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Re: HLPE consultation on the V0 draft of the Report: Biofuels and Food Security

Australian Government ,
30.01.2013
FSN Forum

Australian Contribution to the High Level Panel of Experts for Food Security and Nutrition (HLPE) report on Biofuels and food security

Overall comments

The draft HLPE report on ‘Biofuels and Food Security’ provides a useful overview and highlights well the range of key issues relating to biofuels and their implications for food security. It reads as a good summation of the state of play across countries and the scientific/economic perspectives currently influencing the biofuel agendas including research. It is largely a factual exposition which effectively illustrates the conflicting interactions between biofuels and food security in a world of finite land and energy resources.

The draft policy recommendations acknowledge the potential distortions that mandates, subsidies and tariffs can have on the market for biofuels. The report correctly reflects that the Australian Government has not introduced a national mandate, and that New South Wales is the only state to have one.

However, Australia considers that the analysis of the concept of food security in the draft paper is limited and as a result the recommendations are also limited. For example, the paper analyses food security arising from policy-based biofuels markets in terms of the FAO framework for assessing the determinants of food security – (i) access (i.e. food expenditure/income); (ii) availability (resources available for food production – mostly land and water); (iii) stability (access and availability guaranteed through time); and (iv) utilization (access to resources which enable food to be appropriated). However, the report does not analyse biofuels policy-induced food insecurity in the context of other factors impacting on food security, such as restrictive trade regimes, inappropriate price or output regulation, stockpile policies, dietary preferences, insecure land tenure, taxes on food production etc.  Such an analysis is required to determine the significance of biofuels policy-induced food insecurity in relation to these other factors influencing food insecurity.

Biofuel promotion also has economy-wide impacts aside from its direct impact on food production and price.  For example, replacing some of the liquid petroleum fuel market with biofuels leaves a larger amount of the hydrocarbon market available for the production of agricultural fertilizers, with consequent impacts on price and supply of the inputs to food production.  It would be useful to look at the economy-wide impacts of subsidies to biofuels to understand these effects.

A biofuels mandate may be a good policy for quickly developing a biofuels market. However, unless biofuels are able to compete in the fuels market in the medium to long-term absent the mandate, it is generally not good policy in the longer term. 

Research related comments

The Australian government submits the following general research related matters for the HLPE’s consideration:

  • The interplay and synergies between energy security and food security are becoming more significant than ever though the impacts will vary across countries, with many food productivity advances being more energy intensive in nature particularly in developed countries but also in a range of developing countries.
  • There is and will be a need for ongoing scientific research into biofuels to realise the latent efficiency potential of second and third generation biofuels in developing countries. In this case however, there seems to be large amounts of good research across countries without coordination and therefore considerable duplication of effort, including in developing countries that can ill afford the expenditures. Knowledge transfer mechanisms require increased attention to rectify this defect; with developed countries have a comparative advantage in most cases. It seems that a number of developing countries are engaging in R&D when other countries already have the basic know how which could be adapted in many cases with less expense. The use of jatropha is a case which is mentioned in this draft paper where countries have engaged in the research and production without real access to the scientific and economic information that should be readily available from public sector agencies in other countries; recognising that private sector researchers are understandably more restrictive with information for commercial reasons.
  • While the information gaps are reducing with time, there is still a sense that biofuels are a panacea in some poorer countries where the costs of fossil fuels are increasingly prohibitive. This can lead to false expectations and misuse of resources driven partly by a lack of precise economic data and true reflections on the real opportunity costs of biofuels at country levels. There are very few if any genuine examples of biofuels which do not have an opportunity cost in terms of alternative land and water use for food crops. The exception is where by-products from food/feed crops can be utilised for biofuels or where biofuel crops are natural break crops, thereby reducing the marginal production costs and enabling producers including small holders to diversify the farm enterprise mix which is a basic income and risk management objective in many developing countries.
  • It should be made clearer that the economics of biofuel cropping are volatile and short term horizons are less likely to have success. The variable costs and availabilities of fossil fuels have direct impacts on the viability of biofuels not only because of the comparative prices but also the fact that many biofuels require traditional energy sources at the processing stages which impacts on total production costs.
  • The distortionary policy settings with subsidies and trade restraints in biofuel sectors of many developed countries is addressed in this paper, but we believe this should be emphasised further, given the negative impacts on food affordability in poorer countries over time.

We also submit the following specific comments:

  • Appendix 1, page 65, the entry in the table for Australia requires amendment.  The column headed Mandate-Tools has the entry N/A, presumably meaning Not Applicable and it relates to mandates listed in Columns two and three. The Australian Government policy provides Ethanol Production Grants for producers of fuel ethanol to stimulate domestic production.  As well, it administers the Energy Grants (Cleaner Fuels) Scheme, which aims to provide grants for the manufacture or importation of biodiesel and renewable diesel, among other fuels, to offset any excise or customs duty and give a market advantage to these cleaner fuels. These grants apply throughout Australia and are not restricted to New South Wales. We suggest adding a separate column to capture such policies.
  • The paper is inconsistent in its usage of metric and customary units of measurement (litres vs. gallons). There should be a single measurement system used throughout the reports, or alternatively dual reporting of figures presented in the paper.
    • For example, “x billion litres (x billion gallons)”
  • The paper struggles to scale increases in demand for biofuels with rises in global food prices. This connection needs to be more clearly made to support positional statements in the report claiming the predominance of biofuels in food price increases.

Specific comments on the recommendations of the paper

Australia makes the following comments on the following recommendations of the report:

Recommendation One

Australia’s comments:

Australia recognises that global demand for biofuels is one of the many factors that may affect food security and food prices.

The government believes that inflexible mandates for biofuels are polices contrary to creating an open trading market. We would caution against major market intervention or regulation noting the potential for market distortion.

The Australian biofuels industry does not impact significantly on food prices in Australia due to the small scale of the industry and because of the emphasis on advanced biofuels which are derived from low cost, non-food crops, algae and agricultural wastes and would assist in mitigating competition between food and fuel.

Even if there was a substantial increase in demand for biofuels necessitating their production from traditional food crops, such as grains and sugar, it is unlikely to significantly affect food prices domestically as these commodities trade in global markets.

Recommendation Two

Australia’s comments:  The Australian Government has a policy interest in land use changes and recognises that this is a significant policy issue that requires careful consideration. The Australian Government employs a whole-of-government approach by working closely with states and territories on land use planning.  

In terms of foreign direct investment, Australia has well-established arrangements and regulatory frameworks to protect landholders, investors and communities.

Recommendation Three

Australia’s comments:

The recommendation is not clear as to whether it is referring to integrated land and water management, or the treatment of land and water as a single inseparable property right. The latter would be in conflict with Australia’s current water reform agenda under the National Water initiative, which guides the separation of land and water rights to allow water to be allocated to its highest value use. We propose inserting the word “management” after the phrase “land and water”.

Recommendation Four

Australia’s comments:  The Australian Government agrees with this recommendation.

Recommendation Five

Australia’s comments:  Australia questions the suggestion of a precondition to adhere to the broadly-owned RAI principles. See recommendation two comments regarding investment in Australia.  Investment–whether foreign or domestic–in the agricultural sector can bring significant benefits and opportunities for farmers. The Australian Government does not support an approach that would impose blanket bans or restrictions on foreign investment.

Recommendation Six

Australia’s comments:  Australia is participating in the development of an International Standards Organisation (ISO) Standard for Sustainability Criteria for Bioenergy which covers the economic, environmental and social aspects of sustainability.  The ISO standards involve some 30 countries of which many are from developing nations and experience many of the issues identified in the report.  The ISO standard seeks to address these issues whilst still allowing for the development of a biofuels industry in a sustainable manner.

Recommendation Seven

Australia’s comments: The Australian government is targeting investment in advanced biofuels which have the potential to build a sustainable new industry that could increase national fuel security, assist in reducing greenhouse gas emissions and stimulate regional development.

We are also working with the Biofuels Association of Australia and the ISO to develop internationally agreed sustainability criteria that can be applied to industry to ensure that support for biofuels does not compromise sustainable production practices and will provide greater impetus for move towards advanced biofuels. Voluntary certification schemes can be a useful mechanism for producers to demonstrate their environmental credentials to concerned consumers.

Most Australian exporters subscribe to either the International Sustainability and Carbon Certification Scheme (ISCC) or the Biomass Biofuel Sustainability Voluntary Scheme (2BSVS), which are formally recognised by the European Commission, to supply certified canola to the EU. However, exporters regard the cost of these schemes as an expensive and unnecessary impost, believing that the certification requirements should only be applied to countries with unsustainable production systems.

Recommendation Eight

Australia’s comments: Australia agrees that developing a biofuel’s policy based on the typologies of a country is beneficial. In December 2011, the Australian Government released the Strategic Framework for Alternative Transport Fuels. The Framework establishes a long term approach to a market led adoption of alternative transport fuels in Australia in the context of maintaining Australia’s transport fuel security while moving towards a lower carbon economy by 2030.

In regards to identifying trade-offs, the need for recommendation does not currently apply to Australia because, as previous mentioned, we believe our biofuel policies do not contribute to global food security concerns or have any significant impact of food prices because of the small scale of the Australian industry and because most Australian biofuel production is derived from waste products.

Recommendation Nine

Australia’s comments: The recommendation assumes the options are between using food crops or non-food crops for biofuel (ignoring for the moment the merits, or otherwise, of biofuel mandates etc).  However, there is some research, including in Australia, into the viability of using residues from crops grown for other purposes as the feedstock for biofuels.  This, ostensibly at least, solves the problem of displacing other land uses and should be addressed in the report.

Recommendation Ten

Australia’s comments: The Australia government is targeting investment in advanced biofuels which have the potential to build a significant and sustainable new industry that could increase national fuel security, assist in reducing greenhouse gas emissions and stimulate regional development. Therefore the recommendation to prioritise the development of non-biomass renewable fuels cannot be supported as Australia invests in the research, development, demonstration, deployment and commercialisation of various renewable energy and related technology innovations.

Recommendation Eleven

Australia’s comments:  Australia agrees with this recommendation.

Structure of the report

Some of the recommendations/conclusions at the beginning of the draft report do not seem to be fully reflected in the report itself.  In particular, the paragraphs/recommendations referring to national mandatory biofuel targets and subsidies that impact negatively on food prices: it would be helpful to show more clearly in the report the basis of the policy recommendations that have been reached.  We would also like to suggest that the proposed recommendations/conclusions come at the end of each of the chapters of the report rather than at the beginning of the report.

Concluding comments

The Australian Government thanks the HLPE for developing a zero draft of the ‘Biofuels and Food Security’ report and is happy to engage with the HLPE to provide comment on future drafts.