Box 8: Biofuels and preferential trade initiatives

For developing countries, the challenges associated with producing bioenergy for the international market are particularly acute. Trade opportunities may be reduced by measures that focus exclusively on enhancing production in developed countries, or by protectionist measures designed to limit market access. Tariff escalation on biofuels in developed- country markets can restrict developing countries to exporting feedstocks, such as unprocessed molasses and crude oils, while the actual conversion into biofuels – with its associated value-added – often occurs elsewhere.

A number of European Union (EU) and United States preferential trade initiatives and agreements have been introduced that offer new opportunities for some developing countries to benefit from the increasing global demand for bioenergy. Preferential trade with the EU for developing countries falls under the EU’s Generalised System of Preferences (GSP). In addition, the Everything But Arms (EBA) initiative and the Cotonou Agreement contain provisions of relevance to the bioenergy sector. Under the current GSP, in effect until 31 December 2008, duty-free access to the EU is provided to denatured and undenatured alcohol. The GSP also has an incentive programme for ethanol producers and exporters who adhere to sustainable development principles and good governance. The EBA initiative provides least-developed countries with duty-free and quota-free access to ethanol exports, while the Cotonou Agreement provides duty-free access for certain imports from African, Caribbean and Pacific countries. The Euro-Mediterranean Association Agreements also contain provisions for preferential trade in biofuels for certain countries in the Near East and North Africa. In the United States of America, ethanol may be imported duty-free from certain Caribbean countries under the Caribbean Basin Initiative, although there are specific quantitative and qualitative restrictions depending on the country of origin of the feedstocks. Provisions for duty-free ethanol imports have also been proposed in the US- Central America Free Trade Agreement negotiations.

However, while such preferential access can provide opportunities for beneficiaries, it also creates problems of trade diversion, to the disadvantage of the developing countries not benefiting from the preferential access.

Source: based on FAO, 2007b.

Source: FAO, The State of Food and Agriculture, Biofuels: Prospects, Risks and Opportunities (2008) , Chapter 4, p.53

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Other Figures & Tables on this publication:

TABLE 1: Biofuel production by country, 2007

TABLE 2: Biofuel yields for different feedstocks and countries

TABLE 3: Hypothetical potential for ethanol from principal cereal and sugar crops

TABLE 4: Voluntary and mandatory bioenergy targets for transport fuels in G8+5 countries

TABLE 5: Applied tariffs on ethanol in selected countries

TABLE 6: Total support estimates for biofuels in selected OECD economies in 2006

TABLE 7: Approximate average and variable rates of support per litre of biofuel in selected OECD economies

TABLE 8: Energy demand by source and sector: reference scenario

TABLE 9: Land requirements for biofuel production

TABLE 10: Water requirements for biofuel crops

TABLE 11: Import bills of total food and major food commodities for 2007 and their percentage increase over 2006

TABLE 12: Net importers of petroleum products and major cereals, ranked by prevalence of undernourishment

TABLE 13: Share of net staple food-seller households among urban, rural and total households

Box 1: Other types of biomass for heat, power and transport

Box 2: Biotechnology applications for biofuels

Box 3: Biofuel policies in Brazil

Box 4: Biofuel policies in the United States of America

Box 5: Biofuel policies in the European Union

Box 6: Main sources of uncertainty for biofuel projections

Box 7: Biofuels and the World Trade Organization

Box 8: Biofuels and preferential trade initiatives

Box 9: The Global Bioenergy Partnership

Box 10: Biofuels and the United Nations Framework Convention on Climate Change

Box 11: Jatropha – a “miracle” crop?

Box 12: Agricultural growth and poverty reduction

Box 13: Cotton in the Sahel

Box 14: Biofuel crops and the land issue in the United Republic of Tanzania

Figure 1: World primary energy demand by source, 2005

Figure 2: Total primary energy demand by source and region, 2005

Figure 3: Trends in consumption of transport biofuels

Figure 4: Biofuels – from feedstock to end use

Figure 5: Uses of biomass for energy

Figure 6: Conversion of agricultural feedstocks into liquid biofuels

Figure 7: Estimated ranges of fossil energy balances of selected fuel types

Figure 8: Support provided at different points in the biofuel supply chain

Figure 9: Biofuel production costs in selected countries, 2004 and 2007

Figure 10: Breakeven prices for crude oil and selected feedstocks in 2005

Figure 11: Breakeven prices for maize and crude oil in the United States of America

Figure 12: Breakeven prices for maize and crude oil with and without subsidies

Figure 13: Maize and crude oil breakeven prices and observed prices, 2003–08

Figure 14: Price relationships between crude oil and other biofuel feedstocks, 2003-08

Figure 15: Food commodity price trends 1971–2007, with projections to 2017

Figure 16: Global ethanol production, trade and prices, with projections to 2017

Figure 17: Major ethanol producers, with projections to 2017

Figure 18: Global biodiesel production, trade and prices, with projections to 2017

Figure 19: Major biodiesel producers, with projections to 2017

Figure 20: Total impact of removing trade-distorting biofuel policies for ethanol, 2013–17 average

Figure 21: Total impact of removing trade-distorting biofuel policies for biodiesel, 2013–17 average

Figure 22: Life-cycle analysis for greenhouse gas balances

Figure 23: Reductions in greenhouse gas emissions of selected biofuels relative to fossil fuels

Figure 24: Potential for cropland expansion

Figure 25: Potential for yield increase for selected biofuel feedstock crops

Figure 26: Potential for irrigated area expansion

Figure 27: Agricultural trade balance of least-developed countries

Figure 28: Distribution of poor net buyers and sellers of staple foods1

Figure 29: Average welfare gain/loss from a 10 percent increase in the price of the main staple, by income (expenditure) quintile for rural and urban households