Bioenergy, Agriculture, International Trade and Sustainable Development
14th May 2008
Side-event at the 16th session of the UN Commission on Sustainable Development, 5-14 May 2008
Bioenergy derived from agricultural crops such a sugarcane and sugar beet, corn, wheat, or oilseeds and vegetable oils such as palm oil, soybeans, rapeseed, cotton, or ground nuts, have been portrayed as having the potential to contribute to climate change mitigation, agricultural reform and diversification of energy supplies towards cleaner sources. Both in developed and developing countries, biofuels, also referred to as agrofuels, are seen as potential drivers for rural development by providing farmers with a new opportunity to diversify production, create value-addition and increase their incomes.
In the context of agricultural policies, greater bioenergy production in developed countries would indirectly affect many developing countries by reducing exports of food and feed, leading to higher world prices for these goods. Farmers in developing countries may benefit from the higher prices and expand their own production of food and feedcrops. Such a production increase would also raise the availability of crop residues in developing countries, and the bioenergy industry could gain additional strength based on this added energy feedstock. On the negative side, higher world prices would lead to higher food prices for the poor, both in urban and rural areas, which may undermine food security. While reports of the Intergovernmental Panel on Climate Change point to potential climate change benefits of biofuels, in particular biofuels produced in tropical countries, recent research points to varying degrees of carbon and energy balance, with some biofuels leading to even an increase in GHG emissions through their life cycle.
The potential increase in bioenergy production and trade
Given the significant demand in biofuels and biofuel feedstocks, driven by blending targets set in large markets such as the EU, the US and Japan, global production and trade are expected to rise in the years to come. Each day the world consumes about 21 million barrels of gasoline and another 21 million barrels of diesel. These amounts translate into a potential demand of about 30 million barrels of ethanol and 23 million barrels of biodiesel a day. For illustration purposes only, if potential ethanol demand is translated into hectares of sugarcane or maize, the two major feedstocks for ethanol, then it would require the planting of 300 million hectares of sugarcane or 590 million hectares of maize—about 15 and 5 times, respectively, of the current world plantings of those crops. In the case of biodiesel, the potential demand would be equivalent to 225 million hectares of palm, or 20 times the current world plantings.
Some industrialized countries have established high targets in production and use of bioenergy. The 2007 US Energy Bill requires a big increase in coming years in nationwide use of renewable fuels, such as ethanol. It will sharply boost the US production for renewable fuel use – from 9 million gallons this year to 36 billion gallons by 2022, of which 15 billion can be corn-based ethanol and 21 billion gallons biodiesel and cellulosic biofuels.
As part of its strategy to tackle climate change, the European Union has set targets for ten per cent of all transport fuel to come from biofuels by 2020 and an overall binding target of a 20 percent share of renewable sources in energy consumption by 2020. Biofuels contributed just 1 percent of fuel transport in 2005 and trends would account for 4.2 percent by 2010. Currently, most of the crops for biofuels used in Europe consist of rapeseed for biodiesel grown in parts of Europe. Other crops for biodiesel include palm oil from Southeast Asia and soy from Latin America. Europe also imports some ethanol from Brazil made from sugar cane, and produces some ethanol domestically using wheat and sugar beat.
While international trade could in principle create opportunities for some countries to develop new exports and for importing countries to diversify their energy supplies and respond to their energy demand, trade in biofuels still faces important barriers related to tariffs, subsidies, and technical standards, while trade regulatory frameworks are still in the process of being crafted.
Unless changed, these barriers will delay development of the bioenergy sector in countries with a comparative advantage (mostly developing countries with tropical climates) and encourage the development of protected and more costly bioenergy production in many industrial countries. Eliminating these barriers during the early stages of bioenergy development would be easier than seeking to remove them once powerful national interests have become entrenched. Certification of biomass may also be one way to prevent negative environmental and social side-effects of bioenergy production and use. By setting up minimum social and ecological standards, and tracing biomass from production to end-use, the sustainability of biomass can be ensured.
At least three areas of the ongoing multilateral trade negotiations under the Doha round relate to biofuels. Ethanol, which is classified as an agricultural crop is part of negotiations on agriculture, while biodiesel, considered as an industrial good is covered in non-agricultural market access (NAMA) negotiations. Under negotiations towards the liberalisation of environmental goods and services (EGS), biofuels have been included in some of the proposals submitted by World Trade Organization (WTO) Members, and could therefore benefit from fast track liberalisation as part of an EGS package. For trade in biofuels to occur in a fair, non-discriminatory and sustainable manner, it is essential that negotiations in the Doha, as they draw to a close, result in adequate rules to govern biofuels trade. Such rules would have to address issues of tariff and non-tariff measures. International trade rules may also be required to respond to the growing concerns for social and environmental criteria and certification schemes on biofuels.
The event will address the following questions related to the crafting on rules on international trade in bioenergy, that maximise opportunities for sustainable development while minimising potential risks.
What approach should be pursued for a reform of tariff and non-tariff barriers on international trade in biofuels?
How could concerns related to social and environmental criteria and certification be addressed in international regulatory frameworks?
Which potential international trade policy instruments can contribute to a sustainable production and use of bioenergy?