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February 26, 2008

Analytical tool helps weigh pro, cons of biofuel production

As more countries weigh the pros and cons of biofuel production, a new decision-support tool has been developed to ensure they do not compromise their food production and security.

The Bioenergy and Food Security Modelling Analytical Framework (AF) is designed to identify whether the potential to develop a bioenergy industry exists in a particular country, and provide policy support, said Alexander Müller, Assistant Director-General for natural resources and the environment at the United Nations Food and Agriculture Organisation (FAO).

"The testing phase will help better understand the real potential. What this tool will provide is the possibility to make an informed decision; the countries then will have to make their own policy choices."

The analytical framework tool, designed by a team of economists from the FAO, Utrecht University's Copernicus Institute, in the Netherlands, and the Oeko-Institut, in Darmstadt, Germany, will be field-tested in three countries: Thailand, Tanzania and Peru. The "initial testing is needed to understand the potential impacts of bioenergy developments on food security," said Müller.

The demand for biofuels is already having an impact on the prices of the world's two leading agricultural biofuel feedstocks: maize and sugar. According to the FAO, an increased demand for biofuel production may keep prices above historic levels for the next 10 years and could affect food aid.

In a scenario that takes into account a planned and predictable biofuel expansion in some countries, the US-based International Food Policy Research Institute (IFPRI) projected maize prices rising by more than 20 percent by 2020, and more than 71 percent in a drastic expansion scenario.

In both scenarios, the increase in crop prices resulting from expanded biofuel production is also accompanied by a net decrease in availability and access to food. "Food-calorie consumption decreases the most in sub-Saharan Africa, where calorie availability is projected to fall by more than eight percent if biofuels expand drastically," said the IFPRI paper, The World Food Situation: New Driving Forces and Required Actions, by Joachim von Braun.

A paper by the International Fund for Agricultural Development (IFAD) for a round-table discussion at the 31st session of IFAD's Governing Council on 14 February, commented, "Some nutrition studies show that the number of food-insecure people in the world would rise by more than 16 million for every percentage increase in the real prices of staple foods, meaning that 1.2 billion people could be chronically hungry by 2025; 600 million more than previously predicted."

Recent oil price increases have had devastating effects on many of the world's poor countries: of the 50 poorest, 38 are net importers of petroleum and 25 import all their petroleum requirements. Some now spend up to six times as much on fuel as they do on health, while others spend double the amount allocated to poverty reduction on fuels, according to Sustainable Bioenergy: A Framework for Decision Makers, released by the UN.

"Many of these poor countries lie in tropical zones where relatively low-cost biofuel crops, such as sugar cane and oil palm, already grow," said the UN framework. In 2006, 13 African countries formed the Pan-African Non-Petroleum Producers Association, aimed in part at developing a biofuels industry in the continent.

Global bio-ethanol production was around 40 billion litres in 2006, with 90 percent produced in Brazil and the United States, while more than 6 billion litres of bio-diesel was produced, 75 percent of it in the European Union, mainly in France and Germany, according to the IFAD paper, Biofuel Expansion: Challenges, Risks and Opportunities for Rural Poor People.

Many developing countries have already launched biofuel programmes based on agricultural feedstocks: bio-diesel from palm oil in Indonesia and Malaysia, and from oil-rich, inedible plants such as jatropha and pongamia in India; bio-ethanol from sugarcane in Mozambique and several Latin American countries, such as Honduras, Nicaragua and Panama.

The IFAD paper pointed out that, historically, agricultural prices have been affected by the cost of inputs based on fossil fuels, such as diesel, fertilisers and pesticides, especially in countries applying intensive farming practices, which eventually lower output.

"Now, with rising energy prices and improved bio-energy conversion technologies, energy prices and feedstock prices are increasingly being linked. These linkages are more readily visible in the more integrated markets of sugar and bio-ethanol in Brazil, but most probably will soon emerge in other feedstock prices as well."

The FAO projected that over the next 15 to 20 years biofuels could be the source of 25 percent of the world's energy needs. The UN agency is also concerned that the demand for biofuels could increase the quantity of land being diverted for feedstock production, and estimated that the roughly one percent of the world's arable land used for biofuel development at present could rise to 3 percent by 2030, and as much as 20 percent by 2050.

The FAO's analytical framework links existing analytical tools, such as models or assessments for making specific analyses required to investigate the effects of bioenergy production on food security.

A bioenergy development scenario is set up, in which the FAO helps governments define their bioenergy policy options and the various possible strategies for achieving those options.

In five steps, the framework then makes it possible to assess the technical biomass potential, biomass production costs, the economic bioenergy potential, macro-economic consequences, and national and household-level impact and the consequences for food security.

Analysis of the results makes it possible to determine the actual bioenergy potential, and which households are most vulnerable and thus at risk of food insecurity.

Existing mathematical modelling tools such as Quickscan, which calculates global bioenergy potential to 2050, and the FAO's COSIMO, which models the agricultural sector in a large number of developing countries, will be used to generate the results.

The IFAD paper pointed out that biofuels could help mitigate climate change and reduce dependence on oil in the transportation sector. "They can also have a positive impact on the limited foreign exchange reserves of many developing countries. When well managed, they also offer large new markets for higher priced products for agricultural producers that could stimulate rural growth and farm incomes."

Biofuel production could be especially beneficial to poor producers, particularly in remote areas that are far from the consumption centres, where inputs are more expensive and prices lower, making food production, by and large, noncompetitive, according to the IFAD paper.

Farmers in these areas could plant crops that do not compete with production of food crops - such as jatropha and pongamia, or multiple-use, low water-usage crops such as sweet sorghum and cassava - that could meet the varied needs of small producers for food, cash income and animal feed.

IFAD's paper also noted that "Other biofuel crops, such as tropical sugar beet, are as efficient as sugar cane in producing bio-ethanol but require far less water and, most importantly, can grow in alkaline or sodic soils (containing sufficient exchangeable sodium to interfere with the growth of plants, including crops) that are basically unsuitable for food crop production."


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