time for action: shaping biofuel production and trade for the common good daniel g. de la torre...
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Time for Action: Shaping Biofuel Time for Action: Shaping Biofuel Production and Trade for the Production and Trade for the
Common GoodCommon Good
Daniel G. De La Torre UgarteDaniel G. De La Torre Ugarte
Scientific Symposium: Food and Fuel: Biofuels, Development, Scientific Symposium: Food and Fuel: Biofuels, Development,
and a Sustainable Bioeconomyand a Sustainable BioeconomyBoston, MA
February 16, 2008
Characteristics of BiofuelsCharacteristics of Biofuels
Easily integrated with combustion engine infrastructure
Feedstock growth & conversion in / around rural areas
Generates a new energy sector in the economy / increases energy services in rural areas
Provides a sustained demand for ag. resources
Reduced GHG emissions by 20% (no land displacement effect)
Biofuels are not Biofuels are not The SolutionThe Solution to to ( (but could contribute to)::
Climate Change
Energy crisis
Economic development / Poverty
Reduction
Agriculture and PovertyAgriculture and Poverty Developing world
5.5 billion people
2.5 billion are in households involve in Ag
1.5 billion are smallholder households
800 million people food insecure
80% of food insecure people are in rural areas
In many developing countries: >50% of employment
>25% of GDP
Increase in GDP from Ag is twice more efficient for poverty reduction than any sector
Biofuels Expansion took-off when Biofuels Expansion took-off when world inventories were decliningworld inventories were declining
0.00
0.06
0.12
0.18
0.24
0.30
0.36
Per
cen
t o
f to
tal u
se
Corn Wheat Rice
Source: USDA
Grains for Feed and Fuel UseGrains for Feed and Fuel Use
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
00
0 t
on
s
World Feed Demand Feed Demand minus USA Fuel Demnd
Source: OECD-FAO Agricultural Outlook 2007-2016 - OECD © 2007 - ISBN 9789264025097
Feed long term driver of ag. demand
Biofuels demand, the straw that broke the camel’s back
Developing countries are reproducing diet of the west based on high content of animal protein
Long term trend in Long term trend in agricultural commodity pricesagricultural commodity prices
0
50
100
150
200
250
300
350
1957 1962 1967 1972 1977 1982 1987 1992 1997 2002 2007
Pri
ce In
dex
Nominal Real
Source: International Financial Statistics Online, IMF February 10,2008. Except for real price in 2007, which is estimated by author.
30+ years of declining and or flat prices
Trade off Between Agricultural Trade off Between Agricultural Prices and Food SecurityPrices and Food Security
Ag Prices
% Food Security
P0
P1
Increase in ag. prices is not necessarily aBad for food security, specially coming from Low prices
Not all Biofuels are “created” equalNot all Biofuels are “created” equal Feedstock Agricultural production practices Soil characteristics Land use and land displaced Producers / growers Conversion process Biofuel and bio-products produced End use
Global Anthropogenic GHG EmissionsGlobal Anthropogenic GHG Emissions
Source: Fourth Assessment Report, IPCC (2007)(a) Global annual emissions of anthropogenic GHGs from 1970 to 2004. (b) Share of different anthropogenic GHGs in total emissions in 2004 in terms of CO2-eq. (c) Share of different sectors in total anthropogenic GHG emissions in 2004 in terms of C02-eq (Forestry includes deforestation.)
0.26% Searchinger, et al.GHG for ag and forestry is to address the 31% of annualemissions coming. If we take care of this we take care of
Ag Prices
EnvironmentalCost
Trade-off Between Agricultural Prices Trade-off Between Agricultural Prices and Environmental Costand Environmental Cost
P0
P1Under current agricultural practices and food consumption patterns, an increase in ag prices could accelerate environmental costs
The Question isThe Question is
Under which conditions biofuels can be an opportunity for:
Poverty reduction
Climate change / environmental benefit
Energy crisis / energy independence
Biofuels Expansion StrategyBiofuels Expansion Strategy
In check with Ag production capacity Prioritize domestic/local market Mandates should not drive growth but
secure healthy bottom Incentives must be linked to:
Environmental performanceContribution to rural development
Sustainability criteria should play a key role in the development of the sector
Key Element:Key Element: New Generation Biofuels New Generation Biofuels
To diversify feedstock sources
Improve energy balance and GHG
Diversify fuels produced
Potential for new bio-products,
including fertilizers
Strategy for Poverty ReductionStrategy for Poverty Reduction Increase farmers ability to capture larger share of
higher prices: Invest in farmers’ access to markets, improving
marketing & distribution systems Improve product quality
Democratize access to land, water and productive resources
Invest in research and extension to improve productivity to supply the now profitable local market
Implement programs to ensure access to food for vulnerable population
Expand the Impact of Higher Expand the Impact of Higher Prices in Food SecurityPrices in Food Security
Ag Prices
% Food Security
P0
P1
Investments directed to improve share of high prices capture by farmers would improve food security
Strategy for Climate ChangeStrategy for Climate Change
Drastically change diet composition towards more efficient sources of protein and food from local origin
Invest in Research & Extension oriented to: Reduce use of fossil based inputs in agriculture Improve management practices which increase the
environmental performance of production agriculture Ensure the best use of soils and landscape
Recuperate the complementarity of crop and livestock activities in the farm
Integrate GHG emissions and other environmental impacts into farmers balance sheet
Ag Prices
EnvironmentalCost
Higher Ag Prices Create Conditions to Higher Ag Prices Create Conditions to Invest in reducing Environmental CostInvest in reducing Environmental Cost
P0
P1
Investment in agricultural technologies less intensive in fossil inputs, and in tune with local soil and food habits would reduce environmental cost of agriculture
Trade IssuesTrade Issues Biofuels is an answer to WTO’s idea that
excess production is causing low prices
Biofuels trade has a role: expand supply, reduce price pressures, use more suitable feedstock available, new opportunities
Biofuels trade brings very high risks: size of energy market, expansion of arable land into sensitive areas, overtake land holdings of small landholders, water conflicts
Biofuels trade needs to be regulated
Institutional InvestmentInstitutional Investment Strengthen land property rights and
enforcing mechanisms to protect small holders
Re-develop domestic institutionality to support transformation of agriculture
International food reserve system
Global coordination of biofuel development
Concluding RemarksConcluding Remarks
If nothing is done, missed opportunity for poverty reduction, agriculture, and climate change
Biofuels could result in a massive transfer of resources to the ag sector, specially in the South.
Biofules provides the profitability to invest in agriculture and radically change what, how, and where we produce
Countries could benefit from biofuels without producing them
Department of Agricultural Economics, Institute of AgricultureUniversity of Tennessee http://www.agriculture.utk.edu/
Agricultural Policy Analysis Centerhttp://agpolicy.org/
ThanksThanks ! !
Bio-based Energy Analysis Grouphttp://beag.ag.utk.edu/