Rio+20: New tool helps simulate bioenergy futures in developing countries

Maize is used to make biofuel. Photo by CIMMYT

BOGOR, Indonesia (21 June, 2012)_Countries considering bioenergy investment as a way to improve rural incomes and meet other policy goals could be given a glimpse into the future, thanks to a new interactive tool that can simulate the impacts of biofuel production on a range of factors, such as economic growth, land use and job creation.

The tool can help countries weigh up the costs and opportunities of attracting investment in potentially greener, more sustainable, fuel alternatives – an issue dominating discussions at this week’s Rio+20 conference.

The tool, part of an EU-funded project led by the Center for International Forestry Research (CIFOR) has been launched this week as part of the Rio+20 Summit in Brazil. Among other goals, the tool, featured in a recent CIFOR study wanted to understand how investment flows – both international and domestic – could impact upon forest landscapes and people’s livelihoods.

“The choice of business model that a country chooses to adopt could crucially determine the impacts on land and livelihoods, so we developed this tool to understand how policy instruments could affect the magnitude of investment flows to different business models” says Eric Kemp-Benedict of the Stockholm Environment Institute, author of the study, who led the development of the tool.

“Finance, investment and entrepreneurship are powerful economic forces that governments would like to harness, but they have a life of their own and can have impacts that governments are not happy. Local people’s livelihoods, budgets,  and autonomy can all be affected in a negative way,” he added.

In combination with a landscape impacts model, the tool will assist policymakers making bioenergy decisions in developing tropical countries by allowing them to quickly test many different policy combinations in a controlled setting and then evaluate and investigate the modelled impacts.

The tool shows estimates for future scenarios up to the year 2035. It takes different policy options as inputs – such as domestic and export subsidies, zoning, and taxes, including a carbon tax – and reports indicators of interest to policymakers – such as foreign investment, domestic ownership, tax revenue, net energy exports, land use, and jobs.

Additionally, factors that policymakers do not have the ability to control – and which can in many cases be highly uncertain, such as those for future oil prices – can be plugged into the model. Levels of political commitment, security of tenure, and national investment risk are other possible inputs. For these “fuzzy factors” – factors which are hard to put numbers to - model users can  roughly estimate a value, setting the value on a scale from low to high.

While the model is still in development, tests suggest that it can provide useful estimates, allowing countries to look at the potential impacts of the fluctuation in markets.

“The model produces some ‘boom and bust’ cycles for biofuel: Lots of investment flows in, resulting in an over extension, and as a result some of those operations go out of business,” says Kemp-Benedict.

This indicates the model may be a robust means to examine real-life scenarios. Many regions have indeed suffered from such cycles. “So this model allows us to think about what policy options might help to prevent such outcomes in the future.”

Moreover, the CIFOR-led study of which this model is a part has found that the rush to produce biofuel has resulted in high levels of deforestation in many tropical countries, and therefore can have significant impacts on global climate change and local ecosystem services.

Though the public debate on biofuel mostly concerns the “food versus fuel” issue – using edible crops like corn, soy, and sugarcane to make fuel for machinery rather than food for people – deforestation is one outcome that policymakers need to keep in mind, says Kemp-Benedict.

Nonetheless, when managed sustainably – such as by prioritising the cultivation of feedstock crops on degraded lands and avoiding the clearing of virgin forest – biofuel grown for export can make a significant contribution to national development goals.

According to the The Global Biofuel Information Tool, an open-access geographical overview developed by CIFOR with support from Profundo, Indonesia is a net exporter of bioenergy, producing 104 million litres per year of ethanol and biodiesel combined, and exporting nearly four fifths of this, 81 million litres.

Moreover, in a world where fossil fuel resources are shrinking every year, and where the extraction of “residual” sources such as deepwater oil, tar sands and shale gas come with great environmental and safety risks, bioenergy production can also contribute to national energy security.

Supply shocks and dramatic swings in fossil fuel prices have particularly big impacts in developing countries that are net importers of oil, leading many economists and policymakers to argue that developing tropical countries have much to gain from investing in growing their own supplies of bioenergy.

“It all comes down to the fact that this entire sector comes with a lot of promise, but also a lot of risk,” says Kemp-Benedict.

The National Bioenergy Investment Model (NBIM) was produced in collaboration with the South African Council for Scientific and Industrial Research (CSIR) and with the Stockholm Environment Institute (SEI).