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According to International Energy Agency (IEA) scenarios, 100 million ha of land will be required in 2050 for biofuels, equivalent to 2% of total agricultural land. This does not appear to be substantial in absolute terms, but nevertheless represents a three-fold increase in land-use, if biofuel production is multiplied by ten in the next forty years.
The European Commission aimed to increase knowledge about the impact of biofuels development from the point of view of Policy Coherence for Development (PCD) as defined in the Treaty on the Functioning of the European Union.
This report presents an analysis of the impacts of the EU biofuel policies on developing countries with a specific focus on African countries.
It aims in particular to identify the knowledge gaps on the links between biofuel investments and sustainable development in developing countries, and to assess the relevant positive and negative impacts of biofuel ventures on development. It aims also at Identifying and substantiating “common” opportunities (synergies), risks and challenges related to bioenergy production, including a trade flow analysis, a typology by country context and production specificities.
Broadly speaking, there are three main categories of bioenergy resources: i) residues and wastes, ii) natural vegetation and iii) energy crops. The last category includes both food and non-food crops as well as specific production practices that can be adopted producing different impacts on the environment and yields.
It is generally accepted that bioenergy has the potential of either increasing or reducing food security (especially for smallholder farmers) depending on the policy behind its development and the characteristics of the local agricultural sector. The effects of biofuels development on national food security can be significantly different for a net exporter or a net importer of food and agricultural commodities.
Low and declining productivity of agriculture, coupled with exceptionally unfavourable weather conditions and rising international oil prices, seem to be more prominent drivers behind rising food prices than the current biofuel production level. Even if not the major driver food prices, an increase in biofuels production in the future will further exacerbate the pressure on food prices.
The general trend however is that food is becoming more expensive and biofuels production is - with or without EU blending requirements - becoming more prevalent. Besides biofuels, other factors are driving up food prices. Stronger demand for food crops in conjunction with slow growth in agricultural productivity, low stocks and high fossil fuel prices has resulted in upward pressure on prices. Developing countries that rely on importing basic food stuffs from the international market become vulnerable and the Special Rapporteur on the Right to Food argues that a drop in local or regional food production has a far more pronounced impact than international commodity prices on local retail prices.
More specifically, multiple cropping and crop rotation allows the cultivation of more than one crop, enabling the farmers to spread market risks and spread required labour and input more evenly during the year. Crop diversity can also mitigate the economic risks linked to adverse weather. At the same time, farmers may reduce their reliance on chemical pesticides and nutrient inputs as most pests and diseases are plant specific and the extended cultivation of host plants allows for an increasing resistance of pests and pathogens. With crop rotation, the interruption in the cultivation of the host plant, by growing non-host plants, leads to the eradication of pests and pathogens in the soil. On the other hand, it could be difficult for farmers to adopt new crops, depending on the existing conditions, such as labour availability and skills, available equipment, field types and agreements in place.
Four broad groups of biofuel policy measures can be distinguished:
The EU Food Security Policy Framework, adopted in 2010, has recognised the Right to Food and has a focus on creating an enabling environment for the smallholder sector as the single most effective instrument for increasing food security in developing countries. The EU has also committed to focus on access to food by implementing the Voluntary Guidelines to Support the Progressive Realisation of the Right to Adequate Food in the Context of National Food Security (COM(2010)127 final).
In this context, a clear link can be established between the EU bioenergy policy and the strong interest of European companies to acquire agricultural land in developing countries, especially in Africa. This also entails that the development of conventional biofuel production has an impact on access to natural resources such as land and water, and often leads to an increase in land concentration to the detriment of smallholder farming practices.
The problem is that many countries do not have legal or procedural mechanisms in place to protect local rights and take account of local interests, livelihoods and welfare amidst increasing conflicts due to increasing land pressures and large-scale land acquisition.
The differentiation between local and foreign investors might be important for political discussions but does not influence investment projects, as both are following the same goals, i.e. to maximise the return. In case public investments by governments are not primarily profit driven, these investments have to be profitable in the long term in order to become sustainable. The report highlights the main investment constraints that affect the rate of private investment and the survival and growth of firms. In addition to achieving a return on the investment, employment generation could be a significant public goal among others.
The main criticism deals with the concerns and relevance of treatment of “unused” or “marginal” lands. The threat of dispossession or eviction from land due to a government’s failure to offer adequate protection is very real. In most cases, land is already being used or claimed – yet existing land uses and claims go unrecognised because land users are marginalised from formal land rights and access to the law and institutions. Pastoralists and herders tend to be most vulnerable in such processes.
Another critique is linked to the fact that research has found that changes in land tenure systems and the related changes in land use have also often resulted in weakening women’s land entitlements, particularly where women are poor and their access to land is dependent on male relatives, as is the case in most customary land systems in Africa. The very few positive cases found to increase women’s income have tended to focus on Jatropha, the culture of which has been used as a sharecropping secondary income generation scheme and did not result in land tenure changes or competition with food crops.
As a matter of facts, the bulk of investments in the biofuels sector in developing countries is made by foreign investors, which reflects the region’s fundamental lack of local finance that hampers the development of its agricultural sector. Yet, investments in biofuels can have positive spill over effects in the agriculture and food production sector. However, these positive results can be achieved only through support to these countries in strengthening the policy framework for bioenergy (both for framework development and policy enforcement) and also providing them with training, sharing best practices, and facilitating technology transfer at the same time.
Biofuels business strategies are often long-term strategies as plants for feedstock crops (Jatropha, palm, eucalyptus and others) need several years before enabling a first commercial harvest (Jatropha = 4 years, palm = 40 months after seed planting in the nursery, eucalyptus = 7 years).
Jatropha, a shrub native to Central America that has spread to Africa and Asia, emerges as a significant driver for some large-scale land acquisitions in the world. According to the Land Matrix Database, a large majority of the “non-food” projects (73 %) are exclusively dedicated to Jatropha production with most of them located in Africa, particularly in East African countries (Ethiopia, Mozambique and Tanzania). The potential to grow it in marginal land with little rainfall requirements can help revive certain areas. However, it is important to distinguish between plantation for land rehabilitation (long-term dimension) and an objective for production: that Jatropha is able to cover marginal land does not mean that the production will be high enough for biofuel production.
In Africa, it is frequently observed that the value chain is only limited to the production level. In Senegal, for example, while Jatropha production is encouraged, the rest of the value chain is undeveloped with no stable market for seeds. A review mentioned in the report highlighted the difficulty in transforming Jatropha from local, small-scale produce into a major global export commodity. One of the most significant issues highlighted was the unreliability of supply (in terms of quantity and quality of oilseeds) to allow penetration into global export markets for biofuels.
EU private investors are major actors involved in large scale land acquisitions aimed at the production of Jatropha. Recent emerging data suggest that a number of large scale Jatropha investments in Africa (with negative consequences for local people) are of a speculative nature. At the same time, evidence is gained about the low Jatropha performance, with yields much lower than expected. It seems that viable projects are those that do not target just the international biofuel market, but also local uses of Jatropha (e.g. for heat generation from residues or soap making). This would also apply to other energy crops though.
The main crops currently used as feedstock in liquid biofuel production require high quality agricultural land and major inputs in terms of fertilisers, pesticides and water to generate economically viable yields.
A key factor in the analysis of the impacts of biofuels development is thus the type of production system: large-scale plantations; small-scale liquid biofuel farms (contract farming); small-scale local energy farms for local energy power needs; hybrid model (a mix of plantation and out grower). There is no “best” scheme because the conditions must be considered on a case-by-case basis.
The main crops currently used as feedstock in liquid biofuel production require high quality agricultural land and major inputs in terms of fertilisers, pesticides and water to generate economically viable yields.
National and international legislation usually require an Environmental Impact Assessment (EIA) or Environmental and Social Impact Assessment (ESIA) to be conducted before any implementation works begin. Even if some examples demonstrate the interest and the positive effects of such an EIA undertaken under a ‘business-as-usual’ approach, in the majority of cases reviewed, the EIA is considered an administrative burden.
The main environmental impacts of feedstock production for biofuel are caused by intensive farming systems, cultivating crops with high input levels, which are both natural (land, soil, water, native vegetation), and agrochemical. Large scale systems used for food crops production may be efficient but not always sustainable. According to the Tanzanian experiences for example, inclusive business models that involve smallholder farmers as active partners appear to be more attuned than those based on large-scale plantations.
Another important impact is on water resources. Most land acquisitions are linked with free access to water sources and sometime exclusive control over the water resources, when the increasing scarcity of water must be recognized. Many of the crops currently used for biofuel production – such as sugarcane, oil palm and maize – have relatively high-water requirements and, globally the water footprint of biofuels is large compared to other forms of energy: some biofuels are very water-intensive, and the average water footprint of biomass is 70 times bigger than that of oil. Importantly enough, by the 2050, due to climate change, the lands subject to increasing water stress are expected to be significant. That will also generate changes in water quality and quantity and render water access and utilisation more complex.
Besides the high-water requirements for the cultivation and processing, the supposed free water use by biofuel investors leads to inappropriate water footprint (inefficiency, waste and pollution). The uses of water to produce energy and the uses of energy in water supply and sanitation (called water and energy nexus) are not sufficiently taken into consideration by the policy makers. Most of the large-scale sugar cane plantations (for food, fuel or both) are characterised by high levels of water pollution as drained water is often discharged to the river without pre-treatment.
Regarding deforestation, even if its proportion attributable to biofuels sector may be less for oil palm and soybean because the multipurpose natures of these crops, all data coincide to indicate that biofuel feedstock expansion at the expense of forests ranged from 13 to 99%, the highest rates are observed for oil palm in Indonesia.
Benefits should arise from capital inflows, technology transfer leading to innovation and productivity increase, upgrading domestic production, quality improvement, employment creation, backward and forward linkages and multiplier effects through local sourcing of labour and other inputs and processing of outputs. However, these benefits will not flow if investment results in the creation of an enclave of advanced agriculture in a dualistic system with traditional smallholder agriculture.
Meanwhile, a critical issue in measuring the impact of biofuels production on employment and food security is the relative labour intensity of biofuel production. Much of the employment that is likely to come with increased biofuel production, at least in developing countries, will be because of potentially increased labour use at the farm level to grow the feedstock. Even if the so called “marginal” lands cannot support marketable production of crops, they may supply, in particular for poorer households, food, feed, medical plants, building material, or fuel to local people, not to mention sociocultural dimensions.
In agriculture, most jobs are created if labour intensive raw materials are grown, such as Jatropha. Large scale farming of sugarcane tends to create fewer jobs as the level of mechanization increases.
It is therefore crucial to understand the labour requirements of biofuel feedstocks per unit of area-time (e.g. per hectare per year) compared to the labour requirements of alternative land uses. In most cases found during this research, employment negatively affected household economies, or at best, did not have any affect at all due to low wages. In most households where one or more household members went to work at the plantation, their own agricultural activity was either reduced or completely stopped leading to a subsequent decrease in productivity and income. If smallholders start producing feedstock for biofuels on a small scale, they usually make use of their own land. If the workload becomes heavier, more family members have to work, but smallholders do not usually employ other persons. Hence, in such cases, one could speak about the creation of additional income, but not about additional job creation.
Given the status of the technology and investment requirements to establish processing plants, according to UNEP, it is unlikely that second generation biofuels production can be achieved in developing countries in the coming decade.
The report quotes in particular the World Bank’s Managing Director who said: "These large land acquisitions can come at a high cost. The veils of secrecy that often surrounds these land deals must be lifted so poor people don’t ultimately pay the heavy price of losing their land".
The right to adequate food is recognised under International Human Rights Law, and States have a responsibility to protect the right to adequate food whereas investors have a responsibility to respect existing legitimate land use rights. The recent adoption of the Voluntary Guidelines on Responsible Governance of Tenure of Land, Fisheries and Forests within the Context of National Food Security connects existing best practices and obligations in international environmental and human rights law.
While many African countries have implemented or are preparing biofuel policies, policy development shows however several gaps: i) although national policies have been formulated, concomitant regulatory frameworks are lacking, and ii) capacities for land suitability analysis and processing (biodiesel and ethanol) are inadequate.
Most large-scale land investment is indeed taking place in countries with weak land tenure (the way land is held or owned by individuals or groups) governance structures, and very high foreign investment protection and incentives. The evolving concept of land tenure places a stronger focus on security of use rather than outright ownership and a number of countries have taken steps to explicitly strengthen protection and recognition of customary rights in national legislation. Inclusive business models that involve smallholder farmers as active partners appear to be more viable from a social and economic point of view than those based on large-scale land acquisitions. Many large scale biofuels project in Africa failed or are being abandoned.
Further, an increasing body of new studies point towards one commonly recognised lack of transparency and availability of the reliable data. Recent wide ranging studies undertaken by the World Bank, and most recently by the Land Matrix Project, begin with introductory remarks on the remarkable difficulties in obtaining reliable data from target country registries as well as from investors. Good examples from other transparency initiatives, such as the Extractive Industries Transparency Initiative, should be further studied and analysed with the view of setting up similar systems for the improvement of data availability and private sector accountability on investment in agricultural lands and water resources.
Investors take advantage of tax havens and all other forms of financial incentives, which are often granted during the first years, and most likely they will calculate the sales price of their biofuels produced in developing countries in such a way as to ensure that no taxes will be paid in developing countries. Africa is the most targeted region and more than half of the deals over 200,000 ha are taking place in countries with high prevalence of hunger.
Small-scale biofuel projects can bring an important benefit in the form of human, social, natural and physical capital gains where traditional energy sources are particularly costly. This is not only in terms of market price but also in terms of amount of time needed for collecting energy sources through improved energy services in households, communal spaces, public buildings, services and enterprises.
Examples of good practices worldwide targeting both biofuel production for export and stationery energy generation for increasing local energy access demonstrate their potential benefits for soil quality, water availability and quality, agrobiodiversity, climate change mitigation, productivity, income generation and required inputs.
These projects offer a way to hedge the risks of biofuels’ investment, while contributing to local development not only through creation of jobs but also through provision of benefits. They are beneficial:
However, they add complexity to the initial project. For example, energy crop plantations can be coupled with electricity or energy cogeneration (CHP) plant for generating energy from the crop residues (e.g. after oil extraction, sugarcane or grain processing) both with large biofuel processing plants or small applications. Alternatively, residues can be used to produce biogas for household purposes providing a clean source of fuel for cooking and space heating.
Unfortunately, the idea of biofuels as a means to increase the national energy security, for example through the adoption of Integrated Food-Energy Systems (IFES), is still limited as most foreign investors generally target biofuel production for export and treat the domestic market as a secondary target.
National bioenergy strategies should thus be developed together with land use planning, taking into consideration the real land potential for bioenergy production, its environmental, social and economic impacts, and encouraging sustainable practices.
One key conclusion of this study is that a policy focused on fulfilling an internal biofuel blending target through certified biofuels alone cannot expect to develop a sustainable bioenergy industry automatically, especially in developing countries. A particularly important finding of this study relates to the risks associated with the claims and perception of "unused land" availability in developing countries. The general idea depicting developing countries and especially Africa as an untapped reservoir of “land availability for expansion agriculture and biofuels production” fades away when confronted with the reality of limited demarcation level of land, incomplete land reforms and use registration, and general lack of participatory land use planning prior to assigning land for biofuels production on local level.
Another key conclusion of this study is that in term of Policy Coherence for Development, most of the findings presented in this report are insufficiently taken into consideration to review existing policies and shaping new orientations for sustainable development of biofuels. Indeed, a policy focused on fulfilling an internal biofuel blending target through certified biofuels alone cannot expect to develop a sustainable bioenergy industry automatically, especially in poor developing countries, unless these policy measures are backed with international support to strengthen the bioenergy policy frameworks.
To date, production has been heavily dependent on policy intervention and care must be taken to coordinate energy and food security objectives. While caution should be exercised in using food products for the production of energy, the use of some agricultural outputs, such as crop residues, forestry residues, biogas, woody biomass and dedicated energy crops in a multi-cropping system, broaden the options for producers to stabilise farm income. The production of renewable energy may also help mitigate the negative effects of volatility in fossil fuel markets.
One of the challenges for the bioenergy sector lies in the need for the establishment of policy frameworks that are embedded in the overall poverty eradication and sustainable development policies so as to ensure that the poor are among its key beneficiaries. Compliance with the existing developed codes of conduct and certification schemes should be promoted and developing countries should be supported to enforce their adoption, and enabling instruments should be developed to lower the related costs for the farmers.
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