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WELFARE TRADEOFFS OF BIOFUELS INVESTMENTS: A RAPID DECISION SUPPORT TOOL .

WELFARE TRADEOFFS OF BIOFUELS INVESTMENTS: A RAPID DECISION SUPPORT TOOL . Preliminary results from a case study in Tanzania . Giacomo Branca 1 , Luca Cacchiarelli 1 , Irini Maltsoglu 2 , Alessandro Sorrentino 1 , Stefano Valle 1 1 University of Tuscia – Viterbo 2 FAO- Rome.

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WELFARE TRADEOFFS OF BIOFUELS INVESTMENTS: A RAPID DECISION SUPPORT TOOL .

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  1. WELFARE TRADEOFFS OF BIOFUELS INVESTMENTS: A RAPID DECISION SUPPORT TOOL. Preliminary results from a case study in Tanzania. GiacomoBranca1, Luca Cacchiarelli1, Irini Maltsoglu2, Alessandro Sorrentino1, Stefano Valle1 1 University of Tuscia– Viterbo 2 FAO- Rome Icabr. 17th Conference “Innovation and Policy for the Bioeconomy. Ravello June 18-21

  2. OUTLINE • Overview • Research scope • Methodology • Case study • Main Results • Final considerations Icabr. 17th Conference “Innovation and Policy for the Bioeconomy. Ravello June 18-21

  3. Overview • The linkages between biofuels and social welfare are complex. • On one hand biomass production competes with food production for land and other inputs. • On the other hand, biomass production for bioenergy use may contribute to rural development by increasing household incomes, local employment and energy supply. • One key element is that these potential benefits crucially depend on the role of smallholder in the biofuel economy and on the associated institutional set up (Arndt et al. 2010) Icabr. 17th Conference “Innovation and Policy for the Bioeconomy. Ravello June 18-21

  4. Research Scope • Build and test a model to provide a rapid assessement of the socio-economic impact of investments in biofuels production, under minimum (agronomic, engineering and economic) data requirement. • Profitability indicators, based on the comparison between production cost and the relevant diesel or gasoline equivalent prices are computed for several production scales and different feedstock-based liquid biofuel options. • The potential impact of biofuel production on employment opportunities and smallholder involvements isestimated with reference to different institutional arrangement options. Icabr. 17th Conference “Innovation and Policy for the Bioeconomy. Ravello June 18-21

  5. Methodology (1) • The model estimates key profitability indicators at feedstock and processing level for different production pathways (crop technology level, processing scale and contractual agreements) • it relies on “default value” reported in global dataset which are integrated by “ad hoc” national data • estimate socio-economic impacts (labour demand and smallholder involvement) and financial assessment(economic returns of the investment) • it also allows for sensitivity analysis with respect to several exogenous variables such as input prices, factory costs, crop yields and land management practises Icabr. 17th Conference “Innovation and Policy for the Bioeconomy. Ravello June 18-21

  6. Methodology (2) • the crop budget calculates production costs for the crop considered under different technology levels (low, intermediate and high input) • The processing budget computes costs of biodiesel and ethanol production for varying plant capacities (in analysis two representative plant sizes from 5 and 100 million litres) • the model considers different institutional arrangements (“indipendent producers”, “outgrower” and “estate farming”) Icabr. 17th Conference “Innovation and Policy for the Bioeconomy. Ravello June 18-21

  7. Methodology Icabr. 17th Conference “Innovation and Policy for the Bioeconomy. Ravello June 18-21

  8. Dataset • a global database with technical coefficients related to feedstock and liquid biofuel production has been built • Crop potential yields are derived from Global Agro ecological Zone database (IIASA/FAO) and are classified according to the level of inputs for rain fed agricultural production and different land suitability classes • data on fertilizers are computed through a simple agronomic model • national wage values for agricultural labour, national average values for land rental, Inputs data include seeds and seedlings of traditional and improved varieties, labour required for field operations. • energy and mass balance data for biodiesel and ethanol production are derived using the model ASPEN Plus V7.3 • international prices of fossil fuels and liquid biofuels and appropriate conversion factors are used to express all prices in fossil fuel equivalents Icabr. 17th Conference “Innovation and Policy for the Bioeconomy. Ravello June 18-21

  9. Case Study • Tanzania • biodiesel and ethanol production from sunflower and cassava production Icabr. 17th Conference “Innovation and Policy for the Bioeconomy. Ravello June 18-21

  10. Production costs are bigger in A scenario (outgrower involvement) and in a small scale Main Results (1) Table 1. Biofuel processing production costs (with co-products) data in $/litre Source: own elaboration Icabr. 17th Conference “Innovation and Policy for the Bioeconomy. Ravello June 18-21

  11. With respect to cost of imported biofuel only biodiesel from sunflower is competitive for large scale With respect to market price, biofuel production is not competitive for any scenario Main Results (2) Table 2. Biofuel production costs and comparison with imported biofuels and equivalent fossil fuels prices in Tanzania ($/litre) Source: own elaboration Icabr. 17th Conference “Innovation and Policy for the Bioeconomy. Ravello June 18-21

  12. The land needed to implement the plant sizes is bigger in scenario A (outgrower involvement) Scenario A implies a greater number of jobs and smallholders Main Results (3) Table 3. Labour, land and number of smallholders involved in biofuel economy Source: own elaboration Icabr. 17th Conference “Innovation and Policy for the Bioeconomy. Ravello June 18-21

  13. Sensitivity analysis (1) Sunflower (plant from 5 millions litres) Production cost sensitivity analysis from 100% estate to 100% outgrowerschemes (independent or outgrowers % – estate %) The competitive of biofuel prodution can support until 30% of feedstock produced by outgrower Source: own elaboration Icabr. 17th Conference “Innovation and Policy for the Bioeconomy. Ravello June 18-21

  14. Sensitivity analysis (2) Sunflower (5 millions litres) Labour requirement sensitivity analysis from 100% estate to 100% outgrower schemes Source: own elaboration Icabr. 17th Conference “Innovation and Policy for the Bioeconomy. Ravello June 18-21

  15. Sensitivity analysis (3) Sunflower (5 millions litres) Smallholder involvement sensitivity analysis from 100% estate to 100% outgrower schemes Source: own elaboration Icabr. 17th Conference “Innovation and Policy for the Bioeconomy. Ravello June 18-21

  16. Long-run breakeven feedstock price biodiesel production from sunflower Source: own elaboration Icabr. 17th Conference “Innovation and Policy for the Bioeconomy. Ravello June 18-21

  17. Final considerations • feedstock purchase represents a major cost in liquid biofuels production • moving from pure estate farming towards scenarios that foresee a bigger involvement of smallholder produce social benefits in term of labour demand and number of farmers involved • neverthless, social benefits may be gained at a cost of reduced international competitivness • biofuel investments could increase natural resource (land) exploitation, with possible negative consequences in term of reduced food security and environmental esternalities • failed markets need governement intervention to generate the expected social benefits which can only be realised under carefully designed and managed biofuel policies Icabr. 17th Conference “Innovation and Policy for the Bioeconomy. Ravello June 18-21

  18. THANK YOU FOR YOUR ATTENTION!!! Icabr. 17th Conference “Innovation and Policy for the Bioeconomy. Ravello June 18-21

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