Bio fuel crisis india china

Andy Mukherjee, a good opinion writer for Bloomberg, writes about the increasing interest in China and India for Bio-fuels. The consequence of this will be the impact on food due to the scarcity of water.

If water were a globally traded commodity, with unmet demand in China and India reflected in its price, the world might shed its newfound craze for biofuels. Growing corn to make ethanol to run sport-utility vehicles is downright silly; nowhere more so than in China and India.Water

As many as 400 Chinese cities are facing water shortages; farmers in the most-populous nation are forgoing millions of tons of grain production every year. Per-capita availability of water is expected to shrink to alarming levels by 2030.

Amid this water scarcity, China has gone on to become the world’s third-largest bio-ethanol producer after Brazil and the U.S., pouring thousands of gallons of water to grow a ton of corn, and then using more water to turn the corn into ethanol.

The tradeoff between water and biofuels may also be crucial for India. One-sixth of India’s food output is being supported by pumping groundwater, which is depleting rapidly. In the state of Tamil Nadu, more than a third of aquifers are “overexploited,” meaning the rate at which water is being extracted is more than the pace of recharge. According to the World Bank’s estimates, by 2050 demand for water in India will exceed all available supplies.

“If water would have its correct price, then we wouldn’t even be thinking about biofuels,” Nestle SA Chief Executive Officer Peter Brabeck-Letmathe said last month at the World Economic Forum in Davos, Switzerland. “If I had to identify one resource I’m worried about, that’s water.”

Water is emerging as the main issue all around the world. I have written about this issue before.

Greenpeace suggested that the growing need for bio-fuels are fuelling the growth for deforestation in Indonesia.’

In Food or Fuel, Lester Brown comments that “By the end of 2007, the emerging competition between the 800 million automobile owners who want to maintain their mobility and the world’s 2 billion poorest people who want simply to survive will be on center stage.”

And Larry West from says, The most valuable commodity in the world today, and likely to remain so for much of this century, is not oil, not natural gas, not even some type of renewable energy. It’s water—clean, safe, fresh water.

The current Water debate in Australia is clearly shows the need for leadership in this area.

And Water is Wealth. A UNEP Finance Initiate called water “an emerging risk of strategic importance to businesses and their financial backers around the world.”

Economics teaches the opportunity cost of goods and services. This is the basic principle to understand in this march towards alternative fuels.

Atanu Dey explains the importance of opportunity costs:

In fact, I would go so far as to claim that economics at its most fundamental is the careful systematic study of opportunity costs. Opportunity costs implies choices and tradeoffs, and is itself the consequence of a fundamental physical characteristic of the universe that we live in. That fundamental fact is that this universe has limits. Each one of us has a limited amount of time and other derivative resources at our disposal.

Understanding this core principle is important in deciding upon alternatives, making choices and taking policy and strategic decisions.

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