Assessing the impact of biofuels production on developing countries from the point of view of Policy Coherence for Development Final Report Assessing the impact of biofuels production on developing countries from the point of view of Policy Coherence for Development February 2013 Assessing the impact of biofuels production on developing countries from the point of view of Policy Coherence for Development Final Report Table of Contents EXECUTIVE SUMMARY _ 1 INTRODUCTION _ 7 SECTION 2: BACKGROUND _ 9 2.1 OUTLINES OF THE OBJECTIVES AND EXPECTED RESULTS OF THE PROJECT _ 9 2.2 DESK STUDY PHASE _ 9 2.3 FIELD VISIT _ 10 SECTION 3: THE GLOBAL CONTEXT OF BIOFUELS DEVELOPMENT AND IMPLICATIONS FOR DEVELOPING COUNTRIES _ 11 3.1 BIOENERGY FEEDSTOCK PRODUCTION PRACTICES AND CONVERSION INTO BIOFUELS _ 11 3.1.1 Characterisation of the feedstocks _ 11 3.1.2 Bioenergy feedstock production practices _ 13 3.1.3 Biofuel production methods _ 15 3.1.4 Biofuels blending _ 18 3.2 BIOFUEL POLICIES WORLDWIDE _ 20 3.3 CURRENT TRENDS AND STATISTICAL REVIEWS OF BIOFUEL PRODUCTION IN DEVELOPING COUNTRIES _ 23 SECTION 4: EVALUATION OF THE ECONOMIC IMPACTS OF THE PRODUCTION OF BIOFUELS IN DEVELOPING COUNTRIES _ 26 4.1 TRADE PATTERNS OF BIOFUELS _ 26 4.1.1 Trade flows for biofuels and related feedstocks: recent trends and projections _ 26 4.1.2 Regional trade arrangements and South-South cooperation _ 29 4.1.3 Biofuels and food prices on an international, regional and local level _ 29 4.1.4 Typology of the investors and business strategies behind biofuel investments _ 34 4.2 POTENTIAL ECONOMIC GAINS FROM BIOFUELS IN DEVELOPING COUNTRIES ALONG THE VALUE CHAIN _ 38 4.3 STATE OF THE DEVELOPMENT OF THE AGRICULTURE AND INDUSTRIAL SECTOR _ 39 4.3.1 State of the development of the biofuel industry and scenarios _ 39 4.3.2 The potential and the reality for a biofuels industry in Africa _ 45 4.4 IMPACTS OF BIOFUELS PRODUCTION AT LOCAL LEVEL _ 47 4.4.1 Potential impacts at household levels and on small-scale farmers _ 47 4.4.2 Economics of plantation scale and small holder approaches _ 51 4.4.3 Job creation _ 53 4.4.4 Tax and investment environment _ 58 4.5. IMPACTS ON LAND TENURE SYSTEMS _ 59 4.5.1 Land Tenure Systems and Governance Challenges _ 59 4.5.2 Large scale land acquisitions and land pressures _ 61 4.6 ENERGY ACCESS AND SUPPLY SECURITY _ 67 SECTION 5: ENVIRONMENTAL IMPACTS OF THE PRODUCTION OF BIOFUELS IN DEVELOPING COUNTRIES _ 72 5.1 LAND DEGRADATION, DESERTIFICATION AND FERTILITY _ 72 5.1.1 Biofuels and land degradation _ 72 5.1.2 Impact of monoculture plantations _ 75 5.1.3 Clearance of forest and use of new land for biofuels production _ 76 5.1.4 Using degraded land for biofuels production _ 77 Assessing the impact of biofuels production on developing countries from the point of view of Policy Coherence for Development Final Report 5.2 WATER USE, WATER ACCESS AND VIRTUAL WATER AND WATER FOOTPRINT _ 77 5.2.1 Introduction _ 77 5.2.2 Impacts of large irrigation scheme _ 78 5.2.3 Quantitative aspects and water footprint: production and processing_ 79 5.2.3 Water pollution by intensive use of agrochemicals _ 80 5.2.4 Water re-uses _ 81 5.2.5 Management by watershed and water rights _