The Project

Project Summary

Despite the abrupt emergence of biofuels, little is known about how they will directly and indirectly affect the welfare of the poor¡ªespecially those in South Asia and Sub Saharan Africa.

Goals of our proposed research are:

  • to describe the paths of impact between locations of biofuels production and their ultimate effects on small producers and vulnerable consumers, by quantifying impacts of shifts in world supply and demand for food, feed, feedstocks and biofuels;
  • to assess the feasibility of investing in biofuels systems in poor countries, as well as assess which technologies have the largest positive effects on producers and the least negative effect on consumers.

We are using high-quality and scientifically-sound information to create an analytical platform that can produce empirically grounded answers to some of the main questions about biofuels and their effects on poverty. In order to strive toward this long-term goal, we are engaging in an ongoing dialogue with the Gates Foundation over these issues.

Motivation

There is much uncertainty regarding the future of biofuels, however the following appears certain and provides rationale for this project:

  • As the demand for and supply of biofuels expands and the demand for feedstock rises, there will be upward pressure on global agricultural prices.
  • ?If food prices rise significantly and for extended periods of time, those interested in development face both an opportunity and a challenge. Higher prices mean good news for net producers¡ªat least some of them. At the same time, higher prices will mean that net consumers pay more for their food purchases.
  • There is currently no modeling-based, internationally agreed-upon basis for understanding the impact of biofuels or understanding who will benefit, who will get hurt, and by how much. Little reliable information exists, particularly for the poorest countries of the world, with which public, private, or non-profit investors can utilize to make objective assessments of the conditions for investing in biofuels systems and feedstock technology.

Main Questions

Acknowledging that there are many more questions than answers, we are most directly concerned with two broad categories of research questions:

1. How will shifts in world prices caused by changes in some of the world¡¯s largest biofuel producing countries affect the rest of the world¡ª either directly or through secondary ripple effects?

  • Will poor food producers in countries without large biofuel programs benefit from higher commodity prices?
  • What will be the impact on subsistence farmers, particularly those who face high transportation costs that isolate them from world markets (e.g. Sub-Saharan Africa), and those who produce rice, horticultural and other commodities that are not used as feedstock for biofuel production? What kind of substitutions will occur within cropping patterns and what will their significance be?
  • What are the impacts on livestock and aquaculture producers and others who use maize, soybeans and other feed grains as inputs?
  • How will the net food consumers, including the urban poor (landless laborers) in developing countries be affected? What will be the impact of alternative biofuel development pathways on poverty and food security?
  • Will higher prices induce an expansion of cultivated areas devoted to biofuel feedstocks? What are the environmental impacts of expansion into new areas? How will higher prices shift the demand for water and affect water resources? Will higher prices induce farmers to apply higher levels of chemical fertilizers and pesticides?
  • In short, which pathways (including those involving policy interventions by governments and international organizations) most effectively offset the (likely) negative poverty/food security impacts of rapid biofuels expansion, and how do they vary across the regions we are studying? (e.g., improved grain and commodity storage policies vs. increasing irrigated area vs. supplemental feeding programs vs. increased agricultural investment and extension vs. not-doing-biofuels).

2. What are the benefits to poverty-stricken farmers and consumers in poor countries from locally produced biofuels?

  • What types of biofuels systems will have the largest positive impact on the poor?? What pathways are most effective in offsetting any unfavorable food security impacts of rapid biofuel expansion?? How do they vary across the regions under study?
  • What countries will need the above interventions beyond crop technology enhancement to offset potential adverse impacts?? In other words, in which countries do the necessary improvements seem out of reach, given their current levels of productivity and patterns of historical growth? Have we "tapped-out" the possibilities for growth in some/most places, or are there still low-hanging fruit to be picked?
  • Are some production technologies/feedstocks more pro-poor than others? Are there economies of scale in bioenergy production ¨C can small-scale technologies compete in local and/or international markets?
  • What are the benefits of small-scale farmers producing crops other than feedstock crops?
  • When biofuels are produced separately for domestic consumption and export, will producers benefit differently?
  • Where and to what extent should sound investment be focused: towards development of 2nd generation technologies or improve the productivity of 1st generation?
  • Will the rise of biofuels accelerate or slow progress towards the Millennium Development Goals (MDGs)?
  • What are the appropriate policies and institutional and market reforms that can make biofuels development more accessible to the poor?

Objectives

Objective 1: Getting the data right.

  • Developing a publicly-accessible database and theoretically sound as well as biophysically realistic framework for projecting rates of increase in yields of major food and biofuel crops.

Objective 2: Tooling up ¨C building the analytical platform and analyzing the pathways of impacts/assessing biofuel systems.

  • Measuring and quantifying the global pathways of impact in order to understand widespread effects in different geographical contexts (within and between countries), non-traditional measures of human well-being (such as malnutrition and poverty, not just price effects), and economic situations (focusing on developing countries).
  • Creating a modeling platform to assess the feasibility of investing in biofuel systems of poor, developing countries in order to increase food security while improving ecosystem quality, which is necessary to support agriculture. Specifically, our goal is to determine how direct investment, policy reform, and innovative markets and financing mechanism may assist developing countries in increasing productivity and energy efficiency of their agriculture production systems in the face of higher energy prices.

Objective 3: Creating a Biofuels and Food Security Leadership Group (BFSL Group).

  • An experienced and knowledgeable set of economists, agricultural scientists, ecologists and energy experts will be meeting regularly to facilitate ongoing collaborative dialogue with other research and policy groups to increase the flow of information and streamlining efforts around the world relating to biofuels, poverty and food security issues.

Modeling Approach

In order to build an analytical platform to track fluctuations of agricultural prices and their transmission into the developing world [link to ¡°Objective 2¡± above], different strategies are necessary

  • to measure and quantify the pathways of impact, as well as
  • to assess the feasibility of investing in biofuels systems in poor, developing countries.?

Understanding global pathways of impact involves studying how the global expansion of biofuels affects international commodity markets and influences different countries in the developing world.? This is crucial for two reasons:

  1. Large-scale global biofuels development will have sharp, direct effects on hunger and the timely achievement of the Millennium Development Goals through world agricultural prices
  2. Global biofuels expansion will fundamentally affect the economic environment in which more local biofuels projects will be carried out.

Modifying and combining modeling approaches (Global Trade Analysis Project (GTAP)/China¡¯s Agricultural Policy Simulation and Projection Model (CAPSiM), & the International Model for Policy Analysis of Agricultural Commodities and Trade (IMPACT)) enables the tracking of fluctuating agricultural prices around the world and their transmission into the developing world.

Although there are other models that measure different aspects of the combined analytical tool to be created, the impact of biofuels in developing countries is a complex issue that a single descriptive analysis does not comprehensively represent/address.

  • What is GTAP?
  • What is IMPACT?
    • Schematic Presentation of IMPACT
    • IMPACT? (pdf)
What is IMPACT?

IFPRI¡¯s [link to http://ifpri.org/] IMPACT [link to http://www.ifpri.org/themes/impact.htm] model is a global partial equilibrium agricultural market model that is highly aggregated by commodity and allows users to trace impact pathways caused by changes to forces that affect agricultural commodities through the world economy.? There are modules that allow these forces to be examined on food production; consumption; malnutrition; land use; water use and other environmental factors.? It is the most detailed global agricultural sector model in the world, especially in the way which it treats important regions of the developing world like Africa and Asia, and the key food crops that are grown there.? As IFPRI¡¯s current modeling framework is partial equilibrium and does not have an energy sector, the examination of biofuels has been limited to exogenously determined energy scenarios from published sources.

Schematic Presentation of IMPACT

IMPACT in detail (PDF) [link to http://www.ifpri.org/themes/impact/impactwater.pdf ]

What is CAPSiM?

CAPSiM [link to http://www.ccap.org.cn/publication1.asp?PID=813]

is a global model that is linked to:? 1) a detailed partial equilibrium model at the domestic economy level, which is in turn linked to a household model; 2) a general equilibrium model with detailed spatial dimensions which in turn linked to production and land use across space.? Currently this model allows analysis of how changes in the world economy affect international prices, and how these price effects impact domestic economies and how they are transmitted through to regions and households, including households that are disaggregated to those that are poor, women-headed, minority ones.? To adapt the model, broad categories for agricultural commodities and energy sectors will be less aggregated and subdivided in order to more precisely understand the impacts.

Country-level case-studies [link to ¡°Objective 2¡± above] will be conducted in India, Senegal, and Mozambique to trace the pathway of effects into different countries and different regions of each country.? This approach allows in-depth analyses of the precise effects of biofuels that traditional General Equilibrium Trade studies overlook.? Factors that will be taken into account include: physical space differences (land availability, more versus less productive land), household variation (ethnicity, gender, employment), and investment analysis of technological possibilities.?