiesel amid concern over the rising cost of oil and reliance on the Middle East for supplies. The European Commission wants to increase the proportion of biofuel used in road transport from current levels of 0.8 per cent to 5.75 per cent by 2010. However, Alan Jope, Unilever vice-president, fears that the rush to convert food crops into transport fuel will have unintended consequences. He said: “The scale is dramatic. To meet current EU quotas would require between 50 and 80 per cent of rapeseed production. Ultimately, there could be supply shortages.” The price of rapeseed, an important ingredient in margarine, has risen by between 20 and 30 per cent over the past year. Meanwhile, the price of palm oil, another edible oil widely used in food as well as in cosmetics, has risen by more than 20 per cent in the past two months on news that Malaysia and Indonesia plan to set aside 40 per cent of their palm oil crop to produce biodiesel. That will have knock-on effects on food, Mr Jope said. Half the cost of producing a tub of margarine is the edible oils and the price of those commodities has risen by 30 per cent this year. Even more worrying is the long-term consequence of substitution in risks to cardiovascular health. For every 1 per cent rise in the price of margarine, there is a 1 per cent fall in consumption, Mr Jope said. “The switch from healthy vegetable oils (to butter and animal fat) will have a dramatic impact on public health,” he said. Government grants and subsidies for biofuels are also having unintended environmental consequences in the Amazon and South-East Asia, where rain forests are being burnt to clear land for biofuel crops, such as palm oil, and sugar cane, used to produce ethanol. Figures from the OECD show that Europe would need to convert more than 70 per cent of arable land in order to raise the proportion of biofuel used in road transport to 10 per cent. Mr Jope said: “Superficially, it looks politically altruistic for a politician to say we are going to replace dwindling reserves of fossil fuels with renewable biofuels. We are now seeing the prospect of very material deforestation.” Unilever is not opposed to biofuels in principle but wants policymakers to shift the focus to next-generation biofuel technologies that turn wood chips and straw into fuel. These have less effect on the food chain and are better in cutting CO2 output, Mr Jope said.