[MPWG] Fw: [Biomass] FAO, World Bank, IMF, WTO call for end to subsidies + mandates for biofuels

Mon May 16 11:09:38 CDT 2011

Friends and Foresters, PCA -

 I thought you might find this note of interest as the food vrs. fuel is an issue in Nevada with our pine nuts.  I hope it is discussed at the Agroforestry confrence in Georgia. 

Subject: [Biomass] FAO, World Bank, IMF,WTO call for end to subsidies + mandates for biofuels

  This is quite amazing!

    Intergovernmental organisations (including FAO, World Bank, IMF, WTO) call for end to subsidies and mandates for biofuels on grounds of food security.

    See excerpt below, and page recommendation 6 (page 26) of this report: http://ictsd.org/downloads/2011/05/finalg20report.pdf - ahead of G20 discussions in Paris in June.

    It's not been picked up up in media much (yet) - it's from a leak - but given that it's from FAO, IFAD, IMF,OECD, UNCTAD, WFP, the World Bank, the WTO, IFPRI; this is pretty significant!

      Reducing policy conflicts between food and fuel

      Between 2000 and 2009, global output of bio-ethanol quadrupled and production of biodiesel increased tenfold; in OECD countries at least this has been largely driven by government support policies.

      Moreover, trade restrictions by favouring domestic sources of raw material for biofuels do not maximise expected environmental benefits. Biofuels overall now account for a significant part of global use of a number of crops. On average, in the 2007-09 period that share was 20% in the case of sugar cane, 9% for both oilseeds and coarse grains (although biofuel production from these crops generates byproducts that are used as animal feed), and 4% for sugar beet.

      With such weights of biofuels supply-demand balance for the products concerned, it is not surprising that world market prices products (and their substitutes) are substantially higher than they would be if no biofuels were Biofuels also influence products that do not play much of a role as feedstocks, for example because of the close relations between crops on both the demand side (because of substitutability consumption) and the supply side (due to competition for land and other inputs).

      At the international level, crop prices are increasingly related to oil prices in a discrete manner determined by the level of biofuel production costs. Increases in the price of oil enhance ethanol’s competitiveness relative to petrol and strengthen its demand. Since both energy and food/feed utilise the same input, for example grain or sugarcane, increases in the production of ethanol reduce the supply of food and result in increases in its price. This relationship between the prices of oil, biofuels and crops arises due to the fact that, in the short run, the supply of crops cannot be expanded to meet the demand by both food and energy consumers.

      If oil prices are high and a crop’s value in the energy market exceeds that in the food market, crops will be diverted to the production of biofuels which will increase the price of food (up to the limit determined by the capacity of conventional cars to use biofuels - in the absence of flexfuel cars and a suitable distribution network). Changes in the price of oil can be abrupt and may cause increased food price volatility. Support to the biofuel industry also plays a role. Subsidies to first-generation biofuel production lower biofuel production costs and, therefore, increase the dependence of crop prices on the price of oil. Such policies warrant reconsideration.

      Recommendation 6

        a.. G20 governments remove provisions of current national policies that subsidize (or mandate) biofuels production or consumption. At the same time, governments should: 
        b.. Open international markets so that renewable fuels and feed stocks can be produced where it is economically, environmentally and socially feasible to do so, and traded more freely. 
        c.. Accelerate scientific research on alternative paths to reduced carbon emissions and to improved sustainability and energy security. 
        d.. Encourage more efficient energy use, including in agriculture itself, without drawing on finite resources, including those needed for food production. 
      Failing a removal of support, G20 governments should develop contingency plans to adjust (at least temporarily) policies that stimulate biofuel production or consumption (in particular mandatory obligations) when global markets are under pressure and food supplies are endangered.

    Press release on ICTSD:

      Leaked Report Urges G-20 Action on Food Price Volatility
      http://ictsd.org/i/news/bridgesweekly/106224/

      A leaked report by top international food security experts urges the Group of 20 leading economies to tackle food price volatility by reforming biofuel policies, curbing the use of agricultural export restrictions, and rebuilding emergency food reserves.
      Senior agriculture ministry officials from G-20 governments are meeting in Paris on 11-12 May to hammer out an action plan based on the experts’ recommendations.

      Absent from the expert report was a World Food Programme proposal on an emergency reserve system. The new text does, however, provide new advice on biofuel policy and an Agricultural Market Information System (AMIS).

      The report, a collaborative effort between ten international organisations working on food, such as the UN Food and Agriculture Organization and the Organization for Economic Cooperation and Development, has changed little since its previous draft version, though some described the analysis as more “nuanced.”

      Representatives from civil society groups are expected to air their concerns in a 45 minute meeting on Thursday with the G-20 agriculture ‘sherpas’ who have been nominated by agriculture ministers to attend the meeting. These representatives will draft an action plan that agriculture ministers from the G20 will agree to at their first ever meeting on 22-23 June.

      Doha agreement, constraints on export restrictions targeted

      The document recommends that the G-20 lead efforts to concluse the Doha Round as a step towards improved trade policy and less price volatility. Sources close to the report told Bridges that any discussion of a “Plan B” for Doha has been off the table in the group’s discussions. Both the experts advising the group and the representatives of governments have refrained from discussing any alternatives to Doha while attempts to resuscitate it continue.

      As in previous drafts, the experts call for a clearer definition of a “critical food shortage,” and other conditions that allow WTO members to limit exports under international trade law. They also urge a focus on the particular needs of least developed and net food importing countries. At the WTO, a recent proposal by net-food importing developing countries called for some strictures on the use of export restrictions to be part of a Doha Round accord.

      Export restrictions may once again come under the spotlight since the Financial Times reported that Glencore, a Swiss agricultural commodity firm, made bets that Russian wheat prices would surge ahead of a ban in 2010 on sales to buyers abroad. Representatives of the firm had publicly called for such a ban.

      A delegate from a G-20 country in Geneva told Bridges that some states with export interests seemed reluctant to accept the notion of limiting the ability of countries to block exports. At least two members of the G-20, Russia and Argentina, have instituted export restricting measures such as taxes or bans in the past year.

      Biofuels

      Noting that biofuel policies may have played a role in sustaining high prices for corn, with spillover effects into other commodities, the authors urged G20 members to be flexible when providing incentives for fuels derived from food crops.

      Those participating in the inter-agency meetings saw familiar wrangling on approaches to solutions, for example, with the OECD viewing government intervention cautiously and the FAO finding possibly constructive roles for it.

      The report’s recommendations on biofuels say that ideally, governments would eliminate trade restrictions on biofuels and their feedstock, as well as blending mandates and subsidies. With an eye to political palatability, however, the report instead suggests that mandates be ‘automatically’ relaxed or eliminated based on changes in an observable measure such as prices or short term inventory forecasts. Given that such changes might prove costly for biofuel producers and prompt demands for compensation from their governments, the experts suggest a variety of options such as promises to buy output from producers in times of crisis.

      In their most radical departure from the status quo, the experts, many of them economists, envision an open market in renewable fuels, food stocks and food-feed commodities as alternatives. Stressing the need to ensure economically, socially and environmentally sustainable use of resources, they foresee an expanded role for ‘second-generation’ and newer types of biofuels, which do not come from food crops.

      Emergency reserves

      The agencies preparing the report had requested a detailed proposal from the World Food Programme for a “cost-effective system of small, strategically positioned emergency food reserves by the end of 2011.” Sources report that the WFP was unable to deliver this in a timely manner. The Programme did, however, hold consultations with academics, representatives of other international agencies and civil society to hash out what such reserves would look like.

      The interagency report cites the huge costs and potential inefficiencies of international physical or virtual reserves as reasons to not endorse their impelmentation. However, the report doesn’t suggest that individual countries be prohibited from building such reserves.

      An observer participating in the WFP consultations said that the Programme’s proposal was reaching beyond mere food aid. Describing the proposal as “pre-positioned food aid plus,” meaning that it could do more than simply provide emergency stocks held in anticipation of need in a given  country, the source believed that the mechanism would allow national governments to smooth import flows in times of disruptions and price spikes on international markets. According to the source, the proposal would use a combination of physical and virtual in-country stocks to “overcome break downs in international markets” lasting from 30 to 90 days.

      Since much of the funding for the WFP’s working is earmarked for aid to specific countries or for a given crop, some observers have pointed to situations where the agency’s ability to respond to distress calls has been limited. They argue that a system of reserves, even at the national level, would allow the WFP a greater degree of flexibility in preventing extreme hunger. Critics reportedly fear that such a system could potentially expand the role of the WFP and create an implicit international food reserve. To date, no such proposal has made it into formal circulation amongst the G-20.

      The WFP is expected to present a revised proposal directly to the G-20 ahead of the agriculture ministers meeting in June but after consulting with other international organisations.

    -------- Original Message -------- Subject:  [T&E LowCarbonFuels] Digest for te_lowcarbonfuels at googlegroups.com - 3 Messages in 1 Topic 
          Date:  Sat, 14 May 2011 18:30:09 +0000 
          From:  te_lowcarbonfuels+noreply at googlegroups.com 
          Reply-To:  te_lowcarbonfuels at googlegroups.com 
          To:  Digest Recipients <te_lowcarbonfuels+digest at googlegroups.com> 

     Topic: IGO-10 report to the G-20 calls for end to subsidies or mandates for biofuels
      Ronald STEENBLIK <ronald.steenblik at gmail.com> May 13 06:47PM +0200 ^

      In unusually clear and blunt language, a report prepared by 10
      inter-govermental organizations (FAO, IFAD, IMF,OECD, UNCTAD, WFP, the World
      Bank, the WTO, IFPRI and the UN HLTF) on "Price Volatility in Food and
      Agricultural Markets", leaked by the ICTSD

      http://ictsd.org/downloads/2011/05/finalg20report.pdf

      Says in Recommendation 6:

      "G20 governments remove provisions of current national policies that
      subsidize (or mandate) biofuels production or
      consumption. At the same time, governments should:

      � Open international markets so that renewable fuels and feed stocks can be
      produced where it is economically,
      environmentally and socially feasible to do so, and traded more freely.

      � Accelerate scientific research on alternative paths to reduced carbon
      emissions and to improved sustainability
      and energy security.

      � Encourage more efficient energy use, including in agriculture itself,
      without drawing on finite resources,
      including those needed for food production."

      However, it does provide an "out" in the inevitable (and, in my opinion,
      likely) case that G-20 governments don't remove support:

      "Failing a removal of support, G20 governments should develop contingency
      plans to adjust (at least temporarily) policies that stimulate biofuel
      production or consumption (in particular mandatory obligations) when global
      markets are under pressure and food supplies are endangered."

      Still, even to say that is a BIG advance in thinking, in my opinion. Note,
      the International Energy Agency was not one of the IGO-10.

      Ronald

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