Biofuels, the Global Food Balance & Impacts on the Poor

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Mark W. Rosegrant, Director Environment and production Technolgy Division (EPTD) at the International Food Policy Research Institute

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  • This one is important since what we have shown is that the mix of biodiesel/ethanol and the overall size of the mandate drive the results. We have analyzed here the scenario on which the EU task force was agreed on.
  • Why is there almost no impact on US mandate+trade liberalization for both USA and China? Just not efficient enough to benefit? We speak of the EU mandate. US and China are not exporters of ethanol for fuel consumption and appears to not be competitive vs Brazil and other existing exporters
  • Impacts on real income are small.  Is it just because biofuel is such a small portion of these economies? Yes. Interestingly, the losses for Africa are driven by the negative effects of the mandate on crude oil prices. (due to the role of this products in overall  SSA exports)
  • Please describe computation of annual direct savings of emissions.  Bigger net savings and smaller indirect increases in emissions than I expected, very interesting   We apply % of saving on fossil fuel emissions replaced by biofuels. This % is based on life cycle analysis and follows the EC directive targets ( with some EPA figures for the US). e.g. 71% saving for sugar cane ethanol, 46 % for EU maize ethanol, 56% for US maize ethanol....
  • We show the world prices for maize, since that is the main feedstock crop affected by the US policy. The effect of the biofuels target is seen as raising the world price – but the impact of higher yield growth has an even larger effect. It reverses the trend of steadily increasing prices to a trend that looks more like that seen before the food price crisis of 2007-08. The per capita calorie levels are also seen to improve greatly when yield growth improves, and leads to the improved malnutrition outcomes seen previously
  • This is a simple experiment to show how much additional yield growth is needed for cereals, in order to offset the effect on child malnutrition of moving from a base case where the US only reaches half of its 2022 goal of biofuels production – to one where it fulfills its goal of producing 56 billion liters of maize-based ethanol, as prescribed under the 2008 Energy Independence and Security Act (EISA). Assuming the developing world starts from a lower yield level and gets a higher boost, we find that a 0.5% point increase in global average annual cereal yield is needed to keep the malnutrition levels in 2025 at the baseline levels.
  • This is a simple experiment to show how much additional yield growth is needed for cereals, in order to offset the effect on child malnutrition of moving from a base case where the US only reaches half of its 2022 goal of biofuels production – to one where it fulfills its goal of producing 56 billion liters of maize-based ethanol, as prescribed under the 2008 Energy Independence and Security Act (EISA). Assuming the developing world starts from a lower yield level and gets a higher boost, we find that a 0.5% point increase in global average annual cereal yield is needed to keep the malnutrition levels in 2025 at the baseline levels.
  • Biofuels, the Global Food Balance & Impacts on the Poor

    1. 1. Biofuels, the Global Food Balance & Impacts on the Poor Mark W. Rosegrant Director Environment and Production Technology Division Wednesday, June 9, 2010 Bold Actions for Stimulating Inclusive Growth   An international dialogue organized by IFPRI and hosted by EMBRAPA   Brasilia, Brazil, June 2, 2010
    2. 2. Outline <ul><li>Biofuels and Agriculture </li></ul><ul><li>Biofuels and Food Security </li></ul><ul><li>Challenges and Opportunities </li></ul>
    3. 3. BIOFUELS AND AGRICULTURE
    4. 4. MIRAGE CGE based analysis of Biofuels: the EU mandate <ul><li>Focus of the study: Effects of the EU mandate </li></ul><ul><li>Multi country, Multi sectoral Dynamic CGE </li></ul><ul><li>Focus on Indirect Land Use Change </li></ul><ul><li>The core story </li></ul>New Demand for Crops <ul><li>Increase in yield </li></ul><ul><li>Increase in area </li></ul><ul><li>Extension of crop land </li></ul><ul><li>Reduction of other crops </li></ul><ul><li>Hunger? </li></ul><ul><li>Substitution effect </li></ul><ul><li>Feed </li></ul><ul><li>Other sectors (agrifood, cosmetics) </li></ul><ul><li>Substitution effects </li></ul>Source: Al-Riffai, B. Dimaranan and D. Laborde. 2010.
    5. 5. Defining a Central Scenario <ul><li>First step: Having a reasonable dynamic baseline </li></ul><ul><ul><li>Energy policies, Agricultural policies, Trade policies (e.g. Antidumping/Countervailing duties on US biodiesel in the EU) </li></ul></ul><ul><li>Policy uncertainties </li></ul><ul><ul><li>Trade policies </li></ul></ul><ul><ul><ul><li>Status quo </li></ul></ul></ul><ul><ul><ul><li>Full liberalization of biofuel (not feedstocks) in the EU </li></ul></ul></ul><ul><ul><li>Level of Mandate </li></ul></ul><ul><ul><ul><li>5.6% - Fuel consumption for road transportation in the EU </li></ul></ul></ul><ul><ul><ul><li>316 Mtoe in 2020: Total EU consumption for Road Transportation </li></ul></ul></ul><ul><ul><ul><li>31.6 Mtoe of renewable energies: 10% target </li></ul></ul></ul><ul><ul><ul><li>17.8 Mtoe of biodiesel first generation by 2020 </li></ul></ul></ul><ul><ul><ul><ul><li>Compared to the current situation: 9.23 Mtoe in baseline 2008 (3.3%) </li></ul></ul></ul></ul>Source: Al-Riffai, B. Dimaranan and D. Laborde. 2010.
    6. 6. Food price changes (% compared to the baseline in 2020) Source: Al-Riffai, B. Dimaranan and D. Laborde. 2010.
    7. 7. Biofuels Production: Ethanol Source: Al-Riffai, B. Dimaranan and D. Laborde. 2010. Regions  REF Mandate 5.6% Mandate 5.6%+ Trade liberalization   Lev (Mtoe) Lev (Mtoe) Var (%) Lev (Mtoe) Var (%) Brazil 28.51 32.78 14.97 34.36 20.50 CAMCarib 7.25 7.45 2.64 7.19 -0.89 China 10.81 10.83 0.18 10.83 0.16 EU27 0.84 2.17 156.89 0.44 -48.23 LAC 0.69 0.69 0.95 0.70 2.21 RoOECD 5.66 5.78 2.03 5.84 3.03 RoW 1.51 1.50 -0.54 1.50 -0.49 USA 29.10 29.57 1.64 29.72 2.14 World 84.38 90.77 7.58 90.57 7.34
    8. 8. Agricultural Production (2020) Source: Al-Riffai, B. Dimaranan and D. Laborde. 2010. Global trade and environmental impact study of the EU biofuels mandate. European Commission. http://www.ifpri.org/publication/global-trade-and-environmental-impact-study-eu-biofuels-mandate Crops Region REF Mandate 5.6% Mandate 5.6%+ Trade liberalization     Lev (1,000 tons) Lev (1,000 tons) Var (%) Lev (1,000 tons) Var (%) Sugar_cb Brazil 913,385 1,001,556.15 9.65 1,045,492.08 14.46 Rapeseed CIS 571 583.00 2.06 583.42 2.13 PalmFruit Brazil 3,117 3,196.06 2.53 3,181.86 2.07 Rapeseed Brazil 151 153.15 1.59 152.85 1.39 Rapeseed SSA 108 108.87 1.10 108.89 1.12 Sunflower Brazil 153 155.23 1.24 154.91 1.03
    9. 9. Agricultural Value-Added (2020) Source: Al-Riffai, B. Dimaranan and D. Laborde. 2010. Global trade and environmental impact study of the EU biofuels mandate. European Commission. http://www.ifpri.org/publication/global-trade-and-environmental-impact-study-eu-biofuels-mandate
    10. 10. Real Income Impacts (2020) Source: Al-Riffai, B. Dimaranan and D. Laborde. 2010. Global trade and environmental impact study of the EU biofuels mandate. European Commission. http://www.ifpri.org/publication/global-trade-and-environmental-impact-study-eu-biofuels-mandate REF Mandate 5.6% Mandate 5.6%+ Trade liberalization   Lev (US$ bil) Lev (US$ bil) Var (%) Lev (US$ bil) Var (%) Brazil 856 857 0.06 857 0.08 CAMCarib 444 444 -0.01 444 -0.02 China 4,593 4,592 0.00 4,592 -0.01 CIS 1093 1,091 -0.18 1,091 -0.17 EU27 15,182 15,184 0.01 15,182 0.00 IndoMalay 564 564 -0.02 564 -0.03 LAC 1,605 1,604 -0.05 1,604 -0.06 RoOECD 8,590 8,589 -0.01 8,588 -0.01 RoW 5,639 5,633 -0.11 5,633 -0.11 SSA 912 911 -0.12 911 -0.12 USA 15,219 15,218 0.00 15,218 -0.01 World 54,697 54,687 -0.02 54,684 -0.02
    11. 11. Cropland Expansion by 2020 Source: Al-Riffai, B. Dimaranan and D. Laborde. 2010. Global trade and environmental impact study of the EU biofuels mandate. European Commission. http://www.ifpri.org/publication/global-trade-and-environmental-impact-study-eu-biofuels-mandate
    12. 12. Where does Land Expansion Occur? Source: Al-Riffai, B. Dimaranan and D. Laborde. 2010. Global trade and environmental impact study of the EU biofuels mandate. European Commission. http://www.ifpri.org/publication/global-trade-and-environmental-impact-study-eu-biofuels-mandate EU 27
    13. 13. Carbon Balance Sheet (2020) Source: Al-Riffai, B. Dimaranan and D. Laborde. 2010.   REF Mandate 5.6% Mandate 5.6%+ Trade liberalization Total carbon release from forest biomass (MtCO2eq) 43.41 46.07 Total carbon release from organic carbon in mineral soil (MtCO 2 eq) 63.09 71.66 EU Consumption of biofuel in 2020 (million GJ) 443 743 746 Annual carbon release from forest biomass (gCO 2 eq/MJ) 7.23 7.61 Annual carbon release from organic carbon in mineral soil (gCO 2 eq/MJ) 10.50 11.84 Annual direct savings (gCO 2 /MJ) -60.55 -66.38 Total emission balance on a 20 years period (gCO 2 /MJ)   -42.82 -46.93
    14. 14. BIOFUELS AND FOOD SECURITY news.mongabay.com/.../2007_11_25_archive.html http://www.ifad.org/newsletter/images/sp_1008/Bioenergy1.JPG
    15. 15. Biofuels and Food Security Scenarios <ul><li>Base Scenario :   US fulfills only half of its 2022 goal of biofuels production under the 2008 Energy Independence and Security Act (EISA).  </li></ul><ul><li>US Biofuels :  US fulfills goal of 56 billion liters of maize-based ethanol under EISA </li></ul><ul><li>US Biofuels plus crop productivity growth :  Incorporates additional yield growth needed for cereals to offset the effect on child malnutrition of moving from the base case to US Biofuels </li></ul>Page
    16. 16. Change in International Prices between Base and US Biofuels Scenario in 2025 <ul><li>Maize  +25% </li></ul><ul><li>Sugar +11% </li></ul><ul><li>Oilseeds +18% </li></ul><ul><li>Wheat  +8% </li></ul><ul><li>Cassava  +10% </li></ul>Page
    17. 17. Per Capita Calorie Availability Implications of Biofuels Scenarios <ul><li>Sub-Saharan Africa: </li></ul><ul><li>5% decrease in calorie availability due to the biofuels policy </li></ul><ul><li>importance of maize as a staple food in that region </li></ul>
    18. 18. Malnutrition Impacts of US Biofuels Target Malnourished children (0-5) Quantify extra yield growth needed to move from here…. … back to here….
    19. 19. Additional Yield Growth in Cereals to Offset Malnutrition Global Cereal Yield Growth Additional (annual average) yield growth in cereals: Developing world = 0.8% Developed world = 0.4%
    20. 20. CHALLENGES AND OPPORTUNITIES
    21. 21. <ul><li>There will be a “food-versus-fuel” trade-off if: </li></ul><ul><ul><li>Innovations and technology investments in crop productivity are slow </li></ul></ul><ul><ul><li>Reliance is placed solely on conventional feedstock conversion technologies to meet future blending requirements (or displacement) of fossil fuels with biofuels </li></ul></ul><ul><li>Improvement in biofuel conversion and crop productivity improvements reduce trade-offs </li></ul><ul><li>Biofuels increase profitability of crop breeding for productivity improvement in biofuel feedstock crops </li></ul>Challenges and Opportunities
    22. 22. Reducing the Trade-offs <ul><li>Reduce OECD subsidies and mandates for biofuels; liberalize trade in biofuels </li></ul><ul><li>Develop production processes for liquid biofuels that bring benefits to the poor </li></ul><ul><ul><li>Need to design production systems that will integrate rural households into the value chain </li></ul></ul><ul><ul><li>Allow for on-farm addition of value, rather than just extracting raw biomass </li></ul></ul><ul><ul><li>‘ First generation’ processes for producing biofuels compared with emerging ligno-cellulosic technologies? </li></ul></ul><ul><li>Broad-based investment in agricultural research and rural infrastructure </li></ul>
    23. 23. Conclusions <ul><li>Impacts of global biofuel development and growth on rural poor </li></ul><ul><ul><li>Likely to be mixed and farming system-specific – both positive and negative – warrants careful assessment </li></ul></ul><ul><li>Common set of conditions for promoting rural development and enhancing socio-economic growth and biofuel capacity </li></ul><ul><li>Expand consideration of biofuels beyond transportation uses to take into account actual energy demand of the poor </li></ul><ul><li>CORE BUSINESS: Should stay focused on rural socio-economic growth and development, agricultural research and productivity enhancement </li></ul>

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