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Africa’s bioenergy potential: a new resource curse? 16 th ICABR Conference June 24-27, 2012

Africa’s bioenergy potential: a new resource curse? 16 th ICABR Conference June 24-27, 2012. Giorgia Giovannetti ( University of Firenze and European University Institute ) Elisa Ticci ( University of Siena ). Outline of the presentation. Africa’s biofuel energy potential

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Africa’s bioenergy potential: a new resource curse? 16 th ICABR Conference June 24-27, 2012

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  1. Africa’s bioenergy potential: a new resource curse?16th ICABR Conference June 24-27, 2012 Giorgia Giovannetti (Universityof Firenze and EuropeanUniversityInstitute) Elisa Ticci (Universityof Siena)

  2. Outlineof the presentation • Africa’s biofuel energypotential • The state of biofuel development in the continent • Econometric estimates of drivers of large scale land FDI for biofuel crops in SSA • Conclusions

  3. Africa’s biofuel energypotential Source: IIASA 2009 • Africa accounts for the largest share of the world’s non protected grassland and woodland areas potentially suitable for biofuel feedstocks • Southern Africa has been described as a potential ‘Middle East of biofuels’ • National plans to support biofuel sector in Ghana, Angola, Mozambique, Nigeria, South Africa, Tanzania, Zambia, Zimbabwe, Uganda, Benin, Mali, Malawi, Senegal

  4. The state of biofuel development in SSA • Sourcesof data and information • Case studies • Global Biofuel Information Tool of the Center for International Forestry Research • Renewable Fuels Association • Land Matrix

  5. The state of biofuel development in SSA/1 Great investors’ interest: SSA accounts for more than half of worldwide farmland area involved in large scale land deals for biofuel crops since 2001 Large land deals for crops than can be used as biofuel feedstocks by region Source: authors’ elaborations based on Land Matrix

  6. The state of biofuel development in SSA/2 The role of Africa in the biofuel market is expected to increase, but so far it has been marginal. Fig: World fuel ethanol production in 2006, million liters Authors' elaboration from F.O. Licht estimates reported in Renewable Fuels Association (2007)

  7. The state of biofuel development in SSA/3 • Future trends are very uncertain, problems in the start-up of the production. • Main barriers include: • local resistance • financial problems • unexpected technical difficulties • uncertain market and regulatory conditions • long lag between investment and production • building capacity in proper planting, caring and processing is crucial but it is expensive and takes time • small farmers report low yields, processing difficulties, problems with pests and in accessing inputs (Mozambique, Swaziland, Kenya)

  8. The state of biofuel development in SSA/4 Only first-generation biofuels In most cases, biofuel projects are large-scale commercial plantations financed by big corporations According to data from Global Biofuel Information Tool of the Center for International Forestry Research (CIFOR-GBIT), about nine to ten biofuel investments recorded in 22 Sub-Saharan African countries until 2011 (181 projects) have been planned for cultivation, and only ten percent are under outgrowing schemes.

  9. The state of biofuel development in SSA/5 Foreign based investments are a very important component of biofuel projects in Sub-Saharan Africa Planned and executed biofuel investments. Area of land accessed (in ha) Source: Authors’ elaboration from CIFOR - GBIT

  10. The drivers of land FDI for biofuel investments in SSA Focus on land demand for biofuel crops Dependent variable: number of deals concluded in SSA since 2001 with the purpose to cultivate crops that can be used as biofuel feedstocks (Land Matrix) Gravity model framework Zero-Inflated Poisson model: in the first stage a logit regression estimates the probability that land FDI for biofuel projects are not affordable or profitable. The second stage estimates the potential count of land investments for the pairs of countries with a non-zero probability of concluding an international land deal.

  11. Independentvariables (and expectedsign) Logit component(probability to encounter zero-values) Poisson regression component • Biofuel producer (-) • Regionaldummy: • GulfStates (+), • High income OECD countries (-) • Emergingeconomies (-) • Landscarcity (-) • Bilateral variables • Distance (-) • Past colonial ties (+) • Origin country variables • Population (+) • Per capita agricultural imports (+) • Destination country variables • freshwater resources (+) • Agricultural land (+) • Land governance (-) • Public land (+) • General institutional conditions (?)

  12. Relatedliterature • Arezki, Deininger and Selod (2011): • Main findings: negative and hardly significant effect of conventional governance variables, robust and negative effect of land governance, positive role of land availability. • Main differences with respect to our estimates: • Data source for the number of land deals • Different focus: biofuel crops and SSA • Slightly different econometric technique: ZIP vs standard Poisson • Closer attention to the role of land governance and water-seeking behavior

  13. Logit regression Notes: Independent variables with negative coefficient estimates are associated with an increase in the probability of biofuel land deals Robust standard errors. * p < 0.10, ** p < 0.05, *** p < 0.01.

  14. Poissonregressioncomponent – bilateralvariables and country-of-originvariables

  15. Poissonregressioncomponent–destinationcountryvariables Notes: Variables in logs. Refer to the main text for robust standard errors, constant included but not reported

  16. Commentsofeconometricresults Our evidence is consistent with the notion that biofuel producers and land-scarce countries see transnational land investments as a possible strategy to integrate and expand their access to biofuel feedstocks for domestic energy Actual or “perceived” agricultural biocapacity of Sub-Saharan African countries appears to act as a pull force Water abundance is another driving force of biofuel land demand Better institutional conditions increase Africa’s attractiveness Countries with weaker protection of land rights and higher share of rural public property land are more likely to host a greater number of land FDI for biofuel crops

  17. Directionsfor future research Comparing the currentresultswith alternative methods of dealing with zero values (Eaton–TamuraTobitmodel and Heckman sample selection model) Estimating the number of projects for biofuel crops in a destination country. Comparing drivers of biofuel and other agricultural projects.

  18. Conclusions • Preliminary stage of development, promising signals but also many barriers • Some features of biofuel development in SSA raise concerns on its equity and sustainability: • Specialization in first-generation biofuels • Prevalence of large plantations and of export-oriented foreign corporations • Strict link between biofuel investment and large scale farmland acquisitions. • Biofuel-oriented land FDI seem mainly resource-seeking. Land governance weaknesses may be regarded as a way to access land and water resources at very favorable conditions.

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