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Jatropha=agrofuel?

Jatropha=agrofuel?

The frontier market for biofuels is exploding, and sub-Saharan African countries, primarily South Africa, Angola, and Mozambique, may soon become the leading biofuel and carbon credit suppliers to world markets. Biofuels, generally defined as liquid or gas fuels derived from biomass, produce significantly less ozone-damaging carbon emissions than fossil fuels such as coal and petroleum. Overall, many expect that the biofuel market in Africa will help the continent begin to realize its agricultural potential, bring real investment into irrigation technologies, and also lead to infrastructural growth and development. According to Njeri Wamukonya, an energy expert with the United Nations (UN) Environment Program, worldwide investment in bioenergy reached $21 billion (USD) last year. And as one pundit put it, “African countries are keen on [capturing some of this market] by transforming their expansive farmlands into ‘the next oil fields’.”

Under the current Kyoto Protocol framework (set to expire after 2012), the Clean Development Mechanism arrangement (CDM) permits industrialized countries with a greenhouse gas reduction commitment (labeled Annex 1 countries) to invest in projects that reduce emissions in developing countries as an alternative to undertaking more expensive emission reductions in their own countries–thus theoretically lowering the cost of net global greenhouse gas emission reduction through the financing of emissions reduction projects in developing countries that may lack the scale, expertise and capital necessary to effectively contain emissions on their own. Projects that reduce greenhouse gas emissions and contribute to sustainable development can earn saleable certified emission reduction credits (CERs). Countries with a commitment under the Kyoto Protocol can use the CERs to meet a portion of their obligations under the Protocol. The CDM operates under the guise of the UN Framework Convention on Climate Change (UNFCCC). And while the current portfolio of around 1,000 CDM projects worldwide includes very few biofuel-oriented projects, an article from July 2007, written by Katherine Constabile for The Africa Journal, states that “private and public sector institutions such as Agrinergy and the UN Conference on Trade and Development (UNCTAD) are currently working to streamline the CDM biofuel approval process, which will enable industrialized countries to facilitate biofuel projects in Africa for their benefit.” Increasingly, Constabile writes, “Africa will be a frontier for developed nations to diversify their energy supplies and attain carbon ‘neutrality.'” At present, only roughly 3% of all CDM projects are based in Africa, according to a December 2007 report issued by Yvo de Boer, Executive Secretary of the UNFCCC and the UN’s top climate change official.

Biofuel-related CDM projects in Africa are not without controversy, however. One example is a project announced in late 2007 to develop an integrated sugarcane facility at Homa Bay on the shores of Lake Victoria in Kenya, which seeks to foster a dual export and domestic system of sugarcane production, concentrating on both white sugar and biofuel production, and which may qualify for 217,000 tons worth of certified emissions reductions (CERs), of carbon credits. Once at full capacity, the project is expected to produce an annual amount of 100,000 metric tons of white plantation sugar for domestic sale, and an additional 259 million liters of fuel-grade ethanol for the export market. The project also seeks to add ethanol to Kenya’s domestic biofuel market. ‘Kenya has the agricultural capacity to produce biofuel at a good price while, geographically, being well-placed for access to the Asia market,’’ says Pierre Alain Puippe, global manager for biofuels at Fair Energy, a Geneva-based oil and biofuel company, and one of the project’s primary shareholders. ‘‘At the same time, Kenya is not a small country and can also develop an internal biofuel market.”

Proponents of the deal point out that the bagasse (the biomass left behind after sugarcane stalks have been crushed for their juice) produced by the facility will be enough to make the project self-sustainable in the long run in terms of its electricity needs, and that an additional 225,000 MWh of ‘‘green electricity’’ will be supplied to Kenya’s national power grid. But critics of the venture are quick to point out that biofuels may also exacerbate underlying problems, especially in relation to food and water supplies. Constabile writes that food industry analysts “fear [that] the introduction of the profitable and value-added biofuel market will lead many farmers to sell crops to biofuel producers instead of to local food markets, and [that] the cropfeed biofuel market will increase the price of food.” Tiberius Barasa, assistant research fellow at the governance and development program at the Institute of Policy Analysis and Research (IPAR) in Nairobi, reiterates this concern. ‘‘At the moment Kenya, like many African countries, is facing a problem of food shortages,” he says. “If, in the future, we are to use some of our corn or soy beans to produce biofuels, we could affect the supply of food in the country.’’ Moreover, some observers wonder about the risk that biofuels pose to regional water supplies, and especially to those regions particularly affected by drought.

But the relationship between biofuel production and food and water shortages is not necessarily that direct. Take Mozambique, for example, which offers arguably the most promise for biomass production in Africa, given its relatively superior governance, emerging agricultural infrastructure, production capacity and ideal agro-climatic and agro-ecological conditions for growing a myriad array of energy crops. The government of Mozambique seeks biodiesel from the shrub jatropha, an abundant, hardy, drought-resistant, oleaginous plant whose seeds produce up to 40 percent oil and which grows in harsh conditions and marginal soil that doesn’t otherwise support food crops, as well as ethanol from sugar cane. But since both feedstock have significant growth potential in the country, and because neither are significant sources of food for the local population, the issue of market distortion becomes moot. Furthermore, proponents of African biofuel production note that the net effect of biofuels may offset food’s short term price volatility. They argue that the launch of the biofuel market in Africa will actually “alleviate food insecurity as a result of technical assistance provided to farmers, lead to infrastructure improvements, and spur income generated by biofuel sales.” Thus, the argument runs, the development of Africa’s biofuel industry is in fact a means through which political will can grow for future, long term agricultural development in Africa.

Finally, how governments choose to allocate land may have the greatest impact on price fluctuations in food, rather than the mere presence per se of a biofuel industry. “Price rise will depend on whether or not oil crops are planted on arable land that could otherwise be used for growing food crops, and whether water is diverted from food crops to irrigate the biofuel plantations,” says Jeremy Wakeford, a senior lecturer in economics at the University of Cape Town in South Africa. To this extent, Mozambique’s Agriculture Minister, Soares Nhaca, pledged in January that the government would not allow the production of biofuels to compromise the country’s food security. “This is a government decision”, he said, “and work is under way across the country to identify land that can be used to produce biofuel, but always in the perspective of finding marginal land which does not conflict with food production.” And Mozambique’s government has already begun encouraging peasant farmers to grow jatropha on marginal land, he noted. As for water supplies, the hope is that biofuels will in fact be the necessary catalyst to bring attention to water capture and irrigation technologies that, as Constabile notes, are “often neglected areas in African development, as they require significant investment and technological capacity. Since developed nations benefit from the biofuel craze, political will and financial support to capture and recycle food water and tap into deep water tables will likely emerge.”

While China and the European Union (EU) are two of the main players in the continent’s current biofuels boom (the EU’s target of 5.75% of vehicle fuels being renewable by 2010 meant that one quarter of the Continent’s land would have had to be covered with biofuel crops), the government of Brazil’s President Luiz Incio Lula da Silva has established itself as the runaway leader, and countries such as Angola and Mozambique have joined forces with Brazilian companies such as Petrobras (the national oil company), for example, in the development of soybean-based biofuel. Brazil hopes to diversify its own biofuel supplies, while spurring worldwide demand, and has technical cooperation agreements in agriculture with both Angola and Mozambique, allowing for more efficient development of the agriculture biofuel feedstock industry in both countries. Petrobas recently joined with Eni, an Italian energy firm, to export biofuel sources to Italy, and the firms are reportedly planning to collaborate on the construction of future biodiesel plants in Brazil, Angola, and Mozambique. And two years ago, Embrapa, Brazil’s leading government body for agriculture and biotechnology research and the world’s leading institution for tropical research, opened an office in Ghana’s capital, Accra. Since then, Embrapa Africa has also worked in Angola to develop the country’s soybean biofuel industry, and in Mozambique, to kickstart biofuel research capacities in the country’s Institute for Agrarian Research. Constabile writes that “Angola is slated to be Petrobras’ most critical destination for biodiesel production, and Mozambique for ethanol. Both countries are large, with relatively small populations and thus, thousands of hectares available for biofuel crop growth. Angola has one of the largest non-forest agricultural lands in the world, even taking into account lands that cannot yet be tilled due to landmines and that are already tilled for food purposes. The country’s biofuel export potential is estimated at approximately six exajoules of bioenergy per year, the equivalent of 2.7 million barrels of oil per day (bpd).” As per ethanol, Constabile notes that “an average sized ethanol plant costs approximately $85 million to build–ethanol production requires much more investment than biodiesel, which can be produced relatively cheaply on a small scale,” and that “due to Mozambique’s relatively stable political and investment climate, the UK is [also] presently seeking to construct an ethanol plant in the country.” The largest announced project is the launch of the London-listed Central African Mining and Exploration Company (CAMEC) biofuel project, which was unveiled last October. CAMEC will invest $510 million (USD), and produce 120 liters of ethanol from 30,000 hectares of sugar cane. The venture is expected to create 7,000 jobs, and the plant is expected to open in 2010.

Another deal in regards to ethanol production in Mozambique was finally implemented last month, and may be a sign of things to come for CDM projects in Africa. In July, the national government approved an 18,00 hectare bioenergy park that will provide 213 Mgy of ethanol, 92 MW of energy, and 2,600 jobs. The sugarcane ethanol project will be constructed at a cost of $280 million (USD) and is expected to be completed in 2013. The project is spearheaded by Principle Capital, along with local investors, and will take place in Dombe, in Manica province. Mozambique’s President Armando Guebuza said that biofuel development “will not dislodge Mozambican farmers from their lands,” and that government policy would require the use of underutilized or empty lands, would avoid using lands used for food production, and that Mozambique will refine its own raw materials. The government has set aside over $700 million for biofuel research, production and promotion, and many energy experts speculate that Mozambique has potential to be a ‘biofuel superpower’. According to Cornelis van der Waal, an industry analyst with Frost & Sullivan, a South Africa-based consultation company providing advice on development policies, the country has “sufficient rainfall for extensive production of sugarcane, which is currently the most efficient crop for ethanol in terms of production cost, being much faster to process and producing more sugar (thanks to its water content) than maize or sorghum.”

One unusual success story for biofuels in Mozambique began at the Ross School of Business at the University of Michigan in the U.S. There, a team of students known as ‘Mozergy’ discovered jatropha while evaluating renewable-energy technologies to serve BHP Billiton’s (the world’s largest mining company) primary energy need – electricity – in Mozambique (BHP Billiton has committed $300 million to reduce its global-emissions). The students soon concluded that an agricultural/biodiesel enterprise could also help local farmers generate income. And although BHP Billiton did not want to launch into biodiesel production itself, the students eventually made Mozergy into a stand-alone business model that could help the company and the local Mozambique farming community. “[Mozergy] saw biofuels as a way to provide local farmers with an additional cash crop, to help them modernize their agricultural practices, and to diversify their agricultural mix,” says Mike Hartley, one of the firm’s founders. And if ventures into biofuel production from jatropha sound familiar, they should. This past June, Odeveza, a joint venture group of Canadian and Mozambican firms, announced that it would invest $150 million into the production of biodiesel from jatropha over the next six years. “The $150 million investment is aimed at intensive jatropha production for biodiesel extraction in an area of over 70,000 hectares identified in the districts of Barue and Gondola in Manica province and Buzi in Sofala province,” company director, Fernando Azevedo told reporters in Maputo.

JGW

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