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Scope for poverty alleviation focused biofuel production in Tanzania

06 April 2013

According to an article published in August 2012 in the journal Energy Economics, ‘a recursive dynamic computable general equilibrium model’ of biofuel production in Tanzania has concluded that ‘cassava-based ethanol production is more profitable than other feedstock options’, but that this will require ‘improving the productivity of smallholder farmers’, if poverty reduction is to be achieved through biofuel development. It is argued that ‘if smallholder yields can be improved rather than expanding cultivated land, then both sugarcane and cassava out-grower schemes generate similar pro-poor outcomes.’ This supports the view that ‘biofuels could help low-income countries overcome their dependence on oil imports while also reducing greenhouse gas emissions and increasing farmers’ participation in the growth process.’

However, the article notes that the trade-offs between biofuels and food production in low income countries have been questioned in some quarters. Some authors maintain that ‘shifting resources away from food production could increase households’ reliance on marketed foods’, with income from biofuel crop production being insufficient ‘to offset higher food prices’. In this context, it is noted that for every litre of ethanol produced, cassava requires more land than sugarcane.

The article’s findings indicate that ‘real consumer food prices will rise in response to biofuel production’ in Tanzania, since ‘food producers must compete against biofuel producers for land and labour.’ However, this competition for land will largely impact on export crops, not domestic food production crops. In terms of food production it is estimated that if yields of biofuel feedstocks can be increased, then food crop production ‘increases under most biofuels production scenarios, even though higher land and labor input costs mean higher overall real food prices’.

The findings of the modelling exercise suggest that ‘while all biofuels production scenarios improve household welfare, it is the small-scale out-grower schemes, especially for typical smallholder crops like cassava, that are most effective at raising poorer households’ incomes.’ It is recommended that the government of Tanzania ‘explore opportunities to engage smallholders in the production of biofuels’.

While the analysis recognises that efforts to raise smallholder crop yields have in the past faced difficulties, the conclusions of the analysis have tended to ignore this issue. Equally, the analysis excluded ‘public sector costs’ associated with establishing a biofuels industry in Tanzania, which could impact on the general conclusions drawn with regard to the benefits of biofuels development in Tanzania.

Whatever the scope for ACP states to increase domestic biofuel production, all are affected by the bioenergy production of major global players, which have contributed to recent cereal price rises. According to an online report by Timothy Wise, Director of Tufts University’s Global Development and Environment Institute, a recent survey by the US National Academy of Sciences ‘estimated that globally biofuels expansion accounted for 20-40 percent of the price increases seen in 2007-8’. The report considers that the policies of the USA have had a significant impact on global prices: in 2011, about 40% of the country’s maize production was used to produce ethanol. Since it is the world’s largest exporter, ‘this diversion of something in the order of 15 percent of global corn production from food and feed to fuel has created a demand shock in global markets.’

Using a partial equilibrium model previously applied to the effect of US biofuel policies on Mexico, a Tufts University working paper written by Timothy Wise suggests that between 2006 and 2011, the expansion of ethanol production in the US estimated the import costs of net maize- importing countries at US$11.6 billion, ‘with developing countries absorbing more than half of those costs’. According to the paper, ‘net food-importing developing countries saw costs of [US$]2.1 billion over six years.’ 

Editorial comment

Supporters of biofuels paint a tantalising prospect facing agriculturally well-endowed ACP states: to use some resources to produce biofuels that will, at the least, help offset any increase in food prices caused by the bio-energy policies of other countries and, at best, add to the country’s exports. However, as analysis in the US shows, increases in the use of agricultural resources for one purpose may simply divert them away from others. The research on biofuel potential in Tanzania shows that it could contribute to economic development – but only if any increase in biofuel production is not achieved by diversion away from other uses with greater welfare effects. Because it sidesteps both the challenges faced in raising smallholder productivity and public sector costs, the Tanzanian case is by no means the final word on the subject.

Cassava production has traditionally been neglected in Tanzania due to the absence of market outlets. Biofuel production, to substitute for imported heating and lighting fuel in rural areas, could offer scope for the development of arid and semi-arid areas where cassava is traditionally produced and where considerable scope for expansion exists.

Tanzanian farmers have already proved responsive to commercial incentives for traditional crops, with sorghum production expanding in response to increased use in the brewing industry, but some difficulties have been experienced with the cultivation of jatropha as a biofuel. In the cassava sector, issues relate primarily to creating efficiently functioning cassava value chains and getting to grips with constraints on yield improvements (including controlling pests and diseases). These may require substantial new investments, if existing land, labour, water and other inputs are not to be diverted away from higher-income crops. 


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