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This report summarises 20 case studies on investments in the production of biofuel and the feedstocks used for biofuel (palm oil, soybeans, sugarcane and jatropha) in forest-rich countries in Africa, Asia and Latin America. The investments were financed by private entrepreneurs, public financing and private financial institutions. A large number of private financial institutions such as banks, asset managers and pension funds were investing, most of which are located outside the country where the investment took place. Dozens of public financial institutions—many of which are foreign—play a significant role. Since the availability of finance is a crucial precondition for the further growth of the biofuel sector, these actors could play an important role in leveraging more sustainability in the sector. However, our findings suggest that most investors are not yet effectively addressing key environmental and social sustainability challenges, either because they lack sustainability policies or because their policies are of insufficient quality. Realising the potential influence of investors on minimising the negative social and environmental costs associated with feedstock expansion and biofuel production requires improved dissemination of high-quality governance instruments. Whilst private and public investors could develop and adopt better policies voluntarily, we also discuss regulatory options available to governments in production and consumption countries. These options could motivate or assist private financial institutions in developing and applying sound, responsible financing policies.
Interest in biofuels began with oil shocks in the 1970’s, but the more rapid development and consumption of biofuel industry in recent years has been primarily driven by mandates, subsidies, climate change concerns, emissions targets and energy security. From 2004 to 2006, fuel ethanol grew by 26% and biodiesel grew by 172%. As biofuel production continues to expand, investments in capacity expansion and research and development have been made. The 2008 food crisis emphasized the need to re-examine biofuel consequences. Biofuels remain an important renewable energy resource to substitute for fossil fuels, particularly in the transportation sector, yet biofuels’ success is still uncertain. The future of biofuels in the energy supply mix relies on mitigating potential and improving the environmental gains. This book brings together leading authorities on biofuel from the World Bank to examine all of the impacts of biofuel (economic, social, environmental) within a unified framework and in a global perspective, making it of interest to academics in agricultural and environmental economics as well as industry and policy-makers.
Biofuels are currently in the middle of a heated academic and public policy debate. Biofuel production has increased fivefold in the past decade and is expected to further double by 2020. Most of this expansion will happen in developing nations. This volume is the first of its kind, providing a comprehensive overview of the biofuel debate in developing countries. The chapters are written by a multidisciplinary team of experts, exposing the key drivers and impacts of biofuel production and use. The book covers impacts as diverse as air pollution, biodiversity loss, deforestation, energy security, food security, greenhouse gas emissions, land use change, rural development, water consumption and other socioeconomic issues. Its wide focus accommodates examples from countries in Africa, America and Asia. As such, this book will become an indispensable companion to academics, practitioners and policy makers who wish to know more about biofuel issues in the developing world.
With the rapid growth of biofuel production and consumption and the proliferation of policy decisions supporting this expansion, concerns about the biofuel sector’s environmental and social impacts are increasing. Consequently, a range of actors – among them governments, multilateral institutions, nongovernmental organisations and multistakeholder industry groups – have created sustainability frameworks, some mandatory, others voluntary. This report examines how the most developed sustainability frameworks for feedstock production (including biofuels) address key environmental issues. It identifies critical gaps in these frameworks and proposes areas for improvement. The main finding is that the frameworks share broad sustainability principles yet they differ greatly in terms of their comprehensiveness and how they apply specific indicators for environmental issues, particularly with respect to land use change (both direct and indirect), allocation of degraded land for feedstock cultivation, and related accounting of greenhouse gas emissions. In the absence of sufficient hard data with which to gauge the effectiveness of existing sustainability frameworks, the report notes that the standards of these frameworks are not sufficient to mitigate the effects of direct and indirect land use change and promote environmental conservation. A key recommendation is that such standards should be complemented by other policy instruments. Furthermore, as sustainability frameworks are only a means to an end, they must be supported by practical guidance, effective interpretation of standards, principles and criteria, and development of verifiable indicators, along with the provision of appropriate tools, approaches and capacity building activities.
Biofuels are a renewable source of energy used mainly for transportation. They link together food, energy and natural resources sectors, and involve ecological, social and inequality issues. They are an emblematic example of the interactions between economic, environmental, social and political decisions and, as a recent and complex issue, require updated and detailed information to be understood. This book aims to shed light on several economic, social and environmental issues connected to biofuel production and policies. The Economics of Biofuels adopts detailed descriptions, rigorous data analysis and precise econometric methods to estimate the effects of biofuel on different socio-economic factors, avoiding complicated and sometimes ineffective models based on context-specific parameters. In particular, the book focuses on the impact of bioenergy policy on biocommodity production and trade, and on the related phenomenon of land acquisitions to grow biofuel commodities. The book’s main findings are derived by an original and unique dataset collecting information on the investors acquiring land in Africa and on the voluntary standard, certification and labelling schemes adopted by them as Corporate Social Responsibility (CSR) strategy. The analysis links together in an original way public and private initiatives to make biofuel sustainable. Therefore, this book represents an improvement in the understanding of biofuel production and policy’s sustainability. This book is of interest to those who study environmental economics, agricultural economics and sustainable development. It is also suitable for those in the renewable energy sector, with a particular focus on biofuel sustainability.
In December 2007, the Congress expanded the renewable fuel standard (RFS), which requires rising use of ethanol and other biofuels, from 9 billion gallons in 2008 to 36 billion gallons in 2022. To meet the RFS, the Departments of Agriculture (USDA) and Energy (DOE) are developing advanced biofuels that use cellulosic feedstocks, such as corn stover and switchgrass. The Environmental Protection Agency (EPA) administers the RFS. This report examines, among other things, (1) the effects of increased biofuels production on U.S. agriculture, environment, and greenhouse gas emissions; (2) federal support for domestic biofuels production; and (3) key challenges in meeting the RFS. GAO extensively reviewed scientific studies, interviewed experts and agency officials, and visited five DOE and USDA laboratories. GAO suggests that the Congress consider requiring EPA to develop a strategy to assess lifecycle environmental effects of increased biofuels production and whether revisions are needed to the VEETC. GAO also recommends that EPA, DOE, and USDA develop a coordinated approach for addressing uncertainties in lifecycle greenhouse gas analysis and give priority to R & D that addresses future blend wall issues. DOE, USDA, and EPA generally agreed with the recommendations.
This open access book presents a comprehensive analysis of biofuel use strategies from an interdisciplinary perspective using sustainability science. This interdisciplinary perspective (social science-natural science) means that the strategies and policy options proposed will have significant impacts on the economy and society alike. Biofuels are expected to contribute to reducing greenhouse gas emissions, revitalizing economies in agricultural communities and alleviating poverty. However, despite these anticipated benefits, international organizations such as the FAO, OECD and UN have published reports expressing concerns that biofuel promotion may lead to deforestation, water pollution and water shortages. The impacts of biofuel use are extensive, cross-sectoral and complex, and as such, comprehensive analyses are required in order to assess the extent to which biofuels can contribute to sustainable societies. Applying interdisciplinary sustainability science concepts and methodologies, the book helps to enhance the establishment of a sustainable society as well as the development of appropriate responses to a global need for urgent action on current issues related to biofuels.
Biofuels global emergence in the last two decades is met with increased concerns over climate change and sustainable development. This report addresses the core issue of biofuel sustainability of biofuels and related feedstocks, drawing from a wide range of sustainability related studies, reports, policy initiatives. The report critically examines the economic, environmental and social sustainability dimensions of biofuels and review the major certification initiatives, schemes and regulations. In doing so, the report relies on extensive review of a number of country case studies covering a broad range of current biofuel-feedstocks systems. The report analysis clearly distinguish feedstock efficiency (in terms of biofuel yields per unit of land) from sustainability, especially under limiting resource (irrigated water) or sensitive areas (carbon stocks). Also, long run economic viability depend on the future policy support, technical innovations in biofuel systems, economics of biofuel supply and demand and trade-offs between food and energy uses as well as feedstock productivity gains. Biofuels can present both advantages and risks for environmental sustainability; the latter being often difficult to measure or monitor and may conflict with economic sustainability unless great strides in productivity gains are achieved. Social sustainability is the weakest link in current biofuel certification schemes owing to intrinsic local factors and as efforts target more few negative social impacts; much less focus is placed on inclusive processes that strengthen marginal stockholders participation and benefits. Biofuel certification schemes need to be more smallholder inclusive, perhaps through policy initiatives. Finally, poor developing countries, especially with abundant land and biomass production potential, need to prioritise food security and poverty reduction. In many cases, biofuel models that encourage small scale integrated bioenergy systems may offer higher rural development impacts. FDI-induced larger-scale biofuel projects, on the other hand, may be suitable in those situations where countries have sufficient industrial capacity, besides land and biomass potential, and when these biofuel projects can be fully integrated into domestic energy strategies that do not conflict with food production potential and food security.
A new economic opportunity for sub-Saharan Africa is looming large: biofuel production. Rapidly rising energy prices are expected to remain high for an extended period of time because of the increasing demand in prospering and populous countries such as China and India, the depletion of easily accessible supplies of crude oil, and concern over global climate change. As a result, there is renewed interest in biofuels as an alternative to fossil fuels. Africa is uniquely positioned to produce these new cash crops for both domestic use and export. The region has abundant land resources and preferential access to protected markets with higher-than-world-market prices. The rapid growth in the demand for transport fuels in Africa and high fuel prices create domestic markets for biofuels. The European Union and the United States have approved legislation that requires large increases in the consumption of biofuels over at least the next decade. Imports are expected to be needed to meet these mandates, thus opening the door to African and other developing countries that can produce biofuels or feedstocks for biofuels competitively. Expanding the production of crops for biofuels will affect the entire rural sector in Africa as resources are shifted away from traditional crops and the prices of all agricultural commodities rise. Even smallholders can participate in producing biofuel crops. To promote the sustainability and significant contribution of this enterprise, Biofuels in Africa provides guidance in formulating suitable policy regimes, which are based on protecting the rights of current land users, developing revenue-sharing schemes with local communities, safeguarding the environment and biodiversity, expanding institutional capacity, formulating new regulations and procedures, and emulating best practices from experienced countries. This volume will be of value to anyone interested in biofuels, including policy makers, development practitioners, private investors, researchers, and the general public. Now that African countries are trying to significantly increase their energy supply systems, biofuels are an attractive option using both dedicated crops and agricultural waste. This book provides guidance for them to develop a suitable policy regime for a significant contribution by biofuels. Professor Ogunlade R. Davidson, Minister of Energy and Water Resources, Sierra Leone Biofuels in Africa is a sorely needed resource for our understanding of the problems of expanding biofuels production in Africa. A high point of the book is a description of the projects that were started in several countries. A very useful book! Professor Jos Goldemberg, University of S o Paulo, Brazil As Africa most likely will play the same role for global biofuels as the Middle East does for oil, this comprehensive book on African biofuels should be compulsory reading for anyone interested in either African development or biofuels. The book captures the essence of long-term drivers and opportunities as well the complex challenges for investors and society of this huge emerging industry. Per Carstedt, Executive Chairman, EcoEnergy Africa
Policy intervention in the biofuel market has led to a significant increase in biofuel production and use in the past several years. However, the welfare effect of biofuel policies, specifically the ethanol tax credit for corn ethanol, ethanol import tariff and renewable fuel standard (RFS) mandate has not been adequately examined. Moreover, the environmental impact of these policies, and their impact on fuel taxation has not been sufficiently addressed in the literature. This dissertation examines the market and welfare effects of biofuel policies in the US, specifically those relating to corn and sugarcane ethanol, with the aim of determining the welfare implications of existing policies, and designing second-best optimal policies. In measuring welfare effects, changes in social surplus, as well as environmental externalities are taken into account. In addition, the interaction of fuel and biofuel policies with the broader fiscal system is also considered. This dissertation consists of three papers. In the first paper, a stylized model of the US miles and fuel market, including ethanol trade is developed to quantify the market and welfare effects of biofuel policies in the US. In order to examine the effect of the ethanol tax credit and import tariff, several market scenarios are simulated. The market outcome with the two policies in place are compared to a non-intervention scenario, and an optimal baseline where Pigouvian taxes are levied on fuel and miles. Results show that the effect of the tax credit on social surplus is clearly negative, while the impact of the tariff depends on the ability of the US to influence ethanol prices in the world market. Numerical simulations show that the existing ethanol tax credit and import tariff increase miles externalities and GHG emissions and decrease social welfare by $5.9 B relative to non-intervention and by $235 B relative to the optimal scenario. In the second paper, detailed production data on ethanol production costs in the US and Brazil are used together with a numerical model of US biofuel trade with Brazil to quantify the welfare effect of the US RFS mandate for traditional and advanced biofuel (excluding cellulosic and biomass biodiesel) under various scenarios on the currency exchange rate between the US dollar and Brazilian reais. Numerical results show that in 2015, the cost of the mandate is lower when the US currency is appreciated relative to the Brazilian currency, and when the excess supply elasticity of ethanol from Brazil is more elastic. Relative to a baseline without a mandate but with an ethanol subsidy and import tariff in place, GHG emissions decrease and the welfare effect of the mandate ranges from -$23 to +$5 Billion dollars as the exchange rate varies from US$1 = R$1.81 to US$1 = R$3.11. The third paper analyzes the impact of biofuel policies and biofuel use on the second-best optimal carbon tax for fuels in the presence of a labor tax and a biofuel subsidy. Findings show that when biofuel is part of the fuel mix, the carbon tax has a commodity price effect which arises from tax-induced changes in land rent. The commodity price effect could exacerbate or attenuate the tax interaction effect caused by higher fuel prices, depending on the elasticity of substitution between gasoline and biofuel, the price elasticity of miles demand, and the relative emissions intensity of gasoline and biofuel. Numerical results show that the commodity price effect affects the value of the second-best optimal carbon tax, and that the effect is greater if the elasticity of substitution between gasoline and ethanol is higher, iii miles demand is more price inelastic, and the emissions intensity of biofuel is lower relative to gasoline. In addition, the existence of a fixed biofuel subsidy lead to a greater divergence between the value of the second-best optimal carbon tax with or without biofuels. A carbon tax policy decreases GHG emissions and increases welfare, in contrast to a biofuel subsidy, which also decreases GHG emissions but at a net welfare loss.