Biofuels policies may have fatal implications: Oxfam

The Jakarta Post ,  Jakarta   |  Wed, 06/25/2008 9:19 PM  |  National

Biofuels for developing countries might provide genuine development opportunities but the potential social, economic and environmental costs were severe, Oxfam International said in its report launched Wednesday.

"Biofuels may provide opportunity to reduce the amount of fuel subsidy in national budget, provide opportunity of employment, opportunity of increase income and alternative energy self- sufficiency in rural area, however the implication is fatal if not proceed with caution," Oxfam International's biofuels policy adviser Rob Bailey who authored the report said in a statement made available to The Jakarta Post.

Titled "Another Inconvenient Truth: How biofuel policies are deepening poverty and accelerating climate change", the report is describing case study analyzes on Indonesia, Brazil and Tanzania, which were considered as having potential problem of biofuel policies or huge existing biofuel product.

Oxfam Indonesia's policy and advocacy officer Tata Mustasya told the Post that the current biofuel policies of rich countries were neither a solution to the climate crisis nor the oil crisis, and instead "are contributing to food crisis."

"In poor countries, biofuel may offer some genuine development opportunities, but the potential economic, social and environmental costs are severe, and decision makers should proceed with caution," he said.

In attempt to reduce oil consumption, Indonesia issued a presidential regulation in 2006 targeting more than 5 percent of biofuel consumption in its total energy mix by 2025.

The government hope that the effect of reducing oil imports will bring a reduction in oil subsidy as energy is diversified through biofuels development.

"Biofuels industry development will require Rp 100 trillion (US$10.8 billion) to Rp 250 trillion over five years, which is nearly five times the 2007 budget for the national poverty reduction program," Mustasya said quoting government sources.

The 58-page report cited that through biofuel development, the Indonesian government also targeting to save $5-6 billion per year, an amount which can be spent on poverty reduction programs.

But the report argued that the target would not be reached as soaring palm oil price tends to make biodiesel uncompetitive with heavily subsidized petroleum products.

The report also argues that palm-oil sector, which until 2010 will be the main biofuel in Indonesia, is linked to land conflict as the interests of politicians, plantation companies, indigenous peoples, and resettled communities collide.

The report also said that the explosion of biofuels targets was a huge driver for the expansion of oil palm plantations.

"Twenty million hectares of land have been identified for expansion by 2020, which is more than three times the area currently under cultivation," said the report.

Currently Indonesia is the world's second largest producer of palm oil and aims to supply one-fifth of European Union's biodiesel demand. (mvm)

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