by Peter Hazell Thursday, January 5, 2012
Global energy demand is forecast to double by 2025. Fossil fuel supplies are finite and increasingly politicized and insecure. Yet viable alternative energy sources on the required global scale are lacking. In this context, major energy consumers, especially the United States and the European Union, are expanding their use of biofuels as one of the few sources of affordable and secure energy. Assuming this trend continues, biofuels will expand despite public concerns about the implied pressure on food prices and expansion of agriculture into environmentally sensitive areas like rainforests. The biofuels genie is out of the bottle and here to stay, and it is now just a question of how fast and in what ways the industry will grow.
The challenge for key decision-makers is to manage biofuels development to reduce negative impacts, especially on the environment and the poor, and to exploit new and beneficial growth opportunities. One of the primary concerns for biofuels development is the effects that it has on the poor in developing countries. Thus, the top priority is managing the short-term impacts of higher food and energy prices. Rapid expansion of biofuels mandates in the United States and Europe over the last couple of years has contributed to significant increases in food prices. Although prices are now falling because of a world recession, the Food and Agriculture Organization is still predicting that trend prices will settle at 30 to 40 percent higher than their pre-crisis levels. Energy prices will also remain strong, with oil possibly settling in the range of $70 to $80 per barrel. These price increases have an immediate and negative impact on the poor. A 1 percent increase in the price of food directly correlates with a half-percent decrease in calorie consumption by the poor, according to the World Bank. So even modest price increases can lead to a substantial reduction in the nutrition of the poor.
For food-exporting countries like the United States and many in the European Union, having enough food is not a problem. But for developing countries that are net food importers, the issue of food security is a serious concern. When food exporters change land from food crops to biofuels, there is less food to export, so developing countries that rely on imported food are in trouble. They will either have to learn to grow more of their own food, or they will become increasingly dependent on handouts from wealthier countries.
Therefore, a second priority is to invest in future agricultural growth in developing countries to improve their food security in the medium to long term. For example, many African countries have considerable potential to grow more of their own food, but past performance has been constrained by lack of public investment in agricultural development. Now is the time for governments and donors to reverse that neglect. There are encouraging signs that this is beginning to happen.
For example, the African heads of state have committed to doubling agriculture’s share of total government spending to 10 percent. Additionally, the Rockefeller Foundation and the Bill and Melinda Gates Foundation have financed the establishment of the African-led Alliance for a Green Revolution in Africa. And the New Economic Partnership for African Development is leading an Africa-wide initiative for agricultural development called the Comprehensive African Agricultural Development Program. Unfortunately, none of these initiatives has led to the levels of investment needed to significantly change Africa’s agricultural productivity. Renewed agricultural growth would help many small farmers increase their incomes and help lower food prices for all.
A third priority is to invest in new bioenergy opportunities that could
benefit small farmers and poor people. Most rural people in developing
countries already get most of their household energy from biomass, but
their main sources are crop byproducts and animal manures — resources
also badly needed to maintain soil organic matter and fertility — and
charcoal, whose production underlies a lot of deforestation and woodland
degradation. Therefore, development of suitable energy crops for use in
local energy production could provide a source of new income for many
small farmers, improve management of soils and woodlands, and provide an
affordable and secure source of energy for local people and
Furthermore, in developing countries where viable commercial opportunities exist for bioenergy production, whether in the form of biofuels for transport or biomass for large-scale electricity generation, it may be possible to link groups of small farms into the market chain. Where successful, such a linkage could play an important role in raising incomes and employment.
A fourth and final priority is to strengthen environmental regulation in developing countries to prevent encroachment of agriculture, whether for food or energy, into environmentally valued areas like the Brazilian rainforest. This is already a serious problem in many countries — biofuels is just another driver of land conversion — and the real problem is the divergence of interest between individual countries and the larger international community. The local people have a need to make a living and feed their families, even if that involves chopping down forests and clearing land to grow crops, whereas the international community wants the forest to stay intact largely for environmental reasons. Biofuels merely reinforces the need for more effective international collaboration over environmental externalities, and this requires positive incentives for countries and local people, such as can be offered through carbon and other environmental payments or green labeling arrangements, not just negative attempts to enforce trade embargoes.
We can make these priorities a reality by working together. Agricultural scientists can create more efficient and productive energy crops, as well as increase the productivity of food crops to free more land for alternative use. By developing more efficient ways of processing cellulose-rich biomass, energy scientists can help bring forward a new generation of biofuels that competes less with food crops for the best farm land and irrigation water, and which has more favorable energy and carbon balances. Policymakers in all types of countries can invest more in agricultural productivity growth, especially in developing countries. Policymakers in rich countries need to slow down their expansion of biofuel mandates until agricultural productivity growth can keep pace. Finally, biofuels add urgency to the need for a successful conclusion to a new global climate treaty that can resolve major environmental externalities between countries.
The biofuels genie can’t be put back in the bottle. But if we work together, we can harness that genie for good.
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