Promises and Challenges When
Food Makes Fuel
CRAWFORD FUND CONFERENCE ON BIOFUELS,
ENERGY, AND AGRICULTURE – Powering Towards
World Food Security?
Joachim von Braun
Director General
International Food Policy Research Institute
Canberra
August, 2007

Global food system under stress
• global population growth
• economic growth high
• number of hungry and undernourished
hardly decreasing
• scarcity of land and water resources
• under-investment in agricultural
science and technology
• and now + biofuels?
Joachim von Braun, IFPRI, August 2007

Hunger and malnutrition
1000 Number of hungry people in millions
950
900
Developing world
850
800
750
700 Developing world without China
650
600
550
500
1969-1971 1979-1981 1990-1992 1995-1997 2001-2003 2002-2004
provisional prelim inary
Data source: FAO 2006
Joachim von Braun, IFPRI, August 2007

Who is affected by hunger?
Why rural/agriculture focus is so relevant
Urban poor
20%
Fishers, herders
Small Framers
Land less, rural 50%
20%
Source: UN Millennium Project, Hunger Task Force, 2005
Joachim von Braun, IFPRI, August 2007

Old and new global food and
nutrition problems
Type Causes People affected
Hunger Deficiency of calories 0.9 billion
and protein
Children Inadequate intake of food 126 million
underweight and frequent disease
Micro-nutrient Deficiency of vitamins More than
deficiency and minerals 2 billion
Overweight to Unhealthy diets; Lifestyle Increasing also
chronic disease among the poor
Source: Based on data from FAO 2005a, UN/SCN 2004, Micronutrient Initiative and UNICEF 2005
Joachim von Braun, IFPRI, August 2007

History of World supply of primary energy
world Energy 1850-2000
500
450
400
Gas
350
Oil
EJ/year
300
250 Coal
200 Nuclear
150 Hydro +
100 Biomass
50 Hydro+ means
hydropower plus
0 other renewables
besides biomass
1850 1875 1900 1925 1950 1975 2000
Energy supply grew 20-fold between 1850 and 2000. Fossil fuels
Year
supplied 80% of the world’s energy in 2000. (Holdren 2007)
Joachim von Braun, IFPRI, August 2007

Questions
1. Where and for whom are there
opportunities?
2. What are the associated risks and
challenges?
3. How could the opportunities be
tapped and risks and challenges
addressed?
Joachim von Braun, IFPRI, August 2007

The biofuels boom
World ethanol and bio-diesel production, 1975-2005
40
35 4.0
30 3.5
Billion liters
25 3.0
Billion litres
2.5
20
2.0
15
1.5
10 1.0
5 0.5
0 0.0
1975 1980 1985 1990 1995 2000 2005 1991 1993 1995 1997 1999 2001 2003 2005
Ethanol > 90% of biofuel production;
Bio-diesel: EU is the largest
Brazil & US dominate ethanol market
producer & consumer
Joachim von Braun, IFPRI, August 2007 Source: Worldwatch Institute, 2006

Energy - agriculture linkages
Grain for filling an SUV tank with ethanol
=
Grain consumed by 1 person for a year
Joachim von Braun, IFPRI, August 2007

Plans
annual growth in biofuel production …2010/12
• Ethanol: Biodiesel:
- USA: 16% USA: 19%
- EU: 45% EU: 37%
- Brazil: 8% Malaysia: 248%
- India: 15% Indonesia: 143%
- China: 3% Thailand: 70%
Source: USDA, 2006; 2007
Joachim von Braun, IFPRI, August 2007

Potentials
of biofuels (and risks) - countries
• If 15% of transport fuel from biofuels
(and actual plans realized), would
that be a burden for food security?
• variables used:
1. Availability of arable land
2. Availability of water
3. Levels of food insecurity
• of 102 countries: 36 low potential
Joachim von Braun, IFPRI, August 2007

Where are the biofuel potentials and risks?
Joachim von Braun, IFPRI, August 2007 Source: FAO, 2006 & 2007; IEA, 2007; USDA, 2006

Example of a too simplistic concept of
energy - agriculture linkages
Grain for filling an SUV tank with ethanol
= Grain consumed by 1 person for a year
Joachim von Braun, IFPRI, August 2007

Conceptual framework
Joachim von Braun, IFPRI, August 2007

Political and societal change
• New powers and rent seeking (-)
• Biofuels and peace & security (+)
• Agriculture / energy mismatch (?)
• Subsidies for biofuels are anti-poor
• Needed: Establishment of a global
market and trade regime with
transparent standards for biofuels
Joachim von Braun, IFPRI, August 2007

Environmental aspects
• Biofuels can mitigate climate change or
damaging (+/-)
• Can be positive or negative for forests,
and soils (+/-)
needed:
> criteria that internalize the positive and
negative externalities of biofuels
(energy balance; and CO2 emissions)
> Environmental cost-effectiveness
Joachim von Braun, IFPRI, August 2007

Economic change: the issues
• Growth
• Jobs
• Competitiveness and technology
• Food – fuel competition
Prices and the poor
Food security of the poor
Joachim von Braun, IFPRI, August 2007

MIRAGE-Model: From shock to impact
Initial shock Substitution effect
C
CUT in OIL, COAL
and GAS RESERVES o
m
Increase in world Increased
p
prices of oil, coal demand for
e
and gas biofuels
t
Demand for
i
energy is rigid
t
Increased demand i
for land and o
agricultural labor n
What impact
on food e
f
prices and
f
production ? e
c
t
Joachim von Braun, IFPRI, August 2007
Source: Bouet et al., 2007

Change in agric. value added by 2020:
scenarios compared with baseline (%)
Scenario 1 Scenario 2
15.0
10.6
10.0 7.8
5.0 2.9 3.6
1.9 2.6
0.0
-5.0 -3.9 -3.5
-10.0 -8.3 -7.4
EU
ca
a
US
il
ca
a
a
ia
a
in
az
ic
di
si
As
fri
fri
Ch
er
In
A
Br
fA
A
m
d
ng
pe
N
A
o
pi
st
&
L
lo
lo
Re
of
ve
E
ve
le
De
st
De
d
Re
id
M
Source: MIRAGE
Joachim von Braun, IFPRI, August 2007

Competitiveness ?
• Costs of feedstock dominate costs
Ethanol: 50-70%; Biodiesel: 70-80%
• Net production costs differ widely
(Ethanol, US$ / liter 2003/4):
Brazil .17; Thai .28,
Austral. .37; Germany .59
Joachim von Braun, IFPRI, August 2007

Technology and the food – fuel competition
Improved technology in biofuels can
increase the food fuel competition
• biofuel and other agriculture technology
need to be invested in simultaneously = a
CGIAR role
• In many developing countries it makes
sense to wait for second- and third-
generation biofuel- technologies, and plan
for “leapfrogging”
Joachim von Braun, IFPRI, August 2007

Prices: Agricultural and energy prices
increasingly correlate
500 Corn 70
450 Rice
60
Sugar
400
Oil seeds
350 50
Crude oil (right)
300
40
250
30
200
150 20
100
10
50
0 0
90
91
92
93
94
95
96
97
98
99
00
01
02
03
04
05
06
07
19
19
19
19
19
19
19
19
19
19
20
20
20
20
20
20
20
20
…and price variations are up
Source: IMF, 2007; OECD, 2005; World Bank, 2007
Joachim von Braun, IFPRI, August 2007

IMPACT-Model: biofuel scenarios by 2020
Price changes
Biofuel Expansion
% by 2020
Actual plans and
corn: + 3
Scenario 1 assumed
oilseeds: +8
expansions
Doubling of Scen.1 corn: + 13
Scenario 2 expansion oilseeds: +17
another Neglect of technology Corn: +20–41
scenario and expansion Oilseeds: +26-76
Joachim von Braun, IFPRI, August 2007

Calorie availability changes in 2020
compared to baseline (%)
N America
SSA
S Asia
MENA
LAC
ECA
EAP
-3.0 -2.5 -2.0 -1.5 -1.0 -0.5 0.0
Biofuel expansion Drastic biofuel expansionIMPACT-WATER
Source:
Joachim von Braun, IFPRI, August 2007

Price-effects for Bangladesh five-person household
living on one dollar-a-day per person
Spend…their 5 $
3.00 $ on food
.50 $ on energy
1.50 $ on nonfood
>a 20 percent increase in food and energy prices
requires them to cut 70 cents of their
expenditures.
Cuts will be made most in food expenditures:
>reduced diet quality, and
>increased micronutrient malnutrition
Joachim von Braun, IFPRI, August 2007

Conclusions
The world food equation is changing
Biofuel expansion will…
• accelerate globalization of agriculture
• increase crop prizes,
• raise land values, thereby draw capital into
rural areas
• create some jobs
Risks for the poor
No 1 : food price increase and instability
No 2 : ill-considered policies
Joachim von Braun, IFPRI, August 2007

Strategic framework for biofuels needed
3 Pillars of pro-poor biofuels strategy:
1. Science and technology strategy
2. Markets and trade strategy
3. Insurance and social protection strategy
a very different
Green Revolution
is needed
Joachim von Braun, IFPRI, August 2007