On Global Warming and Ethanol: Good use of World Bank presidency bully pulpit, Mr. Wolfowitz!

March 20, 2007
Posted by Nancy Birdsall at 03:00 PM

Politicians and protesters in Washington today for the first Climate Crisis Action Day would do well to remember that global institutions have a potentially valuable role to play in addressing global warming.

There are signs that the top leadership at the World Bank may be catching on. Last Tuesday, according to the Financial Times, World Bank President Paul Wolfowitz, when asked in London whether he meant what he said about opening up the international market in ethanol, said yes: he was indeed calling on President Bush to reduce the U.S. tariff on ethanol that is slowing reduction in U.S. greenhouse gas emissions. Ethanol is a renewable fuel produced quite efficiently from sugar cane and less efficiently from corn. U.S. corn producers have succeeded in keeping U.S. tariffs on ethanol high.

In June 2005 we called on President Wolfowitz to ask World Bank shareholders for a clear mandate and a financial instrument so that the Bank could adequately address global public goods. If ever there were a clear case of a global public good, an effective response to climate change is surely at or near the top of the list. Let's hope Mr. Wolfowitz's use of the bully pulpit is a first step in a more ambitious agenda.

Comments

If our primary policy goal is to mitigate the long-term effects of climate change, then the ethanol tariff is secondary to the issue of rainforest deforestation and the attendant climate change consequences resulting from powerful carbon cycle feedback loops.

As the CO2 content of the atmosphere increases because of human emissions, plants do not need to keep their CO2-intake pores (stomata) open as long. This also reduces the amount of water vapor they release. The result is less evaporation and, for a place that generates its own weather system like the Amazon, less rainfall. As drought conditions destroy vegetation (and wildlife), the soil heats faster and bacterial decomposition increases. When this happens, soil ceases to be a carbon sink and becomes a net carbon emitter – spurring even greater temperature increases and quickening the pace of rainforest collapse. Climate models suggest we could begin seeing signs of this collapse around 2040, with much of the Amazon turned to savannah or desert by the end of the century. Regardless of global mitigation efforts, a carbon cycle disruption of this size would likely push atmospheric CO2 levels beyond the critical tipping point – making the onset of more drastic effects, like the collapse of the Gulf Stream, inevitable.

The policy question of relevance is whether ethanol can be produced from Brazilian sugar without increasing deforestation and quickening the collapse of the Amazon. If the answer is no, I fear that by reducing barriers to production we are effectively choosing to accept (and facilitate) the climatic effects described above. If the answer is yes (i.e. we adequately address the externality problem), then the tariff is an unhelpful distortion. Although Amazon deforestation actually decreased by 11% last year, this was due more to low world soybean prices than conservation efforts. If the profit margin of sugar cane production increases considerably, we may see greater clearing and cultivation.

From a long-term climate perspective, tariff reductions should be accompanied by guarantees on conservation and land-use. Indeed, perhaps the larger issue is whether it is in the interests of the U.S. and other rich nations to pay Brazil to protect the Amazon rainforest – an idea the U.S. flatly rejected at a recent meeting of G8 environmental ministers.