Can Biofuels be Sustainable in an Unsustainable Agriculture? Daniel G. De La Torre Ugarte Chad M. Hellwinckel Chad M. Hellwinckel American Chemical Society 236 th National Meeting and Exposition August 17-21, 2008 Philadelphia, Pennsylvania, USA AGRO

Outline  The state of agriculture when biofuels took- off Prices, development, poverty Greenhouse gases emissions  Potential role of biofuels

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 Source: International Financial Statistics Online, IMF February 10,2008. Except for real price in 2007, which is estimated by author. 30+ years of declining and or flat prices & declining investment in agriculture

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 (b) Share of different anthropogenic GHGs in total emissions in 2004 in terms of CO 2-eq. (c) Share of different sectors in total anthropogenic GHG emissions in 2004 in terms of C0 2-eq (Forestry includes deforestation.) 0.26% Searchinger, et al. GHG for ag and forestry is to address the 31% of annual emissions coming. If we take care of this we take care of

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.

Biofuels are not The Solution to (: Biofuels are not The Solution to (but could contribute to):  Climate Change  Energy crisis  Economic development / Poverty Reduction

The Question is  Under which conditions biofuels can be an opportunity for: Poverty reduction Climate change / environmental benefit Energy crisis / energy independence

Strategy for Poverty Reduction o Increase farmers ability to capture larger share of higher prices: Invest in farmers’ access to markets, improving marketing & distribution systems Improve product quality o Democratize access to land, water and productive resources o Invest in research and extension to improve productivity to supply the now profitable local market with local crops o Implement programs to ensure access to food for vulnerable population

Trade off Between Agricultural Prices and Food Security Ag Prices % Food Security P0P0 P1P1 Increase in ag. prices is not necessarily a bad for food security, specially if coming from low prices

Expand the Impact of Higher Prices in Food Security Ag Prices % Food Security P0P0 P1P1 Investments directed to improve share of high prices capture by farmers and reduce cost to consumers would improve food security A B C

Ag Prices Environmental Cost Trade-off Between Agricultural Prices and Environmental Cost P0P0 P1P1 Under current agricultural practices and food consumption patterns, an increase in ag prices could accelerate environmental costs

Strategy for Climate Change o Drastically change diet composition towards more efficient sources of protein and food from local origin o 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 o Recuperate the complementarity of crop and livestock activities in the farm o Integrate GHG emissions and other environmental impacts into farmers balance sheet

Ag Prices Environmental Cost Trade-off Between Agricultural Prices and Environmental Cost P0P0 P1P1 Under current agricultural practices and food consumption patterns, an increase in ag prices could accelerate environmental costs

Ag Prices Environmental Cost Higher Ag Prices Create Conditions to Invest in reducing Environmental Cost P0P0 P1P1 Investment in agricultural technologies less intensive in fossil inputs, and in tune with local soil and food habits would reduce environmental cost of agriculture C A B D

Biofuels Expansion Strategy  In check with Ag production capacity  Prioritize domestic/local market  Mandates should not drive growth but secure healthy bottom  Incentives must be linked to: Environmental performance Contribution to rural development  Sustainability criteria should play a key role in the development of the sector

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, specially in the South.  Biofules provides the profitability to invest in agriculture and radically change what, how, and where we produce  Countries could benefit from biofuels without producing them

Department of Agricultural Economics, Institute of Agriculture University of Tennessee Agricultural Policy Analysis Center Thanks ! Bio-based Energy Analysis Group