UK's Co-op Insurance issues biofuel warning

A leading British investor today joined the chorus of concern about biofuels as a solution for global warming.

The investment division of Co-operative Insurance said that, while it supports the use of biofuels, it is concerned about the potential environmental and social dangers if growth continues at its current rate.

Sustainability criteria must be built in to the supply chain of any green fuel project to ensure that there is no adverse effect to the surrounding environment and social structure, the group said today in a report.

Risks to investors the report identified included rising food prices as more corn is diverted from food to automobile gas tanks, as well as land (notably wetlands and rain forests) being cleared to increase the production of all biofuels. And it raised concern about farmers concentrating on one crop—corn, for example—not rotating the crops, leading to soil damage, and even erosion.

Co-operative Insurance said it will now engage with companies in which it invests to seek reassurance that they will put strategies in place to mitigate the risks.

"Biofuels are not a panacea for climate change but can play their part if governments and companies start thoroughly managing the social and environmental impacts," said Sam Lacey, author of the report.

"The current growth of the industry is happening without paying attention to long-term impacts. It must be pushed in a more sustainable direction and complemented by fuel efficiency measures and reducing our use of fossil fuels."

It's the latest in a series of indicators in the span of a week or so of trouble brewing in the conventional corn-based ethanol industry (see Ethanol sector slapped on bad VeraSun earnings, and Research firm says a cleantech bubble is looming.)

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