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The impact of EU biofuels production policies on developing countries

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Context - The policies on biofuels in the EU have impacts on developing countries. With the aim of strengthening the knowledge of the consequences of an increased biofuels demand and how can these policies take that into account, this report presents an analysis of these impacts with a specific focus on African countries.

This is a faithful summary of the leading report produced in 2013 by European Commission (EC): "Assessing the impact of biofuels production on developing countries from the point of view of Policy Coherence for Development " 

  • Source document:EC (2013)
  • Summary & Details: GreenFacts
Latest update: 5 December 2017

What are the impacts assessed by this report?

This report produced for the EU aims to identify and assess the relevant positive and negative impacts as well as the knowledge gaps on the links between biofuel investments and sustainable development in developing countries. It looks at the global context of biofuels production, from food security and social impacts to policies and human rights. The report highlights the identified challenges, opportunities, synergies and trade-offs of biofuels production and development objectives in developing countries, on the basis of different domestic contexts and production methods.

What is the influence of biofuel production on food security?

Broadly speaking, there are three main categories materials from which biofuels are made:

  1. residues and wastes;
  2. natural vegetation; 
  3. energy crops.

Biofuel production can either increase or reduce food security (especially for smallholder farmers) depending on the policy behind its development and the characteristics of the local agricultural sector.

Meanwhile, factors such as low and declining productivity of agriculture, exceptionally unfavourable weather conditions or rising international oil prices, seem to be more prominent drivers of food prices rise than the current biofuel production level. However, even if not the major driver, an increase in biofuels production in the future will further exacerbate the pressure on local food prices particularly for developing countries that, as a consequence of a drop in local or regional food production, would more rely on importing basic foodstuffs from the international market.

Multiple cropping and crop rotation, could enable to spread such market risks and also mitigate the economic risks linked to adverse weather

Do the EU biofuels policies have an influence on practices in developing countries?

A clear link can be established between the EU biofuels policies 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. These fail to take into account local interests, livelihoods and welfare amidst increasing conflicts due to increasing land pressures and large scale land acquisition.

Positive spill over effects of investments in biofuels in developing countries would thus be achieved only through strengthening of the policy framework for biofuels, and also by providing training, sharing best practices, and facilitating technology transfer at the same time. The problem is that many countries do not have legal or procedural mechanisms in place to protect local rights.

What are the main criticisms of agricultural investments involving biofuels in developing countries?

The main criticism is about the way “unused” or “marginal” lands are treated. The threat of dispossession or eviction from land due to government’s failure to offer adequate protection of customary land rights (the way land is held or owned by individuals or groups) is 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 that changes in land tenure systems and 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 it is the case in most customary land systems in Africa.

What is the main type of biomass produced for the production of biofuels?

A large majority of the “non-food” projects (73 %) are exclusively dedicated to Jatropha production,a shrub native to Central America that has spread to Africa and Asia, with most of them located in Africa, particularly in East African countries. 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.

Furthermore, biofuels business strategies, with EU private investors as major actors involved in large scale land acquisitions, are often long-term and plants for feedstock crops (Jatropha, but also palm, eucalyptus and others) need several years before enabling a first commercial harvest. Data available also suggest that a number of these investments in Africa are of a speculative nature with negative consequences for local people and many large scale biofuels projects in Africa failed or are being abandoned. Actually, it seems that really viable projects are those that do not target just the international biofuel market, but also local uses of Jatropha such as heat generation or soap making.

What are the main environmental impacts of biofuels investments?

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 but, in the majority of cases reviewed, these are considered just an administrative burden.

The main environmental impacts of feedstock production for biofuel are caused by intensive farming systems that may be efficient but not always sustainable. The main crops currently used as feedstock in liquid biofuel production require high quality agricultural land and, to generate economically viable yields, major inputs in terms of fertilisers, pesticides and water. In terms of deforestation, all data coincide to indicate that biofuel feedstock expansion at the expense of forests ranged from 13 to 99%, the highest rates being observed for oil palm in Indonesia.

National and international legislation usually require an Environmental Impact Assessment (EIA) to be conducted before any implementation works begin but, in the majority of cases reviewed, these are considered just an administrative burden.

Another important impact is on water resources. Many of the crops currently used for biofuel production have relatively high water requirements and globally, the water footprint of biofuels is large compared to other forms of energy (70 times bigger than that of oil). The supposed free water use by biofuel investors also leads to inappropriate water footprint (inefficiency, waste, sanitation and pollution) as drained water is often discharged to rivers without pre-treatment. One Important factor is that by the 2050, due to climate change, the amount of land subject to water stress are expected to be significant.

What are the potential social and employment consequences of biofuel production in developing countries?

Much of the employments that are likely to come with increased biofuel production in developing countries, will be because of potentially increased labour use at the farm level to grow the feedstock. Large scale farming of sugarcane tends however to create fewer jobs as the level of mechanization increases.

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. Large scale farming of sugarcane tends however to create fewer jobs as the level of mechanization increases.

Meanwhile, data showed that 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, and smallholders do not usually employ other persons.

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.

Do regulations play their role in the control of the various impacts of biofuels investments in developing countries and how transparent are these?

An increasing commonly recognised problem is the lack of transparency and availability or reliable data. Examples of transparency initiatives, such as the Extractive Industries Transparency Initiative, should be analysed with the view of setting up similar systems for improvement of data availability and private sector accountability on investment in biofuels projects.

While many African countries have implemented or are preparing biofuel policies, their development shows several gaps; concomitant regulatory frameworks are still lacking and capacities for land suitability analysis for biofuel production are inadequate. Most large-scale land investment is indeed taking place in countries with weak land tenure governance structures. Investors take advantage of tax havens and all other forms of financial incentives, and most likely 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 these countries.

As from a social and economic point of view active local partners appear to be the most viable, a number of countries have taken steps to explicitly strengthen protection and recognition of customary rights in national legislation and inclusive business models that involve smallholder farmers.

Are there anyway positive examples of investments in biofuels in developing countries?

There are indeed examples of good practices worldwide targeting both biofuels production for export and stationery energy generation for increasing local energy access, which demonstrate their potential benefits for soil quality, water availability and quality, agrobiodiversity, climate change mitigation, productivity, income generation and required inputs. Both large and small applications of biofuel plantations and processing plants can be coupled with electricity or energy cogeneration from the crop residues (e.g. after sugarcane or grain processing). Alternatively, residues can be used to produce biogas for household purposes providing a clean local source of fuel for cooking and space heating.

These dimensions add of course complexity to the projects but offer a way to hedge the risks of biofuels investments, while contributing to local development not only through creation of jobs but also through provision of benefits in terms of environment, economy and society.

Unfortunately, as most foreign investors generally target biofuel production for export while the domestic market usually remains only a secondary target, the concept of biofuels as a means to increase the national energy security of developing countries is limited.

What are the key conclusions of this study?

One of the challenges for the biofuels 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 can be among its key beneficiaries.

A policy focused on fulfilling an internal UE biofuel blending target through certified biofuels alone cannot expect to develop a sustainable biofuels industry automatically, especially in developing countries.

Other key conclusions are that most of the data identified in this report are insufficiently taken into consideration by those who have to review existing policies and shaping new orientations for a sustainable development of biofuels and related to the risks associated with the claims and perception of "unused land" availability in developing countries.

Compliance with the existing developed codes of conduct and certification schemes should thus 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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