promises and challenges when food makes fuel

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

Joachim von Braun, IFPRI, 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?


Hunger and malnutrition

500

550

600

650

700

750

800

850

900

950

1000

1969-1971 1979-1981 1990-1992 1995-1997 2001-2003

provisional

2002-2004

preliminary

Developing world

Developing world without China

Data source: FAO 2006

Number of hungry people in millions


Who is affected by hunger?

Why rural/agriculture focus is so relevant

Source: UN Millennium Project, Hunger Task Force, 2005

Land less, rural

20%

Urban poor

20%

Small Framers

50%

Fishers, herders


Old and new global food and

nutrition problems

Source: Based on data from FAO 2005a, UN/SCN 2004, Micronutrient Initiative and UNICEF 2005

Type Causes People affected

Hunger Deficiency of calories

and protein

0.9 billion

Children

underweight

Inadequate intake of food

and frequent disease

126 million

Micro-nutrient

deficiency

Deficiency of vitamins

and minerals

More than

2 billion

Overweight to

chronic disease

Unhealthy diets; Lifestyle Increasing also

among the poor


World Energy 1850-2000

0

50

100

150

200

250

300

350

400

450

500

1850 1875 1900 1925 1950 1975 2000

Year

EJ/y

ea

r

Gas

Oil

Coal

Nuclear

Hydro +

Biomass

History of world supply of primary energy

Hydro+ means

hydropower plus

other renewables

besides biomass

Energy supply grew 20-fold between 1850 and 2000. Fossil fuels

supplied 80% of the world’s energy in 2000. (Holdren 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?


The biofuels boom World ethanol and bio-diesel production, 1975-2005

0

5

10

15

20

25

30

35

40

1975 1980 1985 1990 1995 2000 2005

Billio

n lit

ers

Source: Worldwatch Institute, 2006

Ethanol > 90% of biofuel production;

Brazil & US dominate ethanol market

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

1991 1993 1995 1997 1999 2001 2003 2005B

illio

n lit

res

Bio-diesel: EU is the largest

producer & consumer


Energy - agriculture linkages

Grain for filling an SUV tank with ethanol

=

Grain consumed by 1 person for a year


Plansannual 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


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


Where are the biofuel potentials and risks?

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


Conceptual framework


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


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


Economic change: the issues

• Growth

• Jobs

• Competitiveness and technology

• Food – fuel competition

Prices and the poor

Food security of the poor


MIRAGE-Model: From shock to impact

Initial shockCUT in OIL, COAL

and GAS RESERVES

Demand for

energy is rigid

Increase in world

prices of oil, coal

and gas

Increased

demand for

biofuels

Substitution effect

Increased demand

for land and

agricultural labor

C

o

m

p

e

t

i

t

i

o

n

e

f

f

e

c

t

What impact

on food

prices and

production ?

Source: Bouet et al., 2007


Change in agric. value added by 2020:

scenarios compared with baseline (%)

2.6

-3.9

-8.3

1.9

7.8

3.6

-3.5

-7.4

2.9

10.6

-10.0

-5.0

0.0

5.0

10.0

15.0

Bra

zil

Chin

a

Deve

loped

Asi

a

Deve

lopin

g Asi

a EU

India

Mid

dle E

& N

Afric

a

Rest

of A

fric

a

Rest

of L

Am

erica

US

Scenario 1 Scenario 2

Source: MIRAGE


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


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”


Prices: Agricultural and energy prices

increasingly correlate

Source: IMF, 2007; OECD, 2005; World Bank, 2007

0

50

100

150

200

250

300

350

400

450

500

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

0

10

20

30

40

50

60

70Corn

Rice

Sugar

Oil seeds

Crude oil (right)

…and price variations are up


IMPACT-Model: biofuel scenarios by 2020

Biofuel ExpansionPrice changes

% by 2020

Scenario 1Actual plans and

assumed

expansions

corn: + 3

oilseeds: +8

Scenario 2Doubling of Scen.1

expansion

corn: + 13

oilseeds: +17

another

scenarioNeglect of technology

and expansion

Corn: +20–41

Oilseeds: +26-76


Calorie availability changes in 2020

compared to baseline (%)

-3.0 -2.5 -2.0 -1.5 -1.0 -0.5 0.0

EAP

ECA

LAC

MENA

S Asia

SSA

N America

Biofuel expansion Drastic biofuel expansion Source: IMPACT-WATER


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


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


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

promises and challenges when food makes fuel

Documents

biofuels joachim

poor joachim

year joachim

poor food security

poor source

low potential joachim

conceptual framework

biofuels boomworld ethanol