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The Economic and Social Potential of Biofuels

GENEVA, Jul 31 2012 (IPS) - In 2010, global biofuel production (bioethanol and biodiesel) reached 105 billion litres and is expected to almost double by 2020. Provided that oil prices remain relatively high ­ which is likely ­ the production of biofuels is expected to grow at double-digit rates for the next decade. Most of the biofuels produced are consumed at the national and local levels, with only seven percent of total production being exported. This reflects the fact that biofuels are mainly used for energy diversification and national energy security strategies.

The biofuel business model has changed dramatically over the past decade or so, in many cases because of concerns about the impact of biofuel production on land use and food security.

Fundamental changes in the harvesting methods of biofuel crops, the collection of inputs, the type of inputs used, production methods, and storage and distribution systems have all contributed to a more efficient and sustainable biofuel production process.

With today’s technologies, biofuels can be produced from a much wider range of edible crops as well as various non-edible sources like jatropha, algae, and agricultural residues. While the amount of non-food crops used in biofuel production is still low, the use of second-generation technologies may significantly change that within the next decade.

Biofuels were originally used mostly in the transport sector, but they are now used for a number of other sectors as well, from electricity generation and chemical blending to clean cooking and even aviation. These options and possibilities enhance their value for human development.

Locations and scale have also changed. Due to high prices of fossil-based energy and the incorporation of financial and procurement incentives, biofuels are now becoming an option for small-scale electricity generation in isolated areas of developing and least developed countries.

All of these developments demonstrate the growing potential of biofuels as an alternative source of energy. However, beyond this, biofuels also have important human and social development dimensions.

If carefully conceived and managed, biofuel projects and investments have the potential not only to improve energy security but also to create job and income opportunities in rural areas, boost local innovation systems, and add value to agricultural production.

This is particularly true in the case of second-generation biofuels, where the levels of value addition in the production process and the qualifications required from workers and professionals are much higher. For example, in a recent study by the United Nations Conference on Trade and Development (UNCTAD) on the contribution of biofuels to the rural economy in Mexico, there is evidence that producing biofuels from agricultural residues can result in substantial increases in employment in agriculture. Bioelectricity from agricultural residues could add more than 39,000 new jobs (direct and indirect), bioethanol more than 49,000, biodiesel 71,000, and biogas 4,000 jobs ­ all offering better wages and demanding higher qualification than the current average in Mexican agriculture.

Worldwide, it has been estimated that 1.4 million people were employed in biofuels production as of 2010, and if current growth rates continue another two million jobs should be added globally by 2020.

But this is not the end of the story. Many countries are successfully designing and adapting their biofuel production and distribution systems to address local concerns and needs, for example through initiatives to provide energy to isolated regions, or to make biofuels an explicit component of national, regional, and local development strategies. Experiences in Nepal and the Brazilian Amazon have demonstrated not only that it is economically feasible to engage in small-scale biofuel models but also that they can contribute to local job creation, social inclusion, the use of local plant species, improvement in waste management, and the provision of affordable electricity in areas without access to modern energy services.

This promising scenario has not, however, prevailed everywhere. In Peru, for example, excitement over biofuel crop production in the Amazon contrasts with concerns about the loss of tropical forests and changes in land use, the indirect effects of roads, infrastructure, and disorganised human settlements, as well as potential risks to protected areas and buffer zones. Biofuels production will become sustainable only if due consideration is given to the specific ecological, social, and economic features of the countries concerned and if there is the political will to develop and implement appropriate and effective assessment and mitigation strategies. (END/COPYRIGHT IPS)

* Supachai Panitchpakdi is the secretary-general of the United Nations Conference on Trade and Development (UNCTAD)

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