Socio-economic impacts of biofuels in developing countries

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Cover thesis: Socio-economic impacts of biofuels in developing countries

The global demand for energy, and associated services, is increasing. Energy and energy services (lighting, cooking etc.) are required by societies to foster social and economic development, to improve human welfare and health and to serve productive processes (IPCC 2012). Fossil fuels dominate the current energy supply and this leads to a rapid growth in global greenhouse gas (GHG) emissions. The consumption of fossil fuels accounts for the majority of these GHG emissions (IPCC 2012). Climate change is at the top of the political agenda and negotiations are ongoing in order to set an international policy framework for a post-Kyoto era, in which developing countries are expected to commit towards climate change mitigation goals and measures, alongside developed countries.
There are multiple options for lowering GHG emissions such as energy conservation and promoting efficiency, using renewable energy or deploying nuclear energy (IPCC 2012). There are various possibilities to generate renewable energy via solar, wind, geothermal or biomass resources. The advantage of biomass is that the production of biomass for energy generation can contribute not only to climate change mitigation and energy security, but also to rural development and employment generation (Faaij and Domac 2006). Besides these environmental and social advantages, increasing energy prices, particularly of oil, are also stimulating the market for alternative energy sources. Several studies have indicated that the production of crops for energy production has the (technical) potential to contribute up to one-third of the global energy supply in the year 2050 (Smeets et al. 2007; Van Vuuren et al. 2009; Dornburg et al. 2010). Estimates vary widely with respect to the technical potential (due to the inclusion of various restrictions on resource limitations and environmental concerns), but most studies agree that the
technical potential of generation of energy derived from biomass (i.e., bioenergy) including crops, residues and organic wastes, in 2050 can reach up to 500 EJ/y (Smeets et al. 2007; Batidzirai et al. 2012a). Out of the total technical bioenergy potential, dedicated bioenergy crops have the largest (technical) potential of up to 200 EJ/year in 2050 (IPCC 2014).

Besides the advantages of biofuels for climate change mitigation, energy security and rural development, biofuels can also have positive impacts on (regional) GDP, and on mitigation of local pollutant emissions (Chum et al. 2011). Furthermore,bioenergy is versatile because it can be deployed as solid, liquid and gaseous fuels for a wide range of uses, including transportation, heating, electricity production, and cooking (Chum et al. 2011). The main reasons for the deployment of biofuels are:

  1. Contribution to energy security through diversification of sources, increasing the number of producing countries and potential to develop ‘homegrown’ energy;
  2. Potential to contribute to necessary GHG emission reductions by replacing fossil fuels;
  3. Potential to contribute to development, with special focus on rural development, regeneration of rural areas and improving access to modern energy services.

Many developing countries have a large potential for supplying bioenergy
feedstocks (van der Hilst et al. 2011; Wicke et al. 2011; Batidzirai et al. 2012a). Bioenergy production appears to have more scope for developing into an economically competitive supply source in developing countries compared to economically advanced countries, due to often more suitable climate conditions and relatively lower land and labour costs, and the prevalence of low-intensity agricultural management systems in which there is still ample scope for realising high yield improvements through intensification (Smeets et al. 2007; Hoogwijk et al. 2009; Wicke et al. 2011).

Bioenergy production and trade in developing countries can be economically
beneficial, e.g. by raising and diversifying farm income and by increasing rural
employment. Other benefits are a general improvement of the local livelihood,
supporting local services, an improvement in agricultural techniques and local food security, increased access to energy and an improvement of working conditions (Ewing and Msangi 2009; Wicke et al. 2009; Arndt et al. 2011; van der Horst and Vermeylen 2011; Walter et al. 2011; Diaz-Chavez et al. 2013). Furthermore, increased market opportunities can arise and capacity building can be promoted. These positive impacts take place on different scales, from local to regional and beyond. There are millions of smallholder farmers who could benefit from additional income from energy crops.

However, the production and use of bioenergy does not necessarily contribute to sustainable development. Negative impacts occur in developing countries where existing laws for regulating land, water and other resource use are inadequate or not sufficiently enforced, and where the combination of formal and customary rights creates complex situations (German et al. 2011a). The main risks of cropbased bioenergy cultivation for sustainable development and livelihoods, include environmental problems such as deforestation and loss of biodiversity, but also competition for arable land and related resources and consequent social impacts on food security, tenure arrangements, displacement of communities and economic activities, deforestation, impacts on, and unequal distribution of costs and benefits (Sala et al. 2000; Mitchell 2008b; World Bank 2010b; German et al. 2011a; Diaz-Chavez et al. 2013; Hodbod and Tomei 2013; IPCC 2014). But also economic unsustainability can be a cause of negative impacts, for instance when projects are forced to close down. Some crops can only be produced in an economically competitive manner in specific circumstances such as on a certain soil type, in a particular climate condition, or with a specific management level (Van der Hilst et al. 2010; Wicke et al. 2011; Wicke et al. 2013).

A bioenergy system includes various production systems, business models,
conversion technologies, capital intensities. These systems can thus cause both positive and negative effects and their deployment needs to be in balance with a range of environmental, social and economic objectives. Co-benefits and risks do not necessarily overlap, neither geographically nor socially (Dauvergne and Neville 2010; Wilkinson and Herrera 2010; van der Horst and Vermeylen 2011). This means that multiple sustainability issues across multiple spatial scales and across development and deployment time scales have to be addressed, and a correspondingly diverse array of sustainability assessment criteria and methodologies are needed in order to enable adequate bioenergy investment decision-making and monitoring of projects during implementation (van Dam et al. 2010b). What makes this particularly complex is that interactions between different types of impacts can reinforce certain effects (positively or negatively) or fully negate each other’s impact. Much is still unclear about the exact circumstances under which bioenergy cultivation and processing are likely to produce beneficial results, and under which circumstances they are likely to induce harms, and about the pivotal factors that drive these diverse outcomes in specific
situations. In Table 1-1 an overview is provided of potential positive and negative impacts at different scales.

Impact Scale

Increase in economic activity, income generation and income diversification + Local Investments in agricultural production systems can lead to overall agricultural management improvements
+ Local Promotion of capacity building and new skills + Local Efficient biomass technologies for cooking can improve health conditions
(mainly for women and children)
+ Local
New job opportunities, bioenergy for local power generation using
participarity technology development can increase acceptance and
+ Local
Lower environmental impacts and more efficient land use compared to
reference agricultural and energy systems
+ local to regional
Contribution to energy independence + local to national
Employment creation + local to national
Promotion of participative mechanisms for small scale producers + local to national Improvement of soil and biodiversity and abatement of erosion + local to global Promotion of technology development and/or facilitation of technology transfer
+ local to global
Decrease in food security (due to competition with food production;
decreased food availability, food access, food usage and food supply stability
- local to global
Increase in deforestation and/or forest degradation - local to global
Displacement of activities or other land uses - Local to global
Possible promotion of concentration in income and/or increase in poverty (if
sustainability criteria and strong governance are not in place)
- local to regional
Uncertainty about mid- and long term revenues - national
Possible reduction in labour demand due to technology - local
Improvement or deterioration in land tenure and land use rights +/- local
Cross sectoral spillovers or conflicts between forestry, agriculture, energy
and/or mining
+/- local to national
Impacts on labour rights along the value chain +/- local to national
Decrease or increase in conflicts or social tensions +/- local to national
Use of local knowledge in production and treatment of bioenergy crops, or
discouragement of local knowledge and practices
+/- local
Empowerment of local farmers by creating local income opportunities, or
displacement of smallholders
+/- local
Positive or negative gender impacts +/- local to national
Maintenance or improvement of soil structure, or negative impact on soil
quality, water quality and biodiversity
+/- local to global
Increase or decrease in market opportunities +/- local to global
Contribution to t changes in prices of feedstock +/- local to global
Improvement e in infrastructure coverage or (if only available for a few social
groups), or increase in marginalisation
+/- local

There has been a substantial increase in global trade of biomass since the start of the 21st century (Walter et al. 2008; Lamers et al. 2014). This is mainly driven by the economic margin between the cost of supply, including feedstock production and supply logistics and the market price in importing countries and by an increased demand due to biofuel promoting policies in Europe and the USA. An international market has appeared and global solid biomass trade for example, has increased
more than fivefold in the last decade to 300 PJ in 2010 (Lamers et al. 2012). Hence, due to the sheer growth in production and trade volumes, socio-economic and environmental sustainability issues surrounding production and processing of biofuels have been steadily growing in importance. A range ofinitiatives have been set up that target the development of methodologies and tools to support improved governance of bioenergy value chains, thus ensuring greater sustainability of biofuels. One option to ensure the sustainable production and trade of biofuels is the application of certification systems (Diaz-Chavez 2010).
There is globally an increased focus on the development of such sustainability certification schemes and sustainability initiatives (van Dam et al. 2008b; van Dam
et al. 2010b; Vissers et al. 2011). Examples of these schemes and initiatives are
roundtables of sustainable production (e.g Roundtable of Responsible Soy (RTRS),
Roundtable of Sustainable Palm oil (RSPO), the Better Sugarcane Initiative (BSI),
and the Roundtable of Sustainable Biofuel Production (RSB)), the Renewable
Energy Directive (RED) commissioned by the European Commission, and the Global
Bioenergy Partnership (GBEP) which is a governmental initiative. Sustainability is
also increasingly incorporated in national policy frameworks, such as investor
guidelines and a draft policy for sustainable development of biofuels by Tanzania,
and an implemented governance framework for sustainable biofuels by
Mozambique (MEM 2008; MEM 2012; Republic of Mozambique 2012; Schut et al.
2014). Furthermore, the International Organization for Standardization (ISO) has
included environmental management (ISO 14000) and social responsibility (ISO
26000) in its standards and is now also working on an international ISO biofuel

Sustainability certification schemes and initiatives are developed to assure the
sustainability of production systems in different sectors, but for socio economic
impacts of biofuels they are not yet fully operational, although certified bioenergy
production is required by e.g. the EU Renewable Energy Directive (2009/28/EC
2009). Furthermore, it appears that most of the sustainability certification schemes
for biofuels mainly focus on environmental principles, even though there are also
serious concerns about socio-economic impacts of bioenergy production activities
(van Dam et al. 2010b; German and Schoneveld 2012). The lack of studies that
include empirically examined (positive or negative) social impacts at the local level
is also acknowledged by Hodbod and Tomei (2013), and by van Dam et al. (2010b),
who indicated that certification should be combined with additional impact
measurements and methodological tools on a regional, national and international

Another obstacle to ensuring the sustainability of biofuels is that data
requirements are often found to exceed the resources and capabilities for reliable
data collection in many developing countries from which biofuels are sourced (van
Dam et al. 2010b). Obtaining good quality field data is difficult due to cultural,
infrastructural and other barriers. In addition, some certification schemes are
designed primarily with western conditions in mind, which deviate substantially
from conditions in the rural areas of many developing countries, e.g. with respect
to farming systems, farm sizes, and land use and ownership laws (Romijn et al.
2013). The lack of reliable data is problematic because certification systems cannot
function effectively and efficiently without them (van Dam et al. 2010b).
In the next section the current state of the art knowledge on these issues will be
detailed, and the major areas in which further progress is still badly needed will be
outlined. This is the basis for the formulation of the research aims and questions of
this thesis in section 1.3.

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