The University of East Anglia and the UK Met Office's Hadley Centre have today released preliminary global temperature figures for 2007, which show the top 11 warmest years all occurring in the last 13 years. The provisional global figure for 2007 using data from January to November, currently places the year as the seventh warmest on records dating back to 1850. The announcement comes as the Secretary-General of the World Meteorological Organization (WMO), Michel Jarraud, speaks at the Conference of the Parties (COP) in Bali.
IMF chief economist: biofuels could help cut farm subsidies, protectionism main cause of high food prices
The trend toward increasing production of biofuels provides an opportunity to dismantle agricultural subsidies and tariffs in wealthy countries, according to the International Monetary Fund’s top economist. Non-governmental organisations and developing country governments have been calling for farm subsidy and trade reform for years, to give producers in the South a chance to develop domestic markets. Biofuels offer an opportunity to bring about this much needed transformation.Writing in the December issue of the IMF’s Finance & Development magazine, Chief Economist Simon Johnson looks at how the adoption of biofuels in the EU and the US is driving up world food prices and how the trend can be curbed. Over the past 12 months, the world has experienced a substantial inflationary shock in the form of higher food prices, partly fueled by increasing demand for food crops such as corn, used for biofuels. This shock doesn’t necessarily translate into higher sustained inflation, Johnson writes; monetary policy in most countries appears to be responding appropriately. But it will have adverse effects relatively poor urban residents in low-income countries who depend on imported food.
However, there are two potential major silver linings: direct benefits for farmers in low-income countries and potential policy space for removing agricultural subsidies in rich countries. The vast majority of people qualified as 'poor' are farmers in developing countries. They stand to gain directly from the emerging biofuels industry.
In the IMF staff’s assessment, a significant part of the latest jump in food prices can be traced directly to biofuels policy in wealthy countries, Johnson writes.
A key part of this approach to biofuels is agricultural protectionism. A number of countries, including Brazil, can produce ethanol much cheaper, with a greater saving of nonrenewable energy and lower emissions, for example, by using sugar. But this sugar-based ethanol is subject to a prohibitive tariff in the United States (and there are similar barriers in Europe). - Simon Johnson, IMF Chief EconomistIn addition, production subsidies in rich countries, which are intended to encourage innovation in this sector, seem to have led to excessive entry into the US ethanol distillery business.
The greatest potential gains of using crops for biofuels are for farmers everywhere, including the rural sector of poorer countries, Johnson writes:
energy :: sustainability ::biomass :: bioenergy :: biofuels :: ethanol :: biodiesel :: subsidies :: trade :: tariffs :: IMF :: There is another potential opportunity in this rapidly developing difficult situation, Johnson writes.
Farm subsidies of various kinds in rich countries have long plagued the international trading system and currently make it difficult to move forward with further trade liberalization. Rich countries are reluctant to improve access to their most protected markets.With high food prices, subsidies are less compelling and—depending on how they are structured—may not even pay out when prices are above a certain level, Johnson writes.
Industrial countries need to seize this moment and eliminate subsidies in such a way that it is hard to reimpose them later.Johnson cites the example of the European Union's 'impressive step forward' in terms of export subsidies for milk. With milk at record-high prices this year, these subsidies have been suspended. Given the nature of decision making over agricultural policy, reinstating such subsidies might be difficult.
More recently, the EU also decided to abandon a subsidy for energy crops.
Hat tip to Jeff!
References:
Simon Johnson, "The (Food) Price of Success", Finance & Development, December 2007, Volume 44, Number 4.
Research Recap: "Biofuels Could Help Cut Farm Subsidies" - December 5, 2007.
posted by Biopact team at 6:19 PM
3 Comments:
The vast majority of people qualified as 'poor' are farmers in developing countries? Please provide some figures to back this up. There are hundreds of millions of urban poor in developing countries for whom rising food prices is not welcome news. According to a report by UN-Habitat, "The world’s urban poor are worse off than their rural relatives".
And there are many landless people working in agriculture who are unlikely to benefit from the biofuels boom either.
As for biofuels offering the opportunity to reduce farm subsidies in OECD countries, those are just empty words until we actually see the offers on the table. Judging from the latest drafts of the Farm Bill in the United States, drastic reductions in farm subsidies are unlikely to happen any time soon. Meanwhile, subsidies for biofuels in OECD countries keep being piled on. But since these are predominantly provided through tax breaks, they don't get counted in the agricultural-subsidy budget envelopes.
Ron, strange that you didn't know this very, very basic fact that, indeed, the vast majority of poor in the developing world are ruralites. This is quite a basic in development economics. Three quarters of the world's poor are in rural areas, I would call that the 'vast' majority.
Check the International Fund for Agricultural Development (IFAD), the specialized agency of the United Nations dealing with rural development.
Its comprehensive report has the numbers:
IFAD: Rural poverty report.
You could have deduced this from the simple fact that countries in the developing world, including China and India, are still basically agrarian societies; in LDC's even 80% of poor people can be found in rural areas, - the clear majority, that is.
Moreover, according to the Worldwatch Institute, the vast majority of the 854 million malnourished and hungry people are also found in the rural areas of the developing world.
Which is why the WWI's report on biofuels and their impacts on sustainable agriculture (the most comprehensive and thoroughly researched so far) says that they offer a major opportunity to end global hunger (provided these poor farmers are enabled to participate in the sector).
Check it out:
Biofuels for Transport: Global Potential and Implications for Sustainable Agriculture and Energy in the 21st Century.
The FAO has made similar remarks:
Much of the current debate on bioenergy, focusing on negative aspects such as sharply increased food prices and erosion of biodiversity, obscures the sector's huge potential to reduce hunger and poverty.
If we get it right, bioenergy provides us with a historic chance to fast-forward growth in many of the world's poorest countries, to bring about an agricultural renaissance and to supply modern energy to a third of the world's population.
FAO director-general: Biofuels should benefit the poor, not the rich.
Many people don't have a grasp of the basic numbers on which these often counter-intuitive assessments and views are based.
I am glad to see that the economists are finally waking up to the effects of biofuels on the rural poor.
Nearly two years ago I published an editorial entitled: A Forced End to Africa's Food Dependency? Implications of High Oil Prices
in the
“African Crops News Service Newsletter"
– March 2006” - which I partially excerpt below - because the key point is that if governments act (as Malawi has) it is easy to double yields when western subsidized grains are not sold below production costs (=dumped), such that developing world farmers cannot compete - and head towards subsistence ag.
"One need not be an economist to realize the rapid changes
being wrought on agriculture due to the high fuel prices, one
just need open ones eyes to what is happening in the US corn
belt. A whole new economy is kicking in, with huge public and
private investment, with promises of rapid profits, now that
the pundits are promising that oil prices will never again drop
below $50 a barrel, and it is presently well above $60. Fifty
dollars is the magic threshold number that renders the technologies
of turning quality grain into ethanol, and food oils to
biodiesel profitable in the USA, where they only pay half for
fuel at the pump than most of the developed world.
This huge investment in factories to quickly reap a bonanza
will clearly stabilize the bottom price for grain at a much
higher price than at present. The good side is that subsidies
will no longer be needed in the west, and the African farmer
will no longer have to compete with “dumped” grain, i.e. grain
sold below the actual production costs. But the African
farmer will have to gear up to production, instead of subsistence.
The scary side is that there will no longer be stocks
available for famine relief in times of need. There never will
be “over production”, “set-aside” or surpluses again as long
as oil is more than $50/barrel. Even with all excess grain
going to biofuel production, it will only make a small dent in
the total fuel needs of the west and growing fuel needs in
Asia. The magic fifty dollars also renders nuclear energy a
viable alternative for much of the fuel, but it takes nearly a
decade to build a nuclear power plant, and that is after the
decision is made to build one. Such decisions are not fast in
coming, and other alternative energy sources (e.g. wind, solar)
cannot match the magnitude of the shortfall, no matter
how appealing.
The only viable take home message from this is that Africa
must quickly prepare itself to go it alone vis a vis its food security.
The question: “should we accept transgenic maize as
food aid?” will be moot in a very short time, as such maize will
no longer be available – it will be running someone’s automobile.
Africa must quickly come to the realization that it must
rapidly go from subsistence agriculture, with yields a third of
global averages to productive agriculture to feed Africans. It
can do this only by having good seed bred and available, fertilizer
available at near international prices, and not an unjustifiable
four times these prices. There must be extension
services that get to the farmers and teach the most sustainable,
cost-effective practices. An infrastructure with good storage facilities is critical to ensure storage for times of need,
as well as an equitable price to the farmer. If India could get
such a storage infrastructure going decades ago, Africa has few
excuses for not doing so other than a lack of will except for a
willingness to be dependent on foreign food aid.
The key needs described above started with good seed (and
not the long ago discredited but still repeated mantra of
“farmer-saved seed”, so often mouthed by those who never
watched how good seed deteriorates season after season in
the hands of all but the very best farmers – the few who grow
“certified” seed). The good seed must be of more crop species
than presently grown, and it must be adapted to local conditions.
It should come with as many built-in resistances as possible;
resistance to abiotic stresses, high fertilizer use efficiency,
resistance to African insect, rodent, and avian pests
during cultivation and storage, resistance to indigenous diseases
and the debilitating mycotoxins their pathogens produce,
along with resistance to that scourge of much of Africa, the
parasitic witchweeds (Striga spp.).
Good breeding can surely help, but where decades of breeding
have proven ineffectual, the biotechnology sector must kick in2.
This must be done in more species than maize, as crop biodiversity
is also an essential element of food security. Biotech
priorities should not be haphazard, but based on evaluations of
need. Biotechnology will play an important role, a role that will
be useless if the other institutional and infrastructural issues
are not addressed. And they must be dealt with quickly, as
biofuel plants are quickly coming on line, sucking up the grain
that came to Africa. Africa may have thought it need not produce
and store grain for winter – but winter is on the way."
Jonathan Gressel
Assif-Strategies Ltd.
Environmental Initiatives & Development
Yakum 60972, ISRAEL
Email: [email protected]
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