1 biofuels in africa: potential for sustainable development donald mitchell dar es salaam, tanzania...
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Biofuels in Africa:Potential for Sustainable Development
Donald Mitchell Donald Mitchell
Dar es Salaam, TanzaniaDar es Salaam, TanzaniaFebruary 24, 2010February 24, 2010
Email: don.mitchell09@gmail.comEmail: don.mitchell09@gmail.com
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Historical perspective
Decades of low commodity prices led to Decades of low commodity prices led to underinvestment especially in Energy and underinvestment especially in Energy and Metals/MineralsMetals/Minerals
Structural changes in demand for energy Structural changes in demand for energy and metals led to large price increasesand metals led to large price increases
High energy prices provide incentives for High energy prices provide incentives for biofuels along with other factorsbiofuels along with other factors
Real commodity prices, 1980-2009
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50
100
150
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1980 1985 1990 1995 2000 2005
Energy Metals & Minerals
Real commodity prices, 1980-2009
0
50
100
150
200
1980 1985 1990 1995 2000 2005
Energy Metals & Minerals Agriculture
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Energy prices expected to remain high and are key to biofuels Oil prices expected to average $100/bbl through Oil prices expected to average $100/bbl through
2020 (according to International Energy Agency)2020 (according to International Energy Agency) Due to rapid demand growth, decline in Due to rapid demand growth, decline in
production from mature fields, restricted access to production from mature fields, restricted access to reserves, and higher costs from deep water, remote reserves, and higher costs from deep water, remote areas, and unstable regionsareas, and unstable regions
Climate change responses could make oil more Climate change responses could make oil more costly to consume if not to producecostly to consume if not to produce
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Global demand for biofuels expected to more than double in next decade Primarily due to consumption mandatesPrimarily due to consumption mandates
EU: Ethanol 4 bil lt in 2008, 13 by 2020EU: Ethanol 4 bil lt in 2008, 13 by 2020Biodiesel 9.5 bil lt in 2008, 31 by 2020Biodiesel 9.5 bil lt in 2008, 31 by 2020
Second generation technology not expected Second generation technology not expected to make a significant contribution in next to make a significant contribution in next decadedecade
Imports will be required to meet mandates, Imports will be required to meet mandates, especially in EU, but also U.S.especially in EU, but also U.S.
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High energy prices and increased biofuel production… Impact all agricultural commodity pricesImpact all agricultural commodity prices Implications for povertyImplications for poverty An opportunity for rural sectorAn opportunity for rural sector Rural poor should benefitRural poor should benefit
Some net food buyers may not, Some net food buyers may not, depending on wages & employmentdepending on wages & employment
Urban poor will face higher food pricesUrban poor will face higher food prices
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African countries well placed to export to EU, but there are risks Duty-free access under EBA & provisional EPAsDuty-free access under EBA & provisional EPAs
gives advantage for ethanolgives advantage for ethanol
little advantage for biodiesel or its feedstockslittle advantage for biodiesel or its feedstocks Higher production costs thanHigher production costs than
ethanol from Brazilethanol from Brazil
biodiesel from Southeast Asiabiodiesel from Southeast Asia Risk of preference erosion and changes in Risk of preference erosion and changes in
mandatesmandates
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Domestic market also attractive
High fuel prices in Africa region High fuel prices in Africa region
(US Cents/litre)(US Cents/litre)
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20
40
60
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140
Sub-SaharanLandlocked
Sub-SaharanCoastal
North Africa Reference (USA)
Diesel Gasol ine
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Domestic market also attractive
High fuel prices in Africa regionHigh fuel prices in Africa region Remote areas offer potential for profitable Remote areas offer potential for profitable
production-mining and other industriesproduction-mining and other industries Niche markets for ‘green fuels’ Niche markets for ‘green fuels’ Replacement for charcoal in urban areasReplacement for charcoal in urban areas
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Primary biofuels paths
Ethanol from molassesEthanol from molasses Ethanol from sugar caneEthanol from sugar cane Biodiesel from jatrophaBiodiesel from jatropha Jatropha for export as oils or seeds Jatropha for export as oils or seeds Jatopha for SVOJatopha for SVO Other feedstocks with promise: cassava, sweet Other feedstocks with promise: cassava, sweet
sorgham, oil palmsorgham, oil palm Not competitve in grainsNot competitve in grains
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Ethanol from molasses
Molasses, a by-product of sugar production, is Molasses, a by-product of sugar production, is heavy liquid with high transport costsheavy liquid with high transport costs
Low value for export or animal feed, sells for Low value for export or animal feed, sells for $25/ton in Tanzania (vs $175 in Europe)$25/ton in Tanzania (vs $175 in Europe)
Produces ethanol at $0.20-.025 per litre, vs. Produces ethanol at $0.20-.025 per litre, vs. imported petrol at $.40-.45 per litre and $0.65 in imported petrol at $.40-.45 per litre and $0.65 in landlocked countrieslandlocked countries
Malawi has done it since 1982Malawi has done it since 1982 Policies are not in place in most countries to allow Policies are not in place in most countries to allow
ethanol to be sold as fuelethanol to be sold as fuel
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Ethanol from sugar cane
Potential in Tanzania. Sekab has withdrawn Potential in Tanzania. Sekab has withdrawn but plans to restructurebut plans to restructure
Requires: large tracts of land, irrigation, good Requires: large tracts of land, irrigation, good access to portsaccess to ports
Several countries developing projects, others Several countries developing projects, others are mostly on hold due to lack of financingare mostly on hold due to lack of financing
Existing policies may limit smallholder Existing policies may limit smallholder involvementinvolvement
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Ethanol from sugar cane
Production costs are about $0.45-0.50 Production costs are about $0.45-0.50 per litre (vs. $0.37-0.38 in Brazil)per litre (vs. $0.37-0.38 in Brazil)
Profitable for export to EU because of Profitable for export to EU because of duty-free access and high EU tariffsduty-free access and high EU tariffs
Risk is that duty-free access extended Risk is that duty-free access extended to others-Brazil, South Africa, to others-Brazil, South Africa, Thailand and preferences erodeThailand and preferences erode
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Sugar vs. Ethanol
The EU provides duty-free access to most African The EU provides duty-free access to most African countries for both sugar and ethanolcountries for both sugar and ethanol
One ton of sugar cane produces:One ton of sugar cane produces:82 litres of ethanol worth $.70/litre = $5782 litres of ethanol worth $.70/litre = $57or 100 kgs of sugar and 25 kgs of molasses worth or 100 kgs of sugar and 25 kgs of molasses worth $57$57
Differences in production costs and freight cancel Differences in production costs and freight cancel and joint production is best optionand joint production is best option
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Jatropha: Many questions remain
YieldsYields of 3-5 tons under best conditionsof 3-5 tons under best conditions
Value of by-productsValue of by-products for fertilizer, charcoal, or animal feed for fertilizer, charcoal, or animal feed
Labor requirements and costsLabor requirements and costs1.0-1.5 workers per hectare1.0-1.5 workers per hectareLow value prevents high wagesLow value prevents high wagesLabor can account for 40-50% of costsLabor can account for 40-50% of costs
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Jatropha
May be viable as smallholder cropMay be viable as smallholder cropGrown as hedge or intercroppedGrown as hedge or intercroppedSeeds collected at $0.10/kgSeeds collected at $0.10/kgUsed as raw vegetable oil for rural powerUsed as raw vegetable oil for rural power
Next generation of jatropha may be viable, Next generation of jatropha may be viable, breeding to improve yields, synchronize breeding to improve yields, synchronize flowering to allow mechanizated flowering to allow mechanizated harvesting, better utilization of by-productsharvesting, better utilization of by-products
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Land leases put communities as risk
Many communities are agreeing to long-term Many communities are agreeing to long-term leases on communal lands with no conditions and leases on communal lands with no conditions and no recourseno recourse
If biofuels projects fail, land is not returned to If biofuels projects fail, land is not returned to communitycommunity
Land leases can be held or sold for other usesLand leases can be held or sold for other uses This puts communities at risk of losing their land This puts communities at risk of losing their land
and not getting promised jobsand not getting promised jobs
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Food vs fuel conflicts
Can’t be avoided with First Generation BiofuelsCan’t be avoided with First Generation Biofuels Jatropha does not grow well on marginal and Jatropha does not grow well on marginal and
degraded soils and it does compete for land and degraded soils and it does compete for land and other resources with food cropsother resources with food crops
But, most African countries have land for bothBut, most African countries have land for both At the global level, biofuels will affect food prices At the global level, biofuels will affect food prices
as long as food crops are used to produce biofuelsas long as food crops are used to produce biofuels Second Generation technology offers better Second Generation technology offers better
opportunities for both food and fuel opportunities for both food and fuel
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Food Security
Food security is a complex issue and food Food security is a complex issue and food production is only one aspect production is only one aspect
Restricting production to certain crops or areas Restricting production to certain crops or areas limits the income opportunities of farmerslimits the income opportunities of farmers
A better policy is to focus on food security and A better policy is to focus on food security and allow free trade, make strategic investments to allow free trade, make strategic investments to improve competitiveness, and protect the poorest improve competitiveness, and protect the poorest with social safety netswith social safety nets
And let farmers grow the most profitable crops to And let farmers grow the most profitable crops to raise their incomesraise their incomes
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Volatility of production
Biofuel production costs will be volatile, Biofuel production costs will be volatile, since 80 percent of ethanol and 90 percent since 80 percent of ethanol and 90 percent of biodiesel costs are variable costsof biodiesel costs are variable costs
Communities and governments that depend Communities and governments that depend on biofuels could see large variability in on biofuels could see large variability in revenues and employmentrevenues and employment
Managing price risk is a major challenge for Managing price risk is a major challenge for biofuel’s producersbiofuel’s producers
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Policies are needed to help countries benefit from biofuels Biofuels can’t be sold as fuel unless laws are put in Biofuels can’t be sold as fuel unless laws are put in
place to regulate production, use and qualityplace to regulate production, use and quality Land laws don’t protect communities in case of Land laws don’t protect communities in case of
project failure, or current land users with informal project failure, or current land users with informal land use rightsland use rights
Environmental regulations are needed to prevent Environmental regulations are needed to prevent damage to fragile ecosystems damage to fragile ecosystems
Technology transfer will require modification of Technology transfer will require modification of existing lawsexisting laws
Research is needed to improve yields of biofuel cropsResearch is needed to improve yields of biofuel crops
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Conclusions
Biofuels offer new opportunities in Biofuels offer new opportunities in domestic and export marketdomestic and export market
Uncertainties about energy prices and Uncertainties about energy prices and biofuel policies remainbiofuel policies remain
Impacts will extend to food marketsImpacts will extend to food markets Poverty impacts could be significant Poverty impacts could be significant
because of impact on all commodity pricesbecause of impact on all commodity prices
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