Biofuels and Agriculture:A New Paradigm?

Biokraftstoffe undLandwirtschaft: Ein neuesParadigma?

Biocarburants et agriculture :un nouveau paradigme ?

Much is written in popular andacademic articles these daysabout the impacts of therapidly emerging biofuel sectoron agriculture and energysupply. This journal continuesto contribute significantly tothe debate. What are we tomake of the biofueldevelopment and what mightbe the implications for thepolitical economy ofagriculture and land use?

In the last thirty years globalenergy supplies have nearlydoubled but the relativecontribution from renewableshas hardly changed at around13 per cent. By far the largestelement of the renewablessector globally is solid biomass– mainly wood used forcooking and heating indeveloping countries. The‘new’ renewables (solar, wind,

tide, liquid biofuels) have beengrowing fast from a very lowbase, mainly in the OECD:their contribution, however, isstill marginal at between oneand two per cent of globalrenewable supply.

Although small in terms ofglobal energy supply thedevelopment of the liquidbiofuel sector has the strongestimplications currently foragriculture, land use and thegrowing linkages between foodand energy markets. The rapidglobal development of thissector has been policy drivenin the main, to correctperceived market failuresassociated principally withenergy supply security andenvironmental concernsarising from Greenhouse Gas(GHG) emissions.Opportunities to enhance farmincomes through new marketsand to promote ruraldevelopment also feature inthe policy agenda.

Policy has been backed byfairly massive government

supports, amounting to about$12 billion in the EU andNorth America in 2007 alone.Interventions include biofuelduty reductions, industryinfrastructure grants, biofueluse mandates, biofuel tradetariffs and support for biofuelresearch. Questions must beasked, however, about whetherthis support has resulted inthe intended effects andwhether the costs can bejustified in relation to thelonger-term benefits. Market-based alternatives such ascarbon trading might meetpublic concerns moreefficiently. The recentlyadopted EU sustainabilitycriteria for biofuels and theirfeedstocks may be viewed aseither a genuine attempt toregulate production or arestraint on biofuel trade,depending on where youstand.

One thing is clear, however.There has been a very strongliquid biofuel supply response:about a seven-fold increase inEU biodiesel production and afive-fold increase in USbioethanol production since2000. EU production of

John DavisChief Editor ofEuroChoices

ƒ‘‘Sommes-nous les

temoins d’un

changement de

paradigme dans

l’economie politique de

l’agriculture et de

l’utilisation des

terres ?,,

04ƒEuroChoices 8(1) ª 2009 The Author

Journal compilation ª The Agricultural Economics Society and the European Association of Agricultural Economists 2009

biodiesel and bioethanol isprojected to triple in thenext decade though notexclusively from domesticfeedstock.

ƒ‘‘Sind wir Zeugen

eines Paradigmen-

wechsels in der

politokonomischen

Landschaft im Hinblick

auf die Landwirtschaft

und Flachennut-

zung?,,There are, nevertheless,concerns about the economicviability of biofuel productionand indeed about the ability ofthese fuels to contributesignificantly to GHGreductions. Brazilian ethanolproduced from sugar cane isgenerally regarded as the mostglobally competitive as itgenerates market returnsgreater than the costs ofproduction. In contrast,ethanol produced from wheatin Europe and from corn inthe USA, and biodiesel fromrape oil, do not currently coverproduction costs. It seemsclear, therefore, that thegrowth in biofuel productionin North America and Europehas relied heavily ongovernment supports and willcontinue to do so for theforeseeable future; especiallynow that oil prices are settlingcloser to historic trend. The‘infant industry’ argument mayprovide some justification for

these supports; in the hopethat second and thirdgeneration technologies willeventually enable the industryto become more competitive.But there must be questionsabout just how long theseinterventions can or should besustained.

The so-called ‘food versus fuel’debate now features strongly indevelopment discourse. Foodand fuel markets now providecompeting demands forhitherto exclusively foodcommodities. Biofuel feedstockdemand was clearly one factorin the recent spike in worldfood commodity prices and thisprice effect will likely intensifyin the future. How prices willplay out in Europe remainsuncertain as it depends, amongother things, on how the EUdecides to meet its ten per cent

renewable transport fuel target.If met by current firstgeneration biofuels then verysignificant impacts on wheatand oilseed prices in particularwill likely follow, with knock-oneffects on the animal feedsector.

Higher global food prices, ofcourse, have their most severeimpacts on the poorer

households in the developingworld where food purchasestypically account for 50–70 percent of household budgets.Different schools of thought onthe impacts of biofuels areemerging, however, in thedevelopment community. Onthe one hand critics deplore theimpact of the West’s policies onfood prices. But others believebiofuel feedstock production, inpart to support local renewableenergy projects, creates incomeopportunities for farmhouseholds in the developingworld; these projects in turncan promote wider ruraldevelopment, especiallyin landlocked countrieswhere it is expensive to importoil.

A new mix of powerful interestgroups – including automobile,aviation and energy companies– are increasingly bringing theirweight to bear on globalbiofuel policies and practices,and on the R&D needed tomake the transition to secondand third generation biofuels.Are we witnessing a paradigmshift in the political economylandscape of agriculture andland use? Fertile ground indeedfor our profession to debateand ultimately to generate theobjective evidence needed toguide policy and practice inthis increasingly complexarena.

John Davis, Chief Editor ofEuroChoices

Email: john.davis@qub.ac.uk

ƒ‘‘Are we witnessing

a paradigm shift in the

political economy land-

scape of agriculture

and land use?,,

ª 2009 The Author EuroChoices 8(1)ƒ 05

Journal compilation ª The Agricultural Economics Society and the European Association of Agricultural Economists 2009