Energy Demand and Prices and Global Food Security Mark W. Rosegrant, Director Simla Tokgoz, Research Fellow Pascale Sabbagh, Research Analyst

Transcription

1 Energy Demand and Prices and Global Food Security Mark W. Rosegrant, Director Simla Tokgoz, Research Fellow Pascale Sabbagh, Research Analyst Environment and Production Technology Division Fourth McGill Conference on Global Food Security Montreal, Canada, October 4-6, 2011

2 Outline Role of rising energy prices and demand in the agricultural sector Global energy demand trends and projections Scenarios of future energy demand, food price and food security impacts Policy conclusions

3 Role of Rising Energy Prices in the Agricultural Sector

4 Context World energy prices have increased rapidly in recent years Agriculture has become more energy intensive in the past decade 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 Increased costs of fertilizer and pesticides

5 Energy s Shares of Production Costs Impact of energy cost changes on producers depends on both overall energy expenditures and energy s share of production costs Energy costs as a share of total operating costs, USA, 2004 Source: USDA 2006

6 Share of Energy Costs as a Percentage of Production Costs, Vietnam Percentage Black pepper Coffee Vegetables Rice dry season Rice fall season 13.5 Rice wet season 17.8 Maize Source: IFPRI-SubNIAPP survey of farm households in the Dong Nai River Basin, 2000/2001

7 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, in particular biofuels Could induce changes in crops Could increase the use of energysaving management practices Conservation tillage Low water-use irrigation Nitrogen management How Do Rising Energy Costs Affect Agriculture? Drip irrigation Source: European Commission 2008; USDA 2006

8 Impacts on Water Increased costs of water extraction, conveyance and desalinization Need for efficient water allocation mechanisms Efforts to reduce water losses, leaks Higher demand for hydroelectric power Increased supply of surface water? Increased cost of subsidizing water services Reform of water policies? In Texas, water pumped for irrigation decreased by 17.8% from low natural gas price years to high natural gas price years (Guerrero et al 2006)

9 Energy Prices and Agricultural Input Prices International prices of fertilizer and crude oil (in real terms) Source: World Bank Global Economic Monitor

10 Food price versus oil price

11 Global Energy Demand Trends and Projections

12 World primary energy consumption by fuel type 60 percent of biomass is traditional biomass Source: IEA 2006

13 Energy Demand Projections: Current Policies Scenario (= reference scenario) New Policies Scenario Takes account of broad policy commitments and plans announced by countries, including pledges to reduce GHG emissions and plans to phase out fossil-energy subsidies 450 Scenario IEA Scenarios Energy pathway consistent with the goal of 2 temperature increase through limitation of the concentration of GHG in the atmosphere to 450 ppm CO 2 - eq by 2080 Source: IEA World Energy Outlook 2010

14 Energy Demand Projections: IEA Scenarios World primary energy demand by scenario 1.4% increase per year 1.2% increase per year 0.7% increase per year China accounts for 20% of projected growth Developing countries account for 60% Source: IEA World Energy Outlook 2010

15 Oil Price Projections: IEA Scenarios Average IEA crude oil import price by scenario (annual data) Dollars per barrel (2009) Current Policies Scenario New Policies Scenario 450 Scenario Source: IEA World Energy Outlook 2010.

16 Energy Supply Projections: IEA 450 Scenario Oil production peaks before 2020 and declines steadily to 2035 Gas production peaks by the late 2020s and declines steadily to 2035 Renewables supply 45% of total electricity and 20% of total heat by 2035 Share of biofuels in total transport fuel supply reaches 14% in 2035 Source: IEA World Energy Outlook 2010

17 Scenarios of Future Energy Demand and Price Impacts on Food Prices and Food Security

18 Percent Increase in World Food Prices , Baseline Scenario 50 Percent increase in price Wheat Rice Maize Soybean Rapeseed Source: IFPRI IMPACT Model, June 2011 simulations

19 Number of Malnourished Children (Under 5) Millions of children Developing countries South Asia Sub Saharan Africa Source: IFPRI IMPACT Model, June 2011 simulations

20 Four Scenarios Compared to Baseline IEA 450 Energy pathway consistent with the 2 goal through limitation of the concentration of GHG in the atmosphere to 450 ppm CO2- eq Higher energy prices 67% higher oil prices in 2050 compared to baseline 75% higher fertilizer price Biofuel technology pessimistic Second generation biofuels start 10 years later (in 2039 instead of 2029) Higher energy prices and higher productivity 67% higher oil prices in 2050 compared to baseline 75% higher fertilizer price 20% increase in crop productivity growth

21 Commodity/ Scenario World Price Changes Relative to Baseline, 2050 (%) IEA 450 Higher energy prices Biofuel technology pessimistic Higher energy prices & higher productivity Maize Wheat Soybean Soybean oil Rapeseed Rapeseed oil Palm oil Sugar Source: IFPRI IMPACT Model, June 2011 simulations

22 Commodity/ Scenario World Crop Area Changes Relative to Baseline, 2050 (%) IEA 450 Higher energy prices Biofuel technology pessimistic Higher energy prices & higher productivity Maize Wheat Soybean Rapeseed Palm Sugar cane Sugar beet Source: IFPRI IMPACT Model, June 2011 simulations

23 Impacts on Child Malnutrition Scenario IEA 450 Higher energy prices Biofuel technology pessimistic Higher energy prices & higher productivity Change in number of malnourished children relative to Baseline, 2050 (million children) Source: IFPRI IMPACT Model, June 2011 simulations

24 Policy Implications

25 Challenges and Opportunities Rising energy prices, biofuel demand, and other supply and demand drivers will lead to higher agricultural prices Increased opportunities for agricultural sector, but costs to consumers, especially poor consumers in developing countries Potential threats to natural resources: land, water, environmental preservation, biodiversity

26 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 reduce trade-offs Biofuels increase profitability of crop breeding for productivity improvement in biofuel feedstock crops

27 Reducing the Trade-offs Reduce OECD subsidies and mandates for biofuels; liberalize trade in biofuels; reduce water, energy, fertilizer subsidies Develop production processes for liquid biofuels that bring benefits to the poor Need to design production systems that will integrate rural households into the value chain Allow for on-farm addition of value, rather than just extracting raw biomass Develop biofuels for local use: household electricity, clean cooking fuel, lamp oil

28 Agricultural Productivity Increasing crop productivity: agricultural research, water management, and rural investment Emphasis on crop breeding (including biotechnology) targeting abiotic and biotic stresses Water harvesting, precision agriculture, minimum tillage, integrated soil fertility management, integrated pest management, reduce post harvest losses Rural infrastructure investment to improve access to markets, risk insurance, credit, inputs, mobile phone towers