Transcript Presentation

The Role of Biofuels in the
Transformation of Agriculture
Daniel G. De La Torre Ugarte and Chad M. Hellwinckel
The Economics of Alternative Energy Sources and
Globalization: The Road Ahead
Orlando, Florida - November 15–17, 2009
Agriculture and Poverty
 Developing world
 5.5 billion people
 2.5 billion are in households involve in Ag
 1.5 billion are smallholder households
 800 million people food insecure
 80% of food insecure people are in rural areas
 In many developing countries:
 >50% of employment
 >25% of GDP
 Increase in GDP from Ag is twice more
efficient for poverty reduction than any sector
Long term trend in
agricultural commodity prices
30+ years of declining and or flat prices
Source: International Financial Statistics Online, IMF February 10,2008. Except for real price in 2007,
which is estimated by author.
Public Spending in Agriculture has stagnated
and it is the least where is needed the most
Biofuels Expansion took-off when
world inventories were declining
Source: USDA
Global Anthropogenic GHG Emissions
Source: Fourth Assessment Report, IPCC (2007)
(a) Global annual emissions of anthropogenic GHGs from 1970 to 2004. (b) Share of different anthropogenic GHGs in total emissions
in 2004 in terms of CO2-eq. (c) Share of different sectors in total anthropogenic GHG emissions in 2004 in terms of C0 2-eq (Forestry
includes deforestation.)
GHG for ag and forestry is to address the 31% of annual
emissions coming. If we take care of this we take care of
0.26% Searchinger, et al.
The story thus far:
Agricultural commodity prices went from
depressed to walking on a “razor’s edge”
Biofuels are “the straw that broke the camel’s
back
Current industrial agricultural system is not
sustainable; biofuels sustainability largely
depend on the way feedstock are produced
Today’s agricultural economic, environmental,
and social problems are not caused but
exacerbated by biofuels.
The Question is
 Under which conditions biofuels can be
an opportunity for:
 Poverty reduction
 Climate change / environmental benefit
 Energy crisis / energy independence
Increased Ag prices could drive new
investment into agriculture
 Type on investment matters. A LOT !
Trade off Between Agricultural
Prices and Food Security
Ag Prices
Increase in agricultural prices is not necessarily a
bad for food security, specially if coming from
long trend of low prices
P1
P0
B
A
% Food Security
Expand the Impact of Higher
Prices in Food Security
Investments directed to improve share
of high prices capture by farmers would
improve food security
Ag Prices
P1
B
C
P0
A
% Food Security
Trade-off Between Agricultural Prices
and Environmental Cost
Ag Prices
Under current agricultural practices and food
consumption patterns, an increase in ag prices could
accelerate environmental costs
P1
P0
B
A
Environmental
Cost
Higher Ag Prices Create Conditions to
Invest in reducing Environmental Cost
Investment in agricultural technologies less
intensive in fossil inputs, and in tune with local
soil and food habits would reduce
environmental cost of agriculture
Ag Prices
P1
B
C
P0
D
A
Environmental
Cost
An Illustration
EISA and Cap & Trade
o EISA: expansion of biofuels demand
o Cap & Trade:
 Improve environmental performance
 Offsets: tillage, afforestation, grasses, methane
capture, energy dedicated crops.
 Carbon price up to US$ 27 /MTCe (EPA)
Land Use Changes
corn
soybean
wheat
cotton
Crop Net Returns
Carbon Net Flux
Strategy for Food Security
Increase farmers ability to capture larger
share of higher prices:
 Invest in farmers’ access to markets, improving
marketing & distribution systems
Increase access to land, water and productive
resources
Invest in research and extension to improve
productivity of local crops to supply the now
profitable local market
Implement programs to ensure access to food
for vulnerable population
Strategy for Climate Change
 Drastically change diet composition towards more
efficient sources of protein and food from local
origin
 Invest in Research & Extension oriented to:
 Reduce use of fossil based inputs in agriculture
 Improve management practices which increase the
environmental performance of production agriculture
 Ensure the best use of soils and landscape
 Recuperate the complementarity of crop and
livestock activities in the farm
 Integrate GHG emissions and other environmental
impacts into food system economic balance sheet
Institutional Investment
Strengthen land property rights and
enforcing mechanisms to protect small
holders
Re-develop domestic and global
institutionality to support transformation
of agriculture
Prioritize poverty reduction and
environmental performance above trade
liberalization
Concluding Remarks
 If nothing is done, missed opportunity for poverty
reduction, agriculture, and climate change
 Biofuels could result in a massive transfer of
resources to the ag sector.
 Biofules could provide the profitability to invest in
agriculture.
 A new framework for agriculture is needed to radically
change what, how, and where we produce
 Countries could benefit from biofuels without
producing them
Thanks !
Agricultural Policy Analysis Center
http://agpolicy.org/
Department of Agricultural Economics, Institute of Agriculture
University of Tennessee http://www.agriculture.utk.edu/