HIGH PANEL ON WATER,FOOD AND ENERGY

5. WORLD WATER FORUM Istanbul, 18. March 2009

Alexander Müller

Assistant Director-General

Natural Resources Management and Environment DepartmentFood and Agriculture Organization of the United Nations (FAO)

Ove

rvie

w

Global Challenges for Food and Agriculture

1. DEMAND FOR FOOD WILL GROW

The main drivers of the long-term outlook

Slow-down in world population growth

0.0

3.0

6.0

9.0

12.0

1750 1800 1850 1900 1950 2000 2050

To

tal p

op

ula

tio

n

(bill

ion

s)

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

An

nu

al in

cre

me

nts

(b

illio

ns)

Th

e d

rivi

ng

fo

rces

of

dem

and

to

203

0

Source: UN, World Population Assessment 2006

The number of undernourished is increasingnumbers of undernourished in the world 1990-92 to 2008 (millions)

842832

848

923

963

700

750

800

850

900

950

1000

1050

1100

1990

-92

1995

-97

2003

-05

2007

2008

2009

2010

years

mill

ion

s

Source: FAO Preliminary est.

Agr

icul

tura

l res

our

ce u

se:

stat

e,

chal

len

ges

and

optio

ns f

or t

he f

utu

re

Irrigation water withdrawal as a share of renewable water resources (%)

0

10

20

30

40

50

60

70

sub-

Sahar

an A

frica

Latin

Am

erica

Near E

ast/N

orth

Afri

ca

South

Asia

East A

sia

All dev

elopin

g co

untri

es

Today in 2030

Is there enough water?

Source: Global Perspective Studies Unit, FAO

How much land is in use, how much is available now and in 2030?

1066 1031

366

220

99

874

497

203 228 232 20786

387

265

0

200

400

600

800

1000

1200

Latin Americaand

Caribbean

sub-SaharanAfrica

East Asia South Asia NearEast/North

Africa

Industrializedcountries

TransitionEconomies

mil

lio

n h

a

Suitable for rainfed cropproduction

Arable land use, 1997/99

T

he

reso

urc

e b

ase

Source: Global Perspective Studies Unit, FAO

2. THE ENERGY MARKET - with a focus on

BIOENERGY-

Energy Consumption and Income are LinkedEnergy Consumption and Income are Linked

5 billion low-income people in countries with rapid economic growth rates

Exajoule (1018), EJ

Energy source: Year World OECD non-OECD All sources 20042 463 231 232

20302 67020502 850

1.) Potential based on Schrattenholzer and Fischer, IIASA, 20002.) Based on IEA: Key energy statistics, 20063.) Derived from http://www.earth-policy.org/Updates/2005/Update49.htm, Earth Policy Institute

How big is the market for Energy? Energy production and potential, biofuels and land

use

Exajoule (1018), EJ

Energy source: Year World OECD non-OECD All sources 20042 463 231 232

20302 67020502 850

1.) Potential based on Schrattenholzer and Fischer, IIASA, 20002.) Based on IEA: Key energy statistics, 20063.) Derived from http://www.earth-policy.org/Updates/2005/Update49.htm, Earth Policy Institute

How big is the market for Energy? Energy production and potential, biofuels and land

use

Biomass Actual use 20042 32.5 7.8 24.6

Exajoule (1018), EJ

Energy source: Year World OECD non-OECD All sources 20042 463 231 232

20302 67020502 850

Biofuels Ethanol 20043 0.84 0.34 0.51

Biodiesel 20033 0.06 0.04 0.02

1.) Potential based on Schrattenholzer and Fischer, IIASA, 20002.) Based on IEA: Key energy statistics, 20063.) Derived from http://www.earth-policy.org/Updates/2005/Update49.htm, Earth Policy Institute

How big is the market for Energy? Energy production and potential, biofuels and land

use

Biomass Actual use 20042 32.5 7.8 24.6

Bioenergy supply in 2004 (according to IEA 2006)47.6

29.4

18.0

13.5

5.83.0

0.8 0.20

5

10

15

20

25

30

35

40

45

50

Africa Asia LatinAmerica

China Non-OECD

Europe

OECD FormerUSSR

MiddleEast

[%]

Share of Bioenergy* in TotalPrimary Energy Supply [%]

How big is the energy market?

1. Energy market (TPES): nearly 500 EJ

2. Biomass: 50 EJ (80% in developing countries)

3. Biofuels: 2.1 EJ, on ca. 26 million ha

4. Transport energy needs: ca. 95 EJ

5. Crop area to cover transport energy needs: >1000 million ha, i.e. 2/3 of global crop area.

6. Energy market is large, creates perfectly elastic demand for agricultural produce at break-even points (parity prices).

Th

e im

pac

ts o

n p

rice

s an

d m

arke

ts

Crude oil prices above US$ 60/bbl drive prices for rapeseed oil

0

10

20

30

40

50

60

70

80

90

100

Okt00

Apr01

Okt01

Apr02

Okt02

Apr03

Okt03

Apr04

Okt04

Apr05

Okt05

Apr06

Okt06

Apr07

Okt07

WT

I, U

S$

/bb

l

0

200

400

600

800

1000

1200

1400

US

$/t

Crude (WTI) Rape seed oil

Preiseffect 1: Floorprice effect

Source: Global Perspective Studies Unit, FAO

Parity prices: Petrol–Crude oil – EthanolVarious feedstocks and farming/production systems

0

20

40

60

80

100

120

0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8

Petrol, US$/l

Cru

de

, U

S$

/bb

l

Gasoline-Crude US$ Cane Brazil, top producers

Cane, Brazil, average Cassava, Thaioil, 2 mio l/d

Cassava, Thailand, OTC joint venture Maize, US

Mixed feedstock Europe Palmoil, MPOB project

Th

e co

mp

etit

iven

ess

Price effect 2: Price link tightens with rising energy prices

Josef Schmidhuber (2005)

BTL: Synfuel/Sunfuel

Ethanol production, 2005-2017

0

20

40

60

80

100

120

140

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Bill

ion

litr

es

United States Brazil EU China India Other

Source: OECD-FAO, 2008

Biofuels will have a modest impact on energy markets...

• 62 billion litres in 2007 (90% in US, Brazil and EU)

• 150 billion litres in 2017 (80% in US, Brazil and EU)

• 1.8 percent of world transport fuels in 2007

• 3.5 percent of world transport fuels in 2030

• total financial support over $6 billion in US in 2006

• and about $5 billion in EU in 2006

3. FOOD, ENERGY AND WATER

A few numbers• Water needed to produce:

– 1 kilo of wheat: 1 000 litres– 1 kilo of meat (beef): 15 000 litres

• Daily water requirements per person:– Drinking: 2-3 litres– Domestic needs: 20–300 litres – Food: 2 000-3 000 litres

• with 2 500 litres of water, we can produce:– food for one person for one day– 1 litre of biofuel

Biofuel and water use (2005)

Source: de Fraiture, IWMI, 2007

Projections for water demand - 2030

Source: de Fraiture, IWMI, 2007

Projected impacts of climate change

1°C 2°C 5°C4°C3°C

Sea level rise threatens major cities

Falling crop yields in many areas, particularly developing regions

FoodFood

WaterWater

EcosystemsEcosystems

Risk of Abrupt and Risk of Abrupt and Major Irreversible Major Irreversible ChangesChanges

Global temperature change (relative to pre-industrial)0°C

Falling yields in many developed regions

Rising number of species face extinction

Increasing risk of dangerous feedbacks and abrupt, large-scale shifts in the climate system

Significant decreases in water availability in many areas, including Mediterranean and Southern Africa

Small mountain glaciers disappear – water supplies threatened in several areas

Extensive Damage to Coral Reefs

Extreme Extreme Weather Weather EventsEvents

Rising intensity of storms, forest fires, droughts, flooding and heat waves

Possible rising yields in some high latitude regions

THANK YOU

4. BIOFUELS AND FOOD SECURITY

- TANZANIA-

Bioenergy and Food Security Project (BEFS)

Objective: Mainstreaming food security concerns into national and sub-national assessments of bioenergy potential.

• Phase 1: Develop analytical framework and guidance to assess the bioenergy and food security nexus

• Phase 2: Assess bioenergy potential and food security implications

• Phase 3: Strengthen institutional capacities, exchange knowledge, pilot sustainable and food-secure bioenergy practices and recommend standards and policies

BEFS Partners: Cambodia, Peru, Tanzania and Thailand

TANZANIABEFS Analytical Framework

Household socio-economic impact

National and international socio-economic impacts

Fed with COUNTRY SPECIFIC DATA 1. Biomass

Potential

Bioenergy Food

Security

2. Biomass Supply Chain

Production Costs

3. Agriculture

Markets Outlook

4. Economy wide

Effects

5. Household

level Food

Security

agricultural and environmental impact

technological and industrial impact

Meteo Station(temp, rainfall, evapotranspiration)

TANZANIAClimatic resource inventory

Thermal zones Length of growing period

Soil and landform resources inventory

Soil (dominant) Elevation Slope

TANZANIASelected “reality checks” in the

field Case study in Kisarawe and Bahi indicate that

biofuels investment impact on livelihoods so far...

Smallholders, already structurally marginalized from land, inputs, and markets face risk of displacement and land grabbing

Inconsistent land tenure system leads to misappropriation during the land acquisition process; risk perception of selling land very low

Decentralized government and weak local regulatory institutions increase smallholders' vulnerability (compensation for land never paid)

Expensive transportation system contribute to unreliable extension services and missing markets for crops, inputs, and labour that influence smallholders disinterest to modernize and generate surplus production.

TANZANIASome of the key preliminary

Modelling Results

• Conservation agriculture increases the amount of suitable land

• Safeguarding livelihoods requires improved land institutions • Outgrower schemes can be economically viable. • Cassava-based ethanol production incorporating smallholders

into agro-fuel production chain can be economically viable.• With investment in agro-industries ethanol made out of sugar

cane molasses or cassava can be competitive for export (under EBA).

• Long-term coexistence with food security requires continuous monitoring, institutional support, extension and training.

• To better assess impact of food prices increases, the next household budget survey would need to include household agriculture income by crop.

Production costs exceed net fossil fuel prices for most major biofuels

Source: OECD-FAO, AgLink/Cosimo database 2008

Biofuel production costs with projections for 2017

-0.50

0.00

0.50

1.00

1.50

2.00

2004 2007 2004 2007 2004 2007 2004 2007 2004 2007 2004 2007

Ethanol sugar caneBrazil

Ethanol sugar beet EU Ethanol Maize USA Ethanol Wheat EU Biodiesel Rape oil EU Biodiesel SoybeanBrazil

US

$/li

tre

Co-product value Feedstock costs Processing costs Energy costs

-0.50

0.00

0.50

1.00

1.50

2.00

Net price of gasoline or diesel in national markets

Net costs, total

...and varying impacts on greenhouse gas emissions...

• impacts vary with feedstock, location, agricultural practices and conversion technologies– 80-90 % reductions for Brazil sugarcane

ethanol and 2nd-generation biofuels– 40-60 % reductions for EU rapeseed biodiesel– 10-30 % reductions for US corn ethanol– smaller reductions—or even increases—when

land use change is considered

Preliminary BEFS recommendations.....if it

• does not hinder the natural resource base • involves smallholders, increases employment and takes

into account the specific risks for subsistence farmers • increases access to markets and infrastructure • builds domestic skills and expertise • ensures local benefits and sustainability of the industry• monitors welfare impacts at the household level • respects and protects the livelihoods of women• strengthen farmer’s negotiating power• further enhances institutional capacity

Biofuel impacts on prices?

Source Estimate Commodity Time period

World Bank (April 2008) 75 % global food index January 2002 – February 2008

IMF (2008?) 70 %

40 %

corn

soybeans

?

?

IFPRI (May 2008) 39 %

21-22 %

corn

rice & wheat

2000 – 2007

2000 – 2007

OECD-FAO (May 2008) 42 %

34 %

24 %

coarse grains

vegetable oils

wheat

2008 – 2017

2008 – 2017

2008 – 2017

Collins (June 2008) 25-60 %

23-35 %

corn

US retail food

2006 – 2008

2006 – 2008

Glauber (June 2008) 23-31 %

10 %

4-5 %

commodities

global food index

US retail food

April 2007 – April 2008

April 2007 – April 2008

January – April 2008

CEA (May 2008) 35 %

3 %

corn

global food index

March 2007 – March 2008

March 2007 – March 2008

...but much bigger impacts on agriculture and food security

• a significant and growing share of agricultural land and commodities are used for biofuels

Brazil US EU World

Cropland 5% 10%

2% 5-10%

1% 12-16%

1% 3-4%

Output 50% of sugarcane 65%

30% of corn 40%

60% of rapeseed ?

5% of cereals,9% of vegetable oils,but over half of the increase since 2005