Biofuels and rainforests
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Abstract
Climate negotiators want developed countries to pay farmers in tropical countries such as Indonesia to stop burning down rainforests. Two years ago, this might have offered a real opportunity for farmers in Europe and the United States. At that time, expansion of cropland in tropical countries undermined world market prices and increased government payments that support farm income. In these past two years, however, biofuel subsidies have complicated this picture, as Europe and the United States already enhance farm prices by subsidizing biofuel production from rapeseed oil and from corn. As a result of these subsidies, world prices of oil crops, including palm oil, are increasing to levels that create a major barrier to any effort to protect the forests. According to projections by Food and Agricultural Policy Research Institute economists (2007), Europe and China will turn to imports of palm oil from Indonesia to satisfy growing consumer demands and demands from industrial users, as Europe burns its rapeseed oil in cars. In the United States, soybean acreage is shifting to corn production to meet ethanol demands, so US exports of soybean oil will suffer as well. The food versus fuel challenge that might have worried importing countries such as