Archive for April, 2010

Natural resources: the x factor

Putting a real price on the use of natural resources is proving a challenge

Everybody is talking about resources. Maybe not directly, and maybe through bywords and buzzwords: sustainability, food security, energy security, water scarcity, climate change.

An increasing number of policy discussions are centring on one big question: how can we get the most from the world’s natural resources without further depleting them? The European Commission has made ‘resource efficiency’ one of the flagships of its new Europe2020 economic strategy. But does it – or anyone, for that matter – really know how to go about achieving it?

Unfortunately there is nothing finite in the resources equation, especially not the output: What we are trying to get the most of? Do we measure resource efficiency in terms of human end calories per unit of land and water? How do we factor in non-essential consumer items and services? Should we then measure the efficiency in terms of some unit of human pleasure (calories plus) per unit of natural resource?

Biofuels in the spotlight

This may seem grossly hypothetical, but it is often the question behind the question, and the ultimate bottom line, in current efforts to make ‘sustainable’ policy.

Take biofuels. The crop and biomass-based fuels have been the subject of a huge amount of soul-searching at EU level, precisely because they are at the resource crossroads. They bring together many of the trade-offs in a series of key questions: should we be using land and water, and incurring a biodiversity and greenhouse gas (GHG) cost, in order to produce alternative fuels in addition to/instead of current or potential food production? And at what point has the cost become too great?

Answering these questions means pitting various food and fuel scenarios against each other; this means assuming that food demand, land availability, the environmental footprint of fossil fuels, the energy potential of other renewables, and global fuel requirements are stable and finite. It soon becomes clear that there is no objective baseline in sight: there is surely infinite scope for raising the efficiency of current resource use (e.g. reducing net land and water use by wasting less food); similarly there is no way of deciding whether fuel-consuming journeys are necessary or discretionary, or whether a burst of radiator heating is for comfort or strictly subsistence.

A value judgement is always involved – and the terrain is thorny for policy-making.

Indirect land use: the new frontier

Brussels is looking at ways of factoring indirect land use change into the process of deeming a biofuel environmentally desirable or not, i.e. are GHG savings in relation to fossil fuels offset by displacing food production elsewhere and triggering conversion of new croplands with a GHG/biodiversity cost?

Palm oil embodies many of the uncertainties: it requires less land and less carbon-intensive fertiliser per unit of energy that it yields (compared to other oilseeds), but often takes the place of high biodiversity, carbon capturing forest-land; rapeseed biodiesel can meanwhile be produced on current cropland in the EU, but palm oil production would be likely to expand in south-east Asia anyway for food use to substitute for the lost rapeseed oil.

As the European Commission is finding out, the equation is full of ifs and buts. But even if – as appears increasingly likely – it is deemed unviable to count in the abstract land conversion factor at this point, the exercise will not have been futile.

With their political mandate, biofuels are the first frontier – and the EU feels within its rights to exact some form of resource sustainability. For food there is at best a hazy ‘food security’ mandate, but the same resource logic can and probably will ultimately be applied to food. The discussions have unleashed a logic for pitting one food production system against another, one fuel against another, food against fuel, food/fuel against urban development, and so on.

Holistic view needed

To date it is only the questions, and not the answers, which have been thrown up by the biofuel debate.

Despite disagreeing on the relative benefits of biofuel types, the slew of recent studies on the matter all tend to fall back on the same (crucial) post scripts: that biofuel production, like almost all human activity, taps natural resources and therefore impacts on the overall GHG and biodiversity balance; that no human activity is ‘zero carbon’ if the zero level implies leaving the land in optimum carbon-stocking, biodiversity-rich condition; that there are multiple direct and indirect effects which could tip the environmental balance either way; that there is a need to collectively rationalise global food and fuel production vis-a-vis available resources; that any system for calculating relative efficiencies is essentially arbitrary until an objective, holistic ‘life-cycle’ resource use model is agreed.

But even the big ‘independent’ studies have failed to take their logic to its conclusion, and to put forward the all-encompassing life-cycle blueprint in question. Last year’s biofuel paper from the UN’s International Panel for Sustainable Resource Management duly abdicates from the task: “A full consideration of all relevant strategies towards this end (e.g. changing diets high in animal based foods and reducing food losses) is beyond the scope of this report” it reads. Without this ‘x factor’ the Panel acknowledges that it is unable to come down conclusively for or against biofuels, even the most efficient ones.

Defining the x factor is certainly a huge task – and would have to involve a set of fairly arbitrary caluclations mapped out against each other. But without it, the current trend of singling out some sustainability factors (e.g. carbon) and undervaluing others (e.g. water use) is all the more arbitrary and half-baked.

Emissions trading schemes for carbon do not reflect the whole resource story and their ‘sustainability’ effect will therefore only be partial. The same applies to carbon footprint labels for food. Consumers are right to feel confused by them: if we are being asked to consider factors other than price, taste and healthiness in our food purchases, then why not paint the whole resource picture? And while we’re at it, what about the long-term socio-economic impacts of resources used towards food exports in developing countries? (For more on the water debt of western food imports see http://www.raeng.org.uk/news/publications/list/reports/Global_Water_Security_report.pdf)

EU environment chief, leading or alone?

EU Environment Commissioner Janez Potocnik has made positive noises about creating a more holistic resource efficiency strategy. In a recent speech he said that “what you don’t measure you won’t achieve”, calling for cross-cutting resource efficiency indicators to be drawn up. Potocnik advocated a “half common sense, half pragmatism” approach that prods the market until it puts “the proper value on the resources we use”.

But as the Slovenian recognises, he is only the Environment Commissioner, and natural resources are so fundamental a concern that any attempt to re-evaluate their use will pit various interests against each other within the Commission and within the Brussels body politic, not to mention the array of private sector interests at stake, nor the individuals who would ultimately be paying the price if water, soil and clean air become the new gold and ivory.

Nonetheless, the EU must try to use the Europe2020 strategy to put resource efficiency firmly on the map; if nothing is done now the EU’s next economic strategy could be drawn up against a backdrop of genuine resource scarcity – and an opportunity to safeguard and perpetuate the earth’s natural capital will have been lost.

Photo by Valentina Pavarotti

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Rising hunger prompts EU rethink

The world is off course to meet food poverty commitments

In the wake of food price shocks, the EU is rethinking ways to curb global food insecurity

In 2007-2008 global grain prices suddenly doubled, sparking sharp mark-ups on consumer prices and putting staple food products out of the reach of many developing world households. The number of global malnourished rose above the 1 billion mark, putting one of the UN’s key Millennium Development Goals in jeopardy.

Ever since, the world has been soul-searching over how years of progress in reducing hunger has been put into reverse. Brussels has now responded by outlining a new strategy on food security and humanitarian food assistance.

The thrust is: reigniting investment flows into African agriculture; channelling this money to smallholders and women; enshrining land rights in the face of foreign ‘land-grabbing’ offensives; supporting disaster prevention infrastructure such as early warning systems and food stocks; not providing food aid when malnutrition is endemic but stable; and sourcing food aid from local/regional farmers when providing it.

The EU’s new Commissioner for Humanitarian Aid explained: “Even in a crisis, there can be more effective ways of helping people other than through simple food hand-outs. For example, we can provide seeds and tools to help disaster-affected farmers get back on their feet.”

Jolted into action

But has the EU truly turned a corner? The new strategy reads almost like an apology for two decades of neglect for third world agricultural investment, during which surpluses from European and American farmers flooded into Africa as subsidised exports or as food aid.

Since the 2008 peaks, prices for many food commodities have sunk back down to where they started, but the political pressure remains on to avoid a recurrence of the price spiral and to bring food poverty back onto the downward trend.

The need to raise productive capacity in the third world – so as to reduce vulnerability to supply shocks elsewhere — has reemerged as a key long term goal, particularly with population increases set to build new and unprecedented food demand into the global system.

A flurry of international activism has taken hold, culminating in the EU’s one-off ‘Food Facility’ to deliver €1bn of seeds and fertiliser to third world farmers, the G8′s €16 billion agricultural aid pledge, and much general sounding-off about speculation, the food supply chain, and price instability.

The new EU strategy looks to draw lessons from the last two years and to write them into long-term development and humanitarian aid policy.

North-south imbalances persist

However, there are reasons to believe that the win-win solutions being trumpeted by the EU might not translate into the desired results.

The EU –like all global players – is not an honest broker; the key is what happens when its economic interests run up against those of the developing world. Last week the NGO Action Aid commended the Commission’s “leadership” on food security, but tellingly cautioned that “readdressing other EU policies – such as energy and trade – is key to achieving food security in the developing world”.

Rebalancing world food production and ensuring a degree of self-sufficiency for basic food commodities in struggling regions is a huge task, and the implications stretch beyond agri-development aid and the modes of delivering it.  A 2009 paper from the International Centre for Trade and Sustainable Development (ICTSD) took issue with the labelling of the 2008 price spikes a ‘food crisis’, given that global food production imbalances have been decades in the making.

Many identify the root causes of food insecurity in the generous farm subsidies and export refunds paid out in the EU and other wealthy countries, which beat down world prices and reduce returns for staple commodities produced in developing countries (where farmers do not receive state support on the same scale). The ICTSD recalls that several of the world’s poorest countries have ended up as net importers of commodities (largely maize or rice) which make up more than half of their calorie intake.

The sudden price rises in 2007-2008 were a boon for competitive mass-producers of staple crops in the west, but the effects were crippling for poor net importing countries. Crucially, it was developed world farmers who expanded their acreages and banked the peak prices; only a fraction of new supply was accounted for by developing countries, and most of this by China (which is increasingly matching the west with generous state support for agriculture).

The volatile price cycle not only aggravated hunger problems for developing world consumers – it also brought nothing to its producers, for whom the window of higher prices was missed as an opportunity to increase production.

Giving with one hand, taking with the other

The new EU strategy recognises the competitive disadvantage of third world agriculture, and the importance of investment to build the capacity to respond when food demand rises (particularly in domestic markets). But is the EU willing to go beyond its statements of goodwill and to tackle the structural imbalances?

The signs to date are mixed. The seeds and fertiliser delivered by the Food Facility could be just the remedy if they can be made into a regular and wider-ranging scheme. Meanwhile, fresh subsidies for EU food exports are working to undermine any progress: the EU responded to last year’s dairy crisis by paying its farmers to offload their produce onto struggling world markets.

The new focus on African smallholders could also be fruitless if developments elsewhere are counter-productive.

Developing world smallholders – whose land rights are often hazy – are the most vulnerable to expropriation at the hands of foreign investors, are the most exposed to price volatility, and could face the biggest fallout from climate change with the fewest resources to adapt to unpredictable conditions.

In all probability the future of African family farms is being decided far from the wording of the EU’s new food security strategy. Securing a fair deal on climate financing in the post-Copenhagen talks could be the real deal-breaker for African smallholders, given the climate challenges they face; the sums of money in question would dwarf agricultural aid delivered under existing frameworks.

EU energy policy could also cloud the picture on smallholder land rights. Brussels has given its backing to African Land Policy Guidelines to prevent marginal farmland or grazing areas being snapped up by foreign investors in countries which need to increase their own food production; but it will be interesting to see whether the EU steers its own biofuel companies away from food insecure zones as they ramp up production in order to meet European renewable energy targets.

All roads lead to Doha

And ultimately, any efforts to raise agricultural capacity in the third world could be fruitless if farmers are unable to sell at a decent price on domestic markets, and are effectively shut out of foreign ones.

The terms of trade are crucial. The new EU strategy does well to avoid any blanket embrace of the free market, acknowledging that “given food security concerns, whether at a national or regional level, developing countries can make use of existing trade policy space, including through border measures”.

The flexibilities given to countries on these matters depend on trade deals: WTO agreements set ceilings for border tariffs and farm subsidies; bilateral deals between the EU and developing countries lay further further tariff reductions on top of this.

The existing WTO regime (agreed back in 1994) does little to discipline the web of agricultural support in wealthy countries, and realisation of this made it a necessity to brand the current Doha cycle of talks as a ‘development round’.

At WTO and bilateral level, the impact of the trade deals on vulnerable farmers will depend on intricate details: which products the EU shields from tariff reductions, whether access to EU markets extends to products higher up the value chain, and whether and at what speed sensitive developing world markets are opened to competition from EU exporters.

If these terms are negotiated fairly and skillfully, the guarantee of stable domestic markets and real openings abroad could provide the signal needed to co-opt public and private investment into raising third world agricultural productivity. Without this signal, African agricultural decline is likely to deepen, the north-south imbalances will continue and fresh agricultural aid could merely be window dressing.

Food security must be local to be global

In 2007-2008 the world learnt that dependence on given regions for the production of bulk commodities is risky and subject to unpredictable climate conditions and market malfunctions; there is now growing consensus that food security must be achieved locally.

Hunger levels cannot be brought down merely by allowing world production levels to adjust themselves to rising demand: capacity must be raised in the right ways, with a durable regional balance, in spite of climate change and without exacerbating it, and with the prudent management to reduce the risk of price shocks and their impact on the world’s poorest.  

The EU must go beyond its new food security strategy, and must prove on all fronts that it is ready to address the structural imbalances which are at the root of food insecurity in the developing world.

Photo by Valentina Pavarotti

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