1. Food and Energy Security:
How to Balance in a Growing World?
Simla Tokgoz
International Food Policy Research Institute
U.S. - Japan Research Institute
February 25, 2013
Washington, DC

2. Outline
 Integration of agricultural and energy
markets
 How does this transformation affect food
and nutrition security?
 US renewable energy and biofuels policy
environment

3. Agricultural Growth and Food Security
Supply side constraints Demand dynamics
Climate change Population:
9 billion people in 2050
Water and land Income growth:
scarcity Africa, not just Asia and
Latin America
Science and technology
policy
Urbanization
Investment in
agricultural research Biofuels sector growth

4. Sources of Supply Growth
 Intensification
• Yield Growth
• Cropping Intensity
 Extensification
• Arable land expansion
 Expansion of irrigated production
 All require public intervention and investment
 Complicated by climate change and its long-term
effects

5. Sources of Demand Growth
 Population growth
 Income growth and urbanization
• Dietary pattern changes
 Biofuels sector expansion
• First generation biofuels
 All of these trends in an environment of higher energy
demand and higher energy prices

6. GLOBAL ENERGY TRENDS

7. Global Energy Trends
 Global energy consumption rises with China, India, and
Middle East accounting for a significant part of this
increase.
 OECD energy demand barely increases, with a shift
toward natural gas and renewable energy.
 Recent rebound in US oil and gas production continues
with US becoming a major producer (switch to a net
exporter from a net importer in the future)
Source: IEA World Energy Outlook 2012

8. Global Energy Trends
 We observe steady increase in hydropower and rapid
expansion of wind and solar power.
 Consumption of biomass for power generation and
biofuels grows.
 Energy access still a significant problem
• Despite progress, nearly 1.3 billion remain without
access to electricity and 2.6 billion do not have access
to clean cooking facilities.
Source: IEA World Energy Outlook 2012

9. Global Energy Trends
Energy and Water
 Water needs for energy production are set to grow at
twice the rate of energy demand.
 Water is growing in importance as a criterion for
assessing the viability of energy projects, as population
and economic growth intensify competition for water
resources.
 Energy-Agriculture-Water nexus is now gaining more
attention.
Source: IEA World Energy Outlook 2012

10. Global Energy Trends
Renewable Energy
 In 2010, 1,684 million ton oil equivalent of renewable
energy was used, making up 13% of global primary
energy demand.
 Between 2000 and 2010, share of traditional biomass
out of total renewable energy fell from 50% to 45%.
 At the same time, the share of biofuels (used in
transport) increased.
 Electricity generation from wind and solar grew.
Source: IEA World Energy Outlook 2012

11. World total energy consumption by region
Current Policies Scenario
14,000
12,000
Million Ton Equivalent
10,000
8,000
6,000
4,000
2,000
0
1990 2010 2015 2020 2030 2035
OECD (Americas) OECD (Europe) OECD (Asia Oceania) E Europe/Eurasia
Non-OECD Asia Africa Latin America Middle East
Source: IEA World Energy Outlook 2012

12. World total final energy consumption
Current Policies Scenario
14,000
12,000
Million Ton Oil Equivalent
10,000
8,000
6,000
4,000
2,000
0
1990 2010 2015 2020 2030 2035
Coal Oil Gas Electricity Heat Bioenergy&Other Renewables
Source: IEA World Energy Outlook 2012

13. World biofuels and renewable energy consumption
Current Policies Scenario
1,600
1,400
Million Ton Oil Equivalent
1,200
1,000
800
600
400
200
0
1990 2010 2015 2020 2030 2035
Industry Transport Buildings
Source: IEA World Energy Outlook 2012

14. ENERGY AND AGRICULTURE

15. Energy and Agriculture
 World energy prices have increased rapidly in recent
years.
 Agriculture has become more energy intensive:
• Diesel fuel and gasoline used for tillage, planting,
transportation, and harvesting
• Electricity, LP, gas, and natural gas used in irrigation;
operation of livestock, poultry, and dairy facilities; on-farm
processing and storage of perishable commodities

16. How do rising energy prices affect agriculture?
 Push up the cost of producing, transporting and
processing agricultural commodities
 Divert increasing amounts of agricultural land to the
production of biomass-based renewable energy
 Direct increase in the price of fertilizers
and pesticides manufactured from fossil fuels

17. Energy Prices and Agricultural Input Prices
450 90
400 80
350 70
300 60
$ per Barrel
$ per MT
250 50
200 40
150 30
100 20
50 10
0 0
1982 1986 1990 1994 1998 2002 2006 2010
Urea (Eastern Europe) Crude Oil WTI
Source: World Bank

18. Feedstocks used for Ethanol
 Corn: US, China, EU, Canada, Turkey
 Sugar cane: Brazil, Colombia, Thailand, Mexico
 Molasses: Argentina, India, Pakistan, Indonesia,
Philippines
 Wheat: China, EU, Canada, Australia, Turkey
 Cassava: China, EU
 Barley: EU
 Sugar beet: EU , Turkey
 Sorghum: Australia, Philippines

19. Feedstocks used for Biodiesel
 Soybean oil: US, Argentina, EU, Brazil
 Rapeseed Oil: EU, Canada, US
 Palm Oil: EU, Malaysia, Indonesia
 Sunflower Oil: EU
 Animal Fats: EU, US, Canada
 Recycled Vegetable Oil: Argentina, EU

20. Feedstock demand
Sugarcane in Ethanol Production in Brazil
350,000
300,000
Thousand Metric Tons
250,000
200,000
150,000
100,000
50,000
-
1991 1994 1997 2000 2003 2006 2009 2012
Source: UNICA

21. Feedstock demand
Grains in Ethanol Production
25,000
20,000
Thousand Metric Tons
15,000
10,000
5,000
0
2006 2007 2008 2009 2010 2011 2012
China EU Canada
Source: US Foreign Agricultural Service

22. Feedstock demand
Corn in Ethanol Production in the U.S.
140,000
120,000
Thousand Metric Tons
100,000
80,000
60,000
40,000
20,000
-
1980 1985 1990 1995 2000 2005 2010
Source: US Department of Agriculture

23. Feedstock demand
Vegetable Oils in Biodiesel Production
12,000
10,000
Thousand Metric Tons
8,000
6,000
4,000
2,000
0
2006 2007 2008 2009 2010 2011 2012 2013
EU
Source: US Foreign Agricultural Service

24. Feedstock demand
Vegetable Oils in Biodiesel Production
10,000
9,000
8,000
Thousand Metric Tons
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
2006 2007 2008 2009 2010 2011 2012
US Argentina Canada Indonesia Malaysia Brazil
Source: US Foreign Agricultural Service

25. World Food and Crude Oil Prices
160 250
140
200
120
Food Price Index
100 150
Crude Oil Price
80
60 100
40
50
20
0 0
Crude Oil Price Food Price Index
Source: US DOE and FAO

26. FOOD AND NUTRITION SECURITY

27. Food and Nutrition Security
 World Food Summit of 1996 defined food security as
existing “when all people, at all times, have physical
and economic access to sufficient, safe and nutritious
food to meet their dietary needs and food preferences
for an active and healthy life”
 FAO’s definition encompasses four key dimensions:
food availability and accessibility, stability of food
supply, access to food, and utilization of food.

28. Food and Nutrition Security Drivers
Urbanization Population Natural
Long Resource
Climate
Term Change
Constraints
Drivers
Income Growth-
Distribution
Trade Policy
Short
Term
Drivers Stocks - Infrastructure&
Hoarding Energy Prices Market Access
Demand Drivers Supply Drivers

29. Food and nutrition security
(country level)
Transportation costs
& market access
Crop and Biofuel Energy markets
livestock markets markets (LG, diesel, gasoline,
natural gas, electricity)
Land use, crop choice,
Fertilizer
and management
market
practices

30. RENEWABLE ENERGY IN US

31. US total final energy consumption
Current Policies Scenario
1,800
1,600
1,400
Million Ton Oil Equivalent
1,200
1,000
800
600
400
200
0
1990 2010 2015 2020 2030 2035
Coal Oil Gas Electricity Heat Bioenergy&Other Renewables
Source: IEA World Energy Outlook 2012

32. US biofuels and renewable energy consumption
Current Policies Scenario
160
140
Million Ton Oil Equivalent
120
100
80
60
40
20
0
1990 2010 2015 2020 2030 2035
Industry Transport Buildings
Source: IEA World Energy Outlook 2012

33. Renewable Energy in US
 Federal and state level policies push renewable energy
 Renewable portfolio standards (for electricity) exists in
many states
 RFS of 2005 and 2007 mandates 36 billion gallons of
biofuels to be blended into transportation fuel by
2022.
 EPA approved E15 in 2012.

34. Renewable Energy in US
 Biodiesel income tax credit and mixture excise tax
credit of $1 per gallon extended till end of 2013.
 Second generation biofuel producer tax credit $1.01
per gallon (cellulosic ethanol) extended till end of
2013.
 Solar tax credits are set to expire in 2016.
 Ethanol import tariffs and tax credit for blending were
removed in late 2011.
 Clean Energy Standard Act of 2012 considered by US
Congress - electricity from renewable sources

35. Renewable Energy in US
Implementation
 EPA denied requests for a waiver of the RFS for
conventional ethanol
• Request was due to cited impacts of the 2012 drought on
crops
 EPA issued waivers that substantially reduced the
cellulosic biofuels obligation under the RFS for 2010,
2011, and 2012.
 Renewable Identification Number (RIN) markets are
regulated by EPA
 RIN is a serial number assigned to a batch of biofuel for the
purpose of tracking its production, use, and trading.

36. Renewable Energy in US
Second Generation
 Biomass Crop Assistance Program
• financial assistance to landowners and operators that establish,
produce, and deliver biomass feedstock crops for advanced biofuel
production facilities
 Biorefinery Assistance Program
• loan guarantees for the development, construction, and retrofitting of
commercial-scale biorefineries that produce advanced biofuels
 Bioenergy Program for Advanced Biofuels
• eligible producers of advanced biofuels, or fuels derived from renewable
biomass other than corn kernel starch, may receive payments to support
expanded production of advanced biofuels

37. Renewable Fuel Standard Volumes by Year
40
35
30
Billion Gallons
25
20
15
10
5
0
2008 2010 2012 2014 2016 2018 2020 2022
Conventional ethanol Cellulosic Biomass-based Diesel Other Advanced Fuels

38. Are Second Generation Biofuels An Answer?
US Cellulosic Ethanol Production
2,000
1,800
1,600
1,400
Million Gallons
1,200
1,000
800
600
400
200
0
2010 2011 2012 2013 2014
EIA Projection Implied Mandate
Source: US DOE EIA Annual Energy Outlook 2013

39. Conclusions
 Higher demand will increase pressure on limited
natural resources: land, water, environmental
preservation, and biodiversity.
 Strengthened linkage between energy and agricultural
markets (globally and locally)
• through expansion of biofuels sector (first generation)
• through higher input costs to agricultural production
 Volatility in energy markets is transferred to
agricultural markets and influences food security of
developing countries.

40. Challenges and Opportunities
 The “food-versus-fuel” trade-off increases if:
• Innovations and technology investments in crop productivity
are slow.
• Reliance is placed on conventional feedstock conversion
technologies to meet future blending requirements (or
displacement) of fossil fuels with biofuels.
 Improvements in biofuel conversion and crop
productivity improvements reduce trade-offs.
 R&D funds allocated to second generation biofuels or
other renewable energy options would ease “food-
versus-fuel” trade-off in the long-run.

41. Biofuel Policy Implications
 Adopting a low-carbon fuel standard (like the
California policy, versus the existing national RFS)
would shift ethanol production away from grains and
towards other lower-carbon feedstocks.
 Indirect land use change is an additional
environmental consequence that policy needs to
factor in (especially from a climate mitigation
perspective).
• There is uncertainty over the magnitude of iLUC attributions
to biofuels – but still many agree that it’s non-zero and
significant in many cases.

42. Investment Policy Implications
 Higher agricultural prices can be overcome if resources
are diverted to efforts aimed at
• Crop productivity growth
• Investment in irrigation
 This requires renewal of the attention paid to
• Agricultural research and technology
• Extension services
• Rural infrastructure

43. Thank you!
s.tokgoz@cgiar.org