Background Paper for UNCTAD’s Report on Least Developed Countries.

The early seventies of the past century where marked by an environmental
revolution in people’s minds. It was prompted by the realization of the
finiteness of the Planet Earth and of the staggering environmental
disruption caused by rapid economic growth on account of careless
technologies, predatory use of natural resources and excessive reliance on
fossil fuels.

More than thirty years later – and three world conferences on environment
and sustainable development held in Stockholm, Rio de Janeiro and
Johannesburg – the gap between environmental rhetoric and disruptive
economic growth is widening. Yet, future historians of our ages may
recognize 2005 as a turning point in public awareness insofar as it signals
the beginning of the oil endgame . Where more than three decades of
environmental predication failed, the hike in oil prices succeeded. Gradual
phasing out of oil consumption and its substitution by biofuels, side by
side with the search for greater energy efficiency, have been put on the
agenda of the development debate.

Total oil depletion is not for tomorrow, perhaps not even for this century.
But there are good reasons to believe that a structural shift occurred
towards high oil prices with dramatic consequences for the least developed
countries, both the oil exporters and the oil importers.

The former will enjoy windfall profits, a curse in disguise judging by the
performance of many oil exporting countries which have been unable to put to
good use the rent accruing from oil and fell victims of Dutch disease,
foreign exchange outflow and widespread corruption.

The latter will be confronted with deterioration of terms of trade and
terrible balance of payments squeeze, likely to offset the promised increase
in ODA. This predicament may yet become a blessing in disguise if the
countries concerned revise thoroughly their development strategies and seize
the opportunity given to tropical countries to produce biofuels, first to
substitute the imported oil and, then, to export ethanol and biodiesel to
industrialized countries.

The present paper will start with a brief discussion of the oil endgame. It
will then examine the impact of expensive oil on oil exporting LDCs before
addressing the energy dimension of inclusive and sustainable development
strategies in oil importing LDCs. A final section will contain some
reflections on a possible action plan.

Beyond the oil age

An intense debate divides the specialists with respect to the forthcoming
oil-peak and the length of the depletion period which may extend beyond this
century . For our purpose it is not important to know when the ultimate
reserves of oil will be exhausted. None of the past transitions from one
energy to another (from wood to coal to oil) occurred because of physical
shortages. We ought to be interested in phasing out oil consumption (and for
that also the consumption of gas and coal) on account of the disrupting
environmental impact of greenhouse gases released by fossil energy, not
speaking of the dangers arising from the explosive geopolitics of oil. The
endgame of oil should thus precede the physical end of oil. Ideally we
should enter in the beyond oil age as soon as possible. But in a world in
which economic criteria are decisive, this could not happen so long as
cheap, versatile and easy to transport oil outpriced alternative sources of
energy. The turning point which put biofuels on the agenda, was the recent
price hike of oil. Sugar cane ethanol produced in Brazil becomes competitive
with oil priced at 35 dollars per barrel .
The question therefore is : to what extent we are in presence of a
structural shift in prices ?

Once more, opinions are divided and sharply polarized. Some pessimists (or
should we say optimists ?) consider that the price of a barrel may exceed
hundred dollars . At the other extreme are those, who believe that the
present prices will not last. But very few risk to say that they will
decrease below the 40 dollars level, which already makes biofuels
competitive, at the present level of technology. In future we may expect the
costs of production going down on account of higher agricultural
productivity, improvements in processing and scaling up of production. As
trees and crops grown for biofuels give the right to carbon credits, their
competitiviness is further enhanced.

Moreover, the evidence gathered by the first school of thought looks more
impressive. After all a leading oil company, Chevron, puts ads in newspapers
saying that in the last twenty years for every two barrels consumed, only
one barrel was added to oil reserves. This admission of depletion comes, so
to say, from the horse mouth. We ought, therefore, work with the assuption
that high oil prices have come to stay, opening a lasting opportunity for
biofuels and other alternative energies.

In this paper we are mainly concerned with biofuels for the following
reasons:

– liquid biofuels - ethanol and biodiesel – substitute the liquid
petrol- based fuels essential to the transportation systems; their use does
not require the modification of the existing infraestructures and allows to
stay, for better and worse, within the motorcar civilization;
– tropical countries have favorable conditions for the production of
biomass for biofuels in rain tropical as well in semi-arid regions;
– if properly handled through appropriate policies, production of
biofuels may generate a fair number of opportunities for decent work and
livelihood for smallholders and their families who constitute between 40 and
50 percent of working population in the developing countries.

Thus promotion of biofuels is at the intersection of the three most
important challenges facing our century: provision of decent work to the
poor masses, arresting the climate change and freeing humanity from the
perils of geopolitics of oil.

For oil exporting LDCs a curse in disguise

In theory, windfall profits from oil exports should be a blessing for the
oil exporting LDCs. Windfall gains for African oil exporters already in 2004
were more than 30 billion dollars. Of this, more than 14 billion accrued to
governments in the form of higher royalties, taxes and direct export revenue
for state-owned enterprises . Research by Overseas Development Institute
found that for the eight oil exporting States in sub-Saharan Africa -
Nigeria, Equatorial Guinea, Cameroon, Angola, Congo (Brazzaville) Gabon,
Sudan and Chad - the combined financing surplus, over and above their own
MDG investment needs and recurrent public expenditure could be as high as 22
billion in 2006 and 35 billion in 2015, around half the total MDG financing
gap for the region . Warner is right to say that these funds could become,
at least in part, a source of aid to the many countries of the region hurt
by the elevated cost of oil imports and that resource-rich African countries
should be incentivated to invest some of their windfall surpluses in
productive infrastructure across boarders in sub-Saharan Africa.

Alas, what we see in most oil producing countries are the symptoms of the
Dutch disease. The oil industry creates very few jobs, out of proportion
with its share in GNP and in government revenues. Oil exports induce an
excessive appreciation of the local currency and domestic production becomes
too expensive to compete with imported goods, not speaking of perverse
effects of oil bonanza in form of corruption, nepotism, ethnical struggles
and wars, as well as of extravagant and pharaonic constructions .

Jean-Marie Chevalier sums up his description of the Dutch disease in the
following words: “it is thus possible to speak of a true oil curse, which
affects many oil producing countries in Africa, Middle-East, the Republics
of Central Asia, Latin America, Asia and perhaps even Russia” . Quite
significantly, the government of Azerbaijan in its advertisement seeking a
senior international adviser for potential use of Azerbaijan’s oil revenues
“to convert black gold into human gold” (sic) foresaw as an activity for him
economic modeling of policy alternatives to minimize the risk of Dutch
disease .

An abundant literature has exposed the devastating effects of Dutch disease
and corruption on such oil producing countries like Nigeria, Angola and
Equatorial Guinea. The latter country has been growing between 1990 and 2003
at the impressive rate of 16,8 percent per year, almost twice as rapidly as
China. It produces around three barrels per day for every five inhabitants
which gives Guinea the fifth largest per capita production of oil in the
world. Today Guinea has the 28th ranking in the world with respect to GNP
per capita, but only the 121st ranking as far as the HDI is concerned. The
life expectancy is of less than 44 years and infant mortality is of 97 per
thousand in the first year of life. Equatorial Guinea invests in public
health a mere 1,3 per cent of its budget . Another depressing instance of
the working of Dutch disease comes from unemployment plagued Algeria, where
20 thousand Chinese construction workers have been brought to build
apartment houses .

Thus, oil producing LDCs are an extreme case of enclave-type economies in
which the investment-profit nexus is outwordly oriented and the challenges
of diversification are not met . To revert this unfortunate trend two
conditions must be met:

– as recalled in the UNCTAD report just quoted “strong and capable
States are needed to bargain with large firms” (p. 58), particularly so with
the oil majors ;
– development cannot be designed piecemeal (or for that project-wise)
; it calls for a holistic approach and appropriate handling of all the
forward and backward linkages of each project .

Recently, the case of Chad has been presented as a successful departure from
the past practices with the bulk of royalties supposed to feed a special
development fund. According to the World Bank and the oil companies that
participate in the deal, great attention has been given to equitable
compensating of peasants, whose land was expropriated for the construction
of the pipe-line. However, several articles and reports give a much more
critical description of the prevailing situation. Even National Geographic
published a first hand report accounting for the discontent of the local
population and quoting the Catholic bishop of Doba, Michel Russo, as saying
that “people didn’t get anything except dust” . The government of Chad
complains that the companies apply an excessive discount on the price of oil
on account of its poor quality and has called for an audit. The strongest
denunciation of the Chad-Cameroon pipe-line came from Amnesty International.
The companies operating in Chad are not required to respect all the national
legislation relative to human rights .

For good practice, we must look to the Norwegian experience with the
Petroleum Fund now worth 190 billion dollars and rising fast . But
conditions in this small and rich Scandinavian country with a strongly
implanted Welfare State differ sharply from those prevailing in LDCs. Even
though, with all that oil wealth, the welfare system could be improved.
Recently, the Central Bank of Norway invited Henrik Syse, a philosopher, to
think about the good uses of the Petroleum Fund .
By contrast, in Canada the oil bonanza, which profits most to the province
of Alberta, has provoked vivid political discussions, both within Alberta
and nationwide. Should the windfall oil prices bring about the slashing of
taxes, investment in physical and social infrastructures or else further
expansion of the Trust Fund which has already accumulated more than 12
billion Canadian dollars? A populist politician proposed the distribution of
a handout of 400 Canadian dollars to each Albertian. Other Canadian state
raised the question of partly sharing the oil resources, but only one
Albertian in five backed this proposal .

Another recently unfolding experience, to be closely followed, is the policy
applied by the president of Venezuela, Hugo Chaves, and the national oil
company PDVSA. Venezuela is renegotiating the terms of contracts with
foreign oil companies, so as to grant a 51 per cent participation to
State-owned PDVSA and to increase the royalties from 16.6 to 30 per cent and
the taxes from 34 to 50 per cent. At the same time, it is transferring its
foreign exchange reserves from American to European banks. Besides
contributing with 10 billion dollars to one third of Venezuela’s federal
budget, PDVSA has earmarked in 2005 over 4 billion dollars for social
programs and development projects.
Part of the government oil revenues finances the new Ministry of Popular
Economy which has an annual budget of 1 billion dollars. According to
Minister Elias Milano, “Our focus is local and territorial development by
massive training of our workers in order to produce the basic necessities
for popular consumption ”. The intention is clear: to transform royalties in
a lever of inclusive and sustainable development, even though it is too
early to evaluate the progress made in reducing the social debt of
Venezuela: 57 per cent of population below the poverty line and a 17 per
cent unemployment rate.
Moreover, Venezuela supplies Cuba with nearly 100 thousand barrels a day of
subsidized oil and is offering discount prices to Caribbean countries. In
exchange, Venezuela receives medical help from 17 thousand Cuban doctors and
dentists stationed in Venezuela .

In a recent review of the debate on the Dutch disease and ways of
counteracting it, the Economist insisted on the importance of greater
disclosure and transparency in oil dealings. The Extractive Industries
Transparency Initiative promoted by Tony Blair points in the same direction
.

For oil importing LDCs a blessing in disguise ?

Even for the industrialized oil importing countries the oil price shock is
difficult to cope with and will affect negatively their rate of growth .
What to say for LDCs ? For them it comes as a catastrophe, and one more
proof that globalization in its present asymmetric form, far from creating
favorable conditions for their development, acts as a powerful obstacle.

To deal with the new situation no immediate solutions are at sight, except
hoping for some extra foreign aid from international sources or from
regional oil exporters.

In the longer run, a thorough revision of the development strategies is
called for in order to reduce the dependence on oil based fuels. This can be
achieved in three complementary ways:

– the most difficult one and, at the same time, the most effective
consists in a structural modification of the energy profile of the
development path ;
– sensible reduction of the oil-addiction can be achieved through
measures of energy conservation and through the use of more efficient
domestic appliances such as improved stoves, solar stoves, solar energy
water heaters, etc. ;
– finally, oil-based fuels can be substituted by biofuels and, more
generally, fossil fuels by renewable energies.

An important caveat is that there is no point in advocating renewable
energies in general, and biofuels in particular, so long as the present
widespread practice of deforestation by the consumers of fuelwood is not
curbed. Given the importance of subsistence activities in LDCs , it is
imperative to propose environmentally sustainable solutions for the local
production of energy for domestic consumption. Hence the importance of new
technologies that produce “green charcoal” from agricultural waste .
Alternatively, farmers ought to plant rapidly growing species of trees for
fuelwood.

We shall briefly examine below the three options.

The energy profile.

The energy profile depends on the mix of activities, their location, the
techniques employed and the efficiency in the production and final use of
energy. The two most important variables are the volume and distance of
transportation required for goods and people and the rate and pattern of
urbanization.

One manner of reducing the demand for expensive oil-based fuels consists in
strengthening the local economies, so as to make them less dependent on
goods brought from far away. Yves Cochet, a former French environment
minister, strongly recommends this strategy of promotion of local
development . It remains to be seen to what extent high costs of
transportation will act as a brake to delocalizations and even set into
motion a process of “deglobalization”.

As for the challenge of rapid and premature urbanization, so characteristic
of many LDCs, it is time to recognize that it creates more problems than it
solves. As pointed out by the British Commission for Africa, Africa is well
on the way to European levels of urbanization, but without the economic base
to sustain it. As a result, around 72 per cent of the total urban population
of Africa live in slums and some cities are socially unsustainable.
Curiously, the same report recommends that international community should
empower African governments in planning for rapid urbanization .

The statistics of African urbanization may be inflated because of the use of
the dichotomy “urban-rural”, while both the European Union and the United
States recommend nowadays a tripartite classification. Besides the numbers
of urban dwellers, the demand for energy will depend on the physical outlay
of the town, the lifestyles of its inhabitants and the transportation
system. All over the world, a major push is needed to make cities more
resource efficient and to reduce their sprawling ecological footprints . For
the LDCs the urgency is even greater, not speaking that they can still avoid
some of the mistakes committed in the advanced countries and leapfrogg into
an energetically less intensive service society, redesigning cities for
people (and their bikes) rather than for automobiles.

Greater energy efficiency.

The amount of energy required to produce 1000 dollars of GNP is an indicator
commonly used as a proxy for energy efficiency. It varies greatly from
country to country and should be carefully studied. In reality, it subsumes
two different measures : on the one hand, the efficiency of the energy
production and distribution and, on the other hand, the efficiency of the
energy final use. Considerable improvement may be achieved in both.
According to Amory Lovins, it should be possible to cut by more than half
the energy consumption in the United States, projected for 2025 at 28
million barrels/day, by adopting a set of measures improving the efficiency
of the end-use of energy at an average cost of 12 dollars per barrel
foregone, i.e. a fifth of the current price of oil. Using energy more
efficiently makes sense not only because it reduces the emissions of
greenhouse gazes, but also because conserving fossil fuels is much cheaper
than buying them .

Renewable energies.

The limits of this paper do not allow for a detailed discussion of the
prospects of different renewable energies, and even less for the
country-wise analysis of the most suitable energy mixes. In this paper we
concentrate, for reasons already explained, on agroenergy.

Agorenergy : an opportunity for LDCs in tropical regions.

In June 2005, the International Energy Agency organized together with the
United Nations Foundation and the Brazilian government an
international seminar “Assessing the Biofuels Option”, which marked so to
say the coming of age of biofuels . It also gave to the Brazilian delegation
an opportunity to present the thirty years experience of Brazil in producing
ethanol from sugar cane and the recently approved biodiesel program (see box
1).

Without prejudging what are the ultimate limits of world biofuels
production, given the limited supply of agricultural land, it is submitted
that several LDCs have suitable conditions to produce domestically ethanol
as an additive and/or substitute for gasoline and in this way stimulate the
development of productive forces in the countryside.

Ethanol derived from sugar cane has an excellent energy-in/energy-out ratio
obtained in the processing of sugar cane . The more so that it is possible
to produce simultaneously considerable quantities of electricity through the
so-called cogeneration process.

Up to 25 per cent of ethanol can be added to gasoline without any
modification of the engine. Furthermore, Brazil is currently producing
bi-flex motorcar engines that allow for blending different proportions of
ethanol and gasoline, depending on their availability and relative costs.
Embraer is even testing ethanol as a fuel for small planes.

Sugar cane ethanol has a clear comparative advantage, both in costs of
production and energy-in/energy-out ratio, over ethanol produced from
grains. For the moment being, the cost of production of celulosic ethanol is
quite high, but a breakthrough in this extremely interesting technology is
envisageable within a few years. Let us recall that celulosic ethanol can be
extracted from any kind of agricultural waste, stalks, straws etc., as well
as from trees and crops specially grown for this purpose.

By contrast, there exists a wide array of oil-seeds that can be selected as
the raw material for the production of biodiesel. Brazilian scientists work
on more than ten different species, some adapted to rain tropical regions
like palm trees, other suitable for the semi-arid regions like ricin
(mamona). The list contemplated in India contains as many as eighty plants,
although strong preference is given to Jatropha nut (see box 2).

When evaluating the rentability of biodiesel, the following elements must be
taken into account:

– oil-cakes may be turned into a valuable livestock feed and/or
fertilizer; large scale production of biodiesel ought to be associated with
restructuring of cattle breeding and reducing the pasture area to be
released for agriculture ; depending on the crop chosen, biorefineries will
turn out different kinds of coproducts, some of them quite valuable, other
more difficult to sell ;
– crops and trees grown for biofuels, that substitute fossil fuels,
entitle to claiming and selling of carbon credits, as foreseen by the Kyoto
Protocol ; as a matter of fact, carbon sinks should be always associated
with socio-economic projects that contribute not only to sustainability,
but also to inclusive development ;
– locally produced oil can be used to action stationary engines for
water pumping, production of electricity, etc. .

One may assume that market forces will impose biofuels as an alternative to
expensive oil. But political will and public policies will be required to
protect the interests of small farmers and ensure that biofuels are produced
in environmentally sustainable ways. The challenge is to start a new cycle
of rural development, generating a fair amount of employment and self
employment for small farmers and their cooperatives, carried within the
precepts of the “ evergreen revolution”, as defined by M.S. Swaminathan :
learning to produce more on less land and with less water, transforming
agriculture into the mainstay of livelihood security system for hundreds of
millions of farmers and of ecological security system for the planet .

How far and how fast we can move along those lines ?

The reply to the first question will depend on detailed country by country
assessment of the availability of land, water, suitable crops and/or tree
species, with special reference to integrated food-energy production
systems, which take as paradigm the natural ecosystems, close whenever
possible the loops between different components of the system and make the
best possible use of agricultural residues. It is submitted that
considerable savings of land and water necessary to produce biofuels can be
achieved in this way, making compatible the search for greater food security
with substitution of oil-based fuels by agroenergy.
In Africa this work has been started by a series of policy dialogues
organized by “Partners for Africa”, a project implemented in close
cooperation with the European Energy Initiative for Poverty Eradication and
Sustainable Development, launched at the Johannesburg Summit. The final
policy dialogue was held in June 2005 in Dar es Salaam . The project has
already assembled valuable documentation. A country like Tanzania to take
one example, which has 4,6 million hectares under crops (5,3 per cent of its
land mass), could easily produce its own fuel and it even has export
potential after having fully substituted its oil imports. Tanzania currently
imports 20 thousand barrels per day. To substitute this by biofuels it would
need 300 thousand hectares with a productivity of 4 thousand liters per
hectare and year. It would save in this way 0,4 billion of dollars per year
and generate 300 thousand jobs (on the optimistic assumption of 1 job per
hectare).

A private consulting firm, F.O.Licht, convened in November 2005 in Amsterdam
a large conference to review the recent technological advances in ethanol
production. Asia Biofuels Conference and Expo was held in Decmber 2005 in
Manila with 40 countries represented. A Central Biofuels Conference and Expo
is scheduled for March 2006 in Panama City, focusing on development of
biofuels in Latin America.
It is to be expected that these events will generate a stream of
information about actual performances and costs of production of different
kinds of biofuels.

Further work along those lines will emerge from the UNCTAD Biofuels
Initiative supported by the UN Foundation, which was formally launched on
December 7th in Montreal by UNCTAD’s Secretary General. In his video message
Dr. Supachai Panitchpakdi stressed that as petrol prices continue to rise,
biofuel production reduces oil import dependency and increases energy
security. It creates employment, encourages economic diversification,
promotes rural development and contributes to the Kyoto Protocol reduction
targets using the financial incentive provided by the Clean Development
Mechanisms.

As for the second question, the pace at which the LDCs will be able to start
and expand local production of biofuels will depend on political will,
ability to design appropriate public policies, access to technologies and,
last but not least, access to finances. South-South technical cooperation,
with Brazil, India and South Africa as main suppliers of know-how and
equipment to LDCs, would be welcome. Furthermore, as already mentioned, the
developing oil exporting countries could contribute to the financing of
biorefineries to be set in LDCs.

The primary energy potential for biomass has been underevaluated by several
authors of recent books on the consequences of oil depletion. The reasons to
it are manifold:
– a hasty extrapolation of the US performance in corn-based ethanol,
characterized by a very low energy efficiency;
– a propensity to look for futuristic technological solutions,
underestimating the potential of agriculture, forestry and turning biomass
waste into wealth ;
– vested interest of powerful lobbies such as the nuclear energy
lobby;
– last but not least, an underestimation of the land and water
resources available for the production of bioenergy without conflicting with
the paramount objectives of food security and environmental prudence. Hence
the importance of refining of the estimates of land and water needed to
produce biofuels through integrated food energy systems adapted to different
biomes .

How do we move there ?

To conclude this paper some reflections are presented in view of an action
plan.

1. Dutch disease should be easier to cope with than AIDS, but it
requires as a political precondition a performing and active, lean and clean
Developmental State capable of a holistic approach to planning, so as to use
the transient oil rent to finance a socially inclusive and environmentally
sustainable long term strategy, ensuring decent livelihoods to the entire
population and using as much as possible the renewable resources. The
existence of State-owned oil enterprises may be an asset when negotiating
with the powerful oil companies.
The oil producing sector usually acts as an enclave isolated from the rest
of the economy. Outmost effort should be made to build backward and forward
linkages and create synergies between the oil sector and the domestic
economy. Furthermore, an exchange policy is called for to offset the trend
towards the appreciation of the local currency.
Even in oil exporting countries it makes sense to expand the production of
biofuels, so long as their cost will be competitive when compared with oil
prices. The surplus of oil can always be sold on world markets.
Outmost care should be given to the production of sustainable energy for the
household sector. It makes no sense to advocate the substitution of oil by
biofuels while tolerating at the same time the devastation of forests by the
collectors of fuelwood.
As already mentioned, besides financing a national development strategy, the
oil rent could be partly used as a leverage to promote regional development
by feeding a Regional Development Fund and/or by supplying oil at discount
prices.

2. The challenge facing the oil importing LDCs is much more difficult,
insofar as oil substitution by biofuels cannot happen overnight. It will
require substantive investment in knowledge, skills, equipment and,
therefore, financial resources. Furthermore it should not interfere with the
paramount objective of food security. The same political precondition – a
performing Developmental State – applies a fortiori here.
It should be clear that production of biofuels is only part of a broader
energy strategy, in which the most important component is the search for
energy conservation and efficiency - the most efficient energy is the one
which is foregone. This may require a drastic overhaul of the urban design
and lifestyles, more specially of the tranportation systems with more
emphasis on mass transportation and bikes, and less on individual cars.
Local economies ought to be strenghened, so as to reduce the dependence on
commodities brought from far away and increase the share of locally produced
goods (which is not tantamount to recommend autarky). In a sense, expensive
oil is likely to bring about some “deglobalization”.
A tempting idea is leapfrogging of LDCs into a modern service society,
bypassing some stages of development of the today developed countries,
characterized by consumerism and oil addiction.
In the same way, biofuels are only part of a broader strategy of
valorization of biomass, which includes production of food, feed, green
fertilizers, industrial feetstoocks, pharmaceuticals and cosmetics. In turn,
production and processing of biomass is only part of a broader rural
development strategy, in which non-agricultural employment and pluriactivity
of peasants and their families play an increasingly important role.
The scope for the production of biofuels should be therefore examined within
the framework of a systemic rural development strategy. Production of
biofuels offers an opportunity to increase rural employment and to provide
sustainable livelihoods to small holders. It may yet prove the blessing in
disguise of the oil shock. But carefully designed policies are called for to
avoid that biofuels production in large and highly mechanized plantations
gives rise to just another kind of enclave-economies. From the very onset,
promotion of agroenergy should be associated with policies of land reforms,
wherever appropriate, and of support to small scale farmers.
As already mentioned, production of biofuels should go hand in hand with the
development of local sources of domestic energy, in order to curb the
presently widespread practices of deforestation through predatory collecting
of fuelwood. So long as this condition is not met, doubts may arise about
attributing carbon credits to countries which engage in substitution of
oil-based fuels by agroenergy.

3. So long as the substitution of oil-based fuels on the internal
market is not completed, it is too early to speak of their potentially
important exports to industrialized countries. However, LDCs situated in the
tropical regions will enjoy on account of climate permanent comparative
advantage in growing sugar cane and oil seeds. They can therefore expect to
be competitive. Their situation would be greately improved if they could
count on long term contracts for the purchase of biofuels with export quotas
and some mechanism to renegociate periodically the prices.
It is submitted that UNCTAD could explore the possibility of organizing the
future international markets of biofuels, so as to meet the interests of
both, biofuels exporters and importers. Insofar as oil companies are
involved in the retail trade of gasoline and diesel, they might be attracted
by the prospect of a stable supply of agrobased additives to oil-based fuels
and, therefore, accept the concept of an organized biofuel international
market.
Special attention should be given to South-South cooperation, not only in
trade in biofuels, but also in the realm of technical cooperation, trainning
and sale of equipment. It is submited that Brazil, India and South Africa
(the so called G3) could take the lead in the organization of a South-South
network on biofuels, and more generally agroenergy. UNCTAD’s biofuel
initiative has a major role to play in assisting the LDCs in these tasks.
Box 1: Brazil’s National Plan of Agroenergy (2006-2011)

Released in October 2005 by the Minister of Agriculture, the Plan emphasizes
the comparative advantages of the country to become a world leader in the
production of biofuels without conflicting with food production and
preservation of native forests: abundant resources in land and water, rich
biodiversity, suitable climatic conditions, advanced research in tropical
agronomy and biology, a capital goods industry capable of supplying
equipment for refineries, last but not least, a 30 years experience in the
pioneering program of Proalcool-use of sugar cane ethanol as an additive to
and a substitute for gasoline.
The Plan aims at transforming agroenergy in the crown jewel of the Brazilian
agrobusiness.
Renewable energies already account for 31.5 per cent of total energy in
Brazil, as compared with 11.2 per cent in the world. The relative share of
modern biomass is 23 per cent against 1.7 per cent in the world. The present
production of ethanol-14 billion liters- is likely to increase to 26 billion
liters in 2015 to meet the internal demand boosted by the success of
flexicars (about 1 million at present, over 8 millions estimated for 2015).
This will call for a 30 per cent expansion of the cultivated area of sugar
cane, at present 5.5 million hectares of which roughly half goes for sugar
production.
The latter figures should be put in the context of a reserve of yet
uncultivated land suitable for agriculture estimated in 90 million hectares
and the possibility of converting at least 30 to 40 million hectares of
degraded pastures.
The volume of exports has not been estimated, but Brazilians expect that
ethanol will become a valuable commodity. The break-even price of oil for
the Brazilian ethanol is estimated in the Plan at 35 dollars per barrel, at
25 dollars by other sources. Brazilian ethanol has the lowest cost of
production in the world. Moreover its energy out/energy in ratio is
excellent: 8.3 as compared to 1.4 for ethanol extracted from corn. The
prospect for large scale exports is thus bright, at least before cellulosic
ethanol becomes competitive.
By contrast with the sugar cane ethanol, the biodiesel is still incipient,
aiming at an initial B2 (2 percent additive of biomass oil, about 1 billion
liters in 2007).
In the long run the target is B40 for 2035 plus significant export of
biodiesel, side by side with ethanol.
Several crops are being tested, among them the oil palm for the rain
tropical regions and the ricin (mamona)for the semi-arid Nordeste.
Production of biodiesel has received fiscal incentives differentiated by
region and by size of the farm. Small scale farmers in the North (Amazon
region)and in Nordeste are the most favored.

Sources: Ministerio da Agricultura, Pecuaria e Abastecimento, 2005, Plano
Nacional de Agroenergia,2006-2011, Brasilia; Macedo, Isaias de Carvalho
(org), 2005, A Energia de Cana-de-açucar, UNICA, Sao Paulo; Crestana,
Silvio, 2005, Nasce a Nova Agricultura dos Tropicos (cyclostyled); O Estado
de Sao Paulo, “Proalcool 30 anos, a arrancada do combustivel do futuro”,
November 8th 2005.
Box 2: Jatropha: a miracle plant?

In India and in several African countries, great hopes are deposited in an
exotic plant native from western hemisphere, Jatropha.
According to Indian sources, Jatropha can yield up to 2 tons of biodiesel
fuel per year per hectare. Jatropha requires minimal inputs, stabilizes or
even reverses desertification, and has use for a variety of produts after
the biofuel is extracted. India has many millions of hectares of wasteland
– saline lands, degraded forests, and other land unavailable for
agricultural use due to overfarming. Biofuel screw presses are simple to
make and can be produced and maintained by a village blacksmith.
If 10 million hectares of wastelands were used for biodiesel production with
a modest estimate of 1,5 tons of seeds per hectare, 4 million tons of
biodiesel would be produced – one tenth of India’s anual oil requirement.
Indian authors consider that employment would grow at the rate of one job
per hectare (this seems over optimistic). At the same time 11 million tons
of organic seedcake fertilizer or livestock feed and 0,4 million tons of
technical grade glycerol would be produced for use or sale (B and G BHAGAT,
“Hope in Jatropha – India gives biofuels a chance to grow”, www.ecoworld.com
).
In his speech on the occasion of the National Day on January 26th, 2005, the
President of India, Abdul Kalam, made a passionate plea for converting waste
land into perennial plantations of biofuels: « We have nearly 63 million
hectares of wasteland available in the country, out of which 33 million
hectares have been allotted for tree plantation. Certain multi-purpose
bio-fuel plants can grow well in wastelands with very minimum input. Once
cultivated, the crop has fifty years of life. Fruiting can take place in two
years. Bio-fuel plants grown in parts of wastelands, for example, 11 million
hectares can yield a revenue of approximately Rs. 20,000 crore a year and
provide employment to over 12 million people both for plantation and running
of extraction plants. It will reduce foreign exchange outflow for import of
crude oil, cost of which is continuously rising in the international market…
We should absorb the best of technologies available worldwide and start
commercial operations immediately. One time investment needed for bio-fuel
plantation to production in 11 million hectares will be approximately Rs.
27,000 crore. Capital equipment and investment in plant and machinery can
come from bank loans and private sector entrepreneurs».
More recently the Indian Planning Commission published a report on biofuel
recommending the creation of a biodiesel mission and proposing a pilot
project: planting Jatropha on 400 thousand hectares of wastelands in 26
States.
Substitution of 20 percent of diesel was set as the long-term goal involving
more than 13 million hectares of wasteland, forest land, agroforestry,
fallow land, public land and even agricultural land (the latter for hedge
plantation).
The Commission did not consider the production of sugar-cane ethanol on
account of its implication for sugar production, nor did it elaborate on the
prospect of “cellulosic ethanol”.
According to some observers, the statistics used on seed yields and input
needs are fraught with uncertainty. It has been pointed out that seed yields
in different (and up-to-now limited) field experiences vary from 1 to 12
tons per hectare. The ecological impact of large scale planting of Jatropha
are not yet known in India, and for that in other countries. Hence the need
to approach with circumspection the Jatropha-based biodiesel projects.
Priority ought to be given to a large scale research programme on
plantation models, processes of oil extraction, equipment for large scale
and local production of biofuels, environmental inputs of Jatropha and
modalities of using the Clean Development Mechanism to claim carbon credits
and reduce in this way the costs of production of biofuels. (see R.Kher,
“Biofuels: the way ahead”, Economic and Political Weekly, December 17th,
2005.)

Polycentric and Losing Focus Anil Netto

PENANG, Malaysia, Mar (IPS) - While a buzz of excitement surrounds the World
Social Forum, now under way in the Pakistani city of Karachi, veteran
activists and political scientists here are having reservations over the
regional approach to the global event, with some even unaware it was taking
place.

This is the first year that a polycentric approach is being used for the
previously global-level WSF, with regional events in three continents. Two
events were held in January in Bamako, Mali and Caracas, Venezuela to
counter the annual World Economic Forum in Davos, Switzerland, held in the
same month.

More than 15,000 people, mostly from the French-speaking parts of Africa,
including farming villages, attended a series of 600 meetings during the
Bamako WSF on Jan 19-23. A further 100,000 people participated in the
Caracas event immediately after that.

About 30,000 people are now converging for the Karachi leg, initially
scheduled for January as well, but postponed due to the earthquake in
Pakistan.

For many activists in Penang, hub for a string of global, regional, national
and local civil society groups, the buzz of excitement surrounding the
Karachi Asian-level WSF is a world away. Certainly, it has not infected them
the same way that previous global-level WSF events did. An IPS survey of
four major non-government organizations (NGOs) here revealed that none of
them was sending representatives to Karachi.

Some observers believe that the lack of enthusiasm, and even awareness,
among activists hinted at a larger problem that goes beyond the move to a
polycentric WSF.

’’It’s a good idea to regionalise the forum,’’ says one veteran activist
here who has been following the WSF’s evolution closely. He said that
regional groups can participate and benefit from the forum and discuss
issues relevant to them.

At the same time, he says, there is a need to harness the energy generated
from previous WSFs and build a genuine global justice movement. ’’We must
have some structure and organisation, such as a permanent secretariat, with
elected representatives, with more than just a coordinating role,’’ he adds.
This structure could coordinate action, clarify vision, formulate strategic
steps and thrash out differences and come up with a broad programme, even if
groups cannot agree on a common ideology.

But there is much resistance to structuring the WSF. ’’Too much is made of
the freedom to do your own thing, and that is understandable as there is
some fear that the event could be manipulated by certain groups,’’ says the
veteran activist, declining to be named.

He warned that the glorification of individualism could undermine the WSF.
’’What is the value (of the WSF in the end)? It becomes too loose a network,
and its annual events turn into a jamboree, a celebration of diversity. It’s
no use to me (in the long run).’’

When the WSF was first launched in 2001 in Porto Alegre, Brazil, its
activities were largely shaped by the founding WSF organising committee,
made up of a string of Brazilian organisations. The event was also given
impetus by a range of progressive European NGOs.

By the third WSF in Porto Alegre, the international council of the WSF,
which had grown to more than 100 organisations, planned most of the
activities. The 2004 edition was held in Mumbai in India while next year’s
event will be staged in Nairobi, Kenya.

’’I have a few misgivings about splitting the venue (the polycentric
approach), but I guess it’s all part of the new political experimentation in
devolved democracy and real participation that I find attractive about the
WSF,’’ said Glasgow-based political scientist and author John Hilley, who
has written about neo-liberal militarism, the WSF and Southeast Asian
politics, in e-mailed comments to IPS.

He felt that the WSF and wider anti-globalisation movements have to work
through multifarious alignments, coalitions and strategies. ’’If the
prevailing power structure is built around a corporate-political-military
hegemony which utilises globalisation and all its ideological resources, any
alternative bloc has to think at a similar level,’’ he said.

Some argue that the global justice movement should be a political movement
and that there is no harm in backing political figures and causes worthy of
support.

Hilley pointed out there is no essential contradiction with the WSF’s
founding principles and its capacity to engage either intellectuals or key
’left’ political leaders.

While intellectuals are an integral part of the movement, too close an
alignment with political leaders could be problematic.

’’This is not only because so many ’left’ leaders and politicians have sold
out and been co-opted,’’ observed Hilley. ’’It is also because of the
fundamental difference between the bureaucratic offices which they inhabit
as parties and governments (or oppositions) and the type of open,
non-hierarchical politics which the WSF is seemingly trying to construct.’’

The polycentric approach this year may also see another sub-regional WSF
event taking place in Bangkok, possibly in October. For Sarojeni Rengam,
executive director of Pesticide Action Network’s Asia Pacific (PAN-AP)
office in Penang, that poses a problem.. ’’For a group like ours, which
covers the whole Asia Pacific region, which sub-regional event do we focus
on with our limited resources, Karachi or Bangkok?’’ she asked.

She said that the WSF had tremendous impact in its early meetings to
challenge neo-liberal economics. ’’It brought together diverse groups with
different ideologies and the events had a lot of creative energy,’’ she told
IPS. ’’But when you don’t have anything to unify the groups, it becomes
difficult to mobilise people constantly and regularly.’’

’’There should be more debates on issues and some level of calls or
statements that people can sign on after such forums,’’ she said, adding
that there could be a need for some kind of structure.

She stressed that local grassroots groups in the struggle — the displaced
and the dispossessed — should be in the frontline of the global movement.
’’They have to be the leaders and play a prominent role.’’

Penang-based political scientist, Johan Saravanamuttu, who participated in
the Mumbai WSF, was not even aware of the Karachi event until IPS contacted
him. ’’The publicity is bad,’’ he told IPS. ’’Somehow I haven’t even caught
any news about the Karachi event unlike the WTO event in Hong Kong.’’

While recognising the benefits of a polycentric approach, he warned that
’’if you have too many things going on, you are going to lose focus and
people will lose the sense of the WSF being a specific apex gathering of all
social movements in the world.’’

This lack of focus, he said, risks undermining the concept of the global
justice movement acting as ’the other superpower’ to counter the neo-liberal
imperialistic agenda of the United States.

Ignacy