FOOD VS. FUEL
     Impacts of energy price
    increases on developing
      countries and the poor

           Dr. Joachi...
Overview
• The emerging biofuel economy, why now?

• What are the impacts on food prices and the
  poor?

• What are the t...
Energy Outlook

     • Global consumption of marketed energy is
       projected to rise by 71 percent between
       2003...
The Emerging Biofuel Economy

             • Potential to serve as an environmentally
               sustainable source of...
Food Production and Price Trends




   Source: Msangi et al., 2007

Joachim von Braun, IFPRI, April 2007
Food and Energy Price Trends

       Price Indices 2000=100

           300                     Food
           250       ...
Food and Energy Price Trends

        Price Indices 2000=100

          300
                                              ...
How Do Prices Correlate? Are there
                            Inconsistencies?
     • Many markets linked to bioenergy ma...
Overview
• The emerging biofuel economy, why now?

• What are the impacts on food prices and the
  poor?

• What are the t...
IMPACT Model

     • Methodology for analyzing alternative scenarios for
       global food demand, supply, and trade

   ...
Scenarios

     • Comparison of 3 scenarios to ‗baseline projections‘
       (which have current biofuel demand embedded)
...
Price Impacts Across Scenarios
                                            Global Commodity Price Changes in 2020
        ...
% Changes in World Feedstock Crop Prices
      under Scenarios, Compared with Baseline
                                   ...
Implications for Food Security: Caloric
                        Availability Across Scenarios

                           ...
Implications for Food Security: Childhood
              Malnutrition Across Scenarios

                                   ...
Summarizing...

     • BOTTOM LINE: Energy crop production
       does not need to lead to food insecurity

     • Why?
  ...
Overview
• The emerging biofuel economy, why now?

• What are the impacts on food prices and the
  poor?

• What are the t...
The Food vs. Fuel Tradeoff
       • Low crop productivity innovations and technology
         investments

       • Relian...
Opportunities

     • Y effect: Energy crops have to potential to provide
       farmers with an important source of produ...
Challenges

   • Biofuels not necessarily better for the
     environment

   • Can lead to deforestation, loss of
     bi...
Overview
• The emerging biofuel economy, why now?

• What are the impacts on food prices and the
  poor?

• What are the t...
Strategies to Reduce Trade-offs

     • Breed crops that yield high amounts of
       energy per hectare or unit of water
...
Minimizing Risks…

     • Improve access to finance + sound policies
       for contract security

     • Provide access t...
Stakeholder Responsibilities

     • Public sector
             Politics of bioenergy can be complexa
                Ca...
Stakeholder Responsibilities

             Enhance market incentives to realize
              environmental + social bene...
Stakeholder Responsibilities

     • Research
             - Public/Private partnerships (e.g. appropriate
               ...
Conclusions

     • Impacts of global biofuel development and growth
       on the poor can be both positive and negative ...
Upcoming SlideShare
Loading in...5
×

FOOD VS. FUEL Impacts of energy price increases on developing countries and the poor

1,755

Published on

Zurich
April, 2007

Published in: Education
0 Comments
5 Likes
Statistics
Notes
  • Be the first to comment

No Downloads
Views
Total Views
1,755
On Slideshare
0
From Embeds
0
Number of Embeds
0
Actions
Shares
0
Downloads
3
Comments
0
Likes
5
Embeds 0
No embeds

No notes for slide

FOOD VS. FUEL Impacts of energy price increases on developing countries and the poor

  1. 1. FOOD VS. FUEL Impacts of energy price increases on developing countries and the poor Dr. Joachim von Braun Director General International Food policy Research Institute Zurich April, 2007
  2. 2. Overview • The emerging biofuel economy, why now? • What are the impacts on food prices and the poor? • What are the tradeoffs between food and fuel? What are the opportunities, risks, challenges? • Policy suggestions for creating a pro-poor sustainable biofuel industry • Conclusions Joachim von Braun, IFPRI, April 2007
  3. 3. Energy Outlook • Global consumption of marketed energy is projected to rise by 71 percent between 2003 and 2030, with 3/4th of the increase coming for developing countries • Oil prices unlikely to fall in the future due to increased demand + recent instability in some major oil producing countries • Biofuels have become competitive with petroleum in many developing countries Joachim von Braun, IFPRI, April 2007
  4. 4. The Emerging Biofuel Economy • Potential to serve as an environmentally sustainable source of energy New sources are cleaner and more efficient Can contribute to mitigating global climate change • However, competitiveness of biofuels depends heavily on relative prices of oil and agricultural feedstock for biofuels Joachim von Braun, IFPRI, April 2007
  5. 5. Food Production and Price Trends Source: Msangi et al., 2007 Joachim von Braun, IFPRI, April 2007
  6. 6. Food and Energy Price Trends Price Indices 2000=100 300 Food 250 Crude Oil 200 150 100 50 0 04 05 06 4 5 6 4 5 6 7 4 5 6 00 00 00 00 00 00 00 00 00 00 l20 l20 l20 n2 n2 n2 n2 ct2 ct2 ct2 r2 r2 r2 Ju Ju Ju Ap Ap Ap Ja Ja Ja Ja O O O Data Source: UNCTAD Commodity Price Statistics Database Joachim von Braun, IFPRI, April 2007
  7. 7. Food and Energy Price Trends Price Indices 2000=100 300 Corn US 250 Wheat US 200 Crude Oil 150 100 50 0 Mar2004 May2004 Mar2005 Mar2006 Jul2004 May2005 Jul2005 May2006 Jul2006 Nov2004 Nov2005 Nov2006 Jan2004 Jan2005 Jan2006 Jan2007 Sep2004 Sep2005 Sep2006 Data Source: UNCTAD Commodity Price Statistics Database Joachim von Braun, IFPRI, April 2007
  8. 8. How Do Prices Correlate? Are there Inconsistencies? • Many markets linked to bioenergy markets  change in price in one market affect can affect prices in ALL other marketsa Soybean Corn Wheat meal Soybeans Soybean oil Petroleum US India Germany US Netherlands Petroleum 1.00 Corn US -0.06 1.00 Wheat India 0.51 -0.23 1.00 Soybean Meal Germany -0.33 0.68 -0.71 1.00 Soybeans US -0.18 0.80 -0.56 0.82 1.00 Soybean Oil Netherlands 0.49 0.01 -0.14 -0.02 0.30 1.00 Data Sources: IMF Commodity, UNCTAD Commodity Price Statistics, and USDA Feed Grain Databases; and Indiastat.com aBullock and Goldsmith, 2006 Joachim von Braun, IFPRI, April 2007
  9. 9. Overview • The emerging biofuel economy, why now? • What are the impacts on food prices and the poor? • What are the tradeoffs between food and fuel? What are the opportunities, risks, challenges? • Policy suggestions for creating a pro-poor sustainable biofuel industry • Conclusions Joachim von Braun, IFPRI, April 2007
  10. 10. IMPACT Model • Methodology for analyzing alternative scenarios for global food demand, supply, and trade • Covers 36 countries and regions + 16 commodities • Generates projections for crop area; yield; production; demand by food, feed, prices; trade etc. • Base year for simulations: 1997 • Key relevant parameters: price and income elasticities of demand; price elasticities of area and yield; and growth rates of population, income, crop area, yield etc. Joachim von Braun, IFPRI, April 2007
  11. 11. Scenarios • Comparison of 3 scenarios to ‗baseline projections‘ (which have current biofuel demand embedded) • Scenario 1 - a “conventional” scenario with rapid global growth in biofuel production under conventional conversion technologies [3%->20% by 2020] • Scenario 2 - considers the „softening‟ of demand on food crops due to “2nd generation” cellulosic technologies coming online • Scenario 3 - adds productivity improvements [2-7%] to show how the impacts can be further mitigated (“2nd generation plus”) Source: Msangi et al., 2007 Joachim von Braun, IFPRI, April 2007
  12. 12. Price Impacts Across Scenarios Global Commodity Price Changes in 2020 160 140 135 % difference from baseline 120 100 89 76 80 66 60 54 41 45 49 43 43 40 30 29 21 23 16 20 0 Conventional 2nd Generation 2nd Generation Plus Cassava Maize Oilseeds Sugarcane Wheat Source: Msangi et al., 2007 Joachim von Braun, IFPRI, April 2007
  13. 13. % Changes in World Feedstock Crop Prices under Scenarios, Compared with Baseline Aggressive biofuel Aggressive biofuel growth scenario Cellulosic growth scenario with productivity biofuel without technology change as well as scenario improvementsa cellulosic conversion Feedstock crop 2010 2020 2020 2020 Cassava 33 135 89 54 Maize 20 41 29 23 Oilseeds 26 76 45 43 Sugar beets 7 25 14 10 Sugarcane 26 66 49 43 Wheat 11 30 21 16 aAssumptions based on stated plans for biofuel production in Brazil, China, Europe, India, and the US, and on a scenario of aggressive biofuel growth in Africa Source: von Braun and Pachauri, 2006 Joachim von Braun, IFPRI, April 2007
  14. 14. Implications for Food Security: Caloric Availability Across Scenarios 2020 Base 2020 Conventional 2020 2nd Generation 2020 2nd Generation Plus kilocalorie availability/ 4000 3500 per cap per day 3000 2500 2000 1500 1000 500 0 S Asia SE E Asia SSA LAC WANA Asia Source: Msangi et al., 2007 Joachim von Braun, IFPRI, April 2007
  15. 15. Implications for Food Security: Childhood Malnutrition Across Scenarios S Asia SE Asia E Asia SSA WANA LAC 180 160 140 million children 120 100 80 60 40 20 0 1997 2020 Base 2020 2020 2nd 2020 2nd Convent. Gen Gen + Source: Msangi et al., 2007 Joachim von Braun, IFPRI, April 2007
  16. 16. Summarizing... • BOTTOM LINE: Energy crop production does not need to lead to food insecurity • Why? - Opportunities for small farmers - BUT, ―food vs. fuel tradeoff‖ exists Joachim von Braun, IFPRI, April 2007
  17. 17. Overview • The emerging biofuel economy, why now? • What are the impacts on food prices and the poor? • What are the tradeoffs between food and fuel? What are the opportunities, risks, challenges? • Policy suggestions for creating a pro-poor sustainable biofuel industry • Conclusions Joachim von Braun, IFPRI, April 2007
  18. 18. The Food vs. Fuel Tradeoff • Low crop productivity innovations and technology investments • Reliance on conventional feedstock conversion technologies • Increased food prices - Winners: Farmers with net surplus of food - Losers: Poor consumers and food deficit farmers • Limited natural resource base  Possible diversion of land and water away from production of food + feed Joachim von Braun, IFPRI, April 2007
  19. 19. Opportunities • Y effect: Energy crops have to potential to provide farmers with an important source of product demand  Increased income for small farmers • Employment effect: Biofuel production is labor intensive and may be a boon to rural areas with abundant labor • Productivity effect: - crop residues e.g. stalks which can be converted into ethanol - Farmers can grow energy crops on degraded land not suitable for food production Joachim von Braun, IFPRI, April 2007
  20. 20. Challenges • Biofuels not necessarily better for the environment • Can lead to deforestation, loss of biodiversity, excessive use of fertilizer + pesticides, land degradation etc. • May exacerbate socioeconomic inequalities Joachim von Braun, IFPRI, April 2007
  21. 21. Overview • The emerging biofuel economy, why now? • What are the impacts on food prices and the poor? • What are the tradeoffs between food and fuel? What are the opportunities, risks, challenges? • Policy suggestions for creating a pro-poor sustainable biofuel industry • Conclusions Joachim von Braun, IFPRI, April 2007
  22. 22. Strategies to Reduce Trade-offs • Breed crops that yield high amounts of energy per hectare or unit of water • Focus on food crops that generate by- products that can be used for bioenergy • Grow biomass on marginal rather than prime agricultural areas • Invest in technologies that increase efficiency and productivity in biofuel production + processing Joachim von Braun, IFPRI, April 2007
  23. 23. Minimizing Risks… • Improve access to finance + sound policies for contract security • Provide access to information on benefits of biofuel production + infrastructure • Provide research + extension services • Design + management of biofuel projects must be participatory Joachim von Braun, IFPRI, April 2007
  24. 24. Stakeholder Responsibilities • Public sector Politics of bioenergy can be complexa  Can help overcome high initial costs + vested interests - ag and industry lobbyists Trade + regulatory systems  Reduce trade distortions aBullock and Goldsmith, 2006 Joachim von Braun, IFPRI, April 2007
  25. 25. Stakeholder Responsibilities Enhance market incentives to realize environmental + social benefits  E.g. develop and promote markets for carbon payments  What is the role of CO2 trading?  partly complementary  partly competitive Joachim von Braun, IFPRI, April 2007
  26. 26. Stakeholder Responsibilities • Research - Public/Private partnerships (e.g. appropriate scales for biomass production + processing) • Private Sector - More long-term investments + commitments Joachim von Braun, IFPRI, April 2007
  27. 27. Conclusions • Impacts of global biofuel development and growth on the poor can be both positive and negative – needs careful assessment • Not necessarily a ‗crowding-out‘ effect – there‘s room for complementarities and synergy- in R&D • Rural agricultural development and socioeconomic growth can go hand-in-hand with enhancement of bioenergy production capacity • Current growth in biofuels is dependent on supply and demand policies—subsidy requirements might be large if demand increases rapidly Source: Msangi et al., 2007 Joachim von Braun, IFPRI, April 2007

×