Beahrs ELP Blog

Reflections on the 2014 Bioeconomy Conference and the Future of Biofuels

After another successful Bioeconomy Conference last week, Professor Zilberman shares the latest cutting-edge research from the presentations as well as the direction of the biofuels and biotechnology. Stay tuned for video clips from the conference presentations and exclusive interviews with speakers! 

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Dear Alumni,

As you know, every year we have a bioeconomy conference, where we invite leading thinkers in this field to UC Berkeley for two days. The basic idea behind the bioeconomy is that the transition to a sustainable system requires moving away from nonrenewable resources, like coal and oil, to sustainable forms of energy, like solar and biofuels. Additionally we have to move from chemistry based on petrochemicals to one based on biological innovations. In order to be able to produce biofuels and other biochemicals, we need to enhance our productivity so that we don’t compromise the welfare of the poor by only allocating resources to produce biochemicals and fuels for the rich. The bioeconomy is about combining better use of biological resources.

The notion of the bioeconomy is not new. There is an old bioeconomy that relies on fermentation; wine and alcohol are bioeconomy products. They serve both as food, health products and fuels. We have cheeses and processed foods. These are all examples of fermentation. New discoveries in science, such as DNA manipulation and other processes, allow us to expand the scope of biological innovations. The bioeconomy conference addresses issues of biofuels, biotechnology and green chemistry.

In US and Europe, biofuels have existed for about ten years. Today ten percent of the gasoline in the US is produced from corn ethanol. In the first few years, the introduction of corn ethanol increased the price of food significantly and was the cause of the main concern. However, the price of corn has since declined and some of our presenters expect the price of corn will drop even further. It seems that this trend of declining biofuel prices will continue in the US and we might even return to the days when corn farmers were subsidized.

The main potential for ethanol in the world is in Brazil where you can grow forty million hectares of sugarcane without affecting forestland. This can replace about fifteen-twenty percent of the gasoline production in the world. The question is why isn’t it being done?

One presenter that Brazil invested too much in the deep-sea water oil which led to the neglect of the sugarcane ethanol development. The presenter suggested that to prevent deforestation it is important to strengthen implementation of forest codes and to intensify the production of cattle and rangeland. Doing so will allow Brazil to meet the same production target with less land, thus having enough land for biofuels. But the extent biofuels will be available in Brazil is uncertain because of policy issues. One thing that is clear after the next election is that Brazil energy policies will change, which will bode well for the ethanol sector.

UC Berkeley’s interest in biofuels is primarily in the development of second-generation biofuels that rely on grasses or wood, and don’t compete with feedstocks. The US government expected much faster development of second-generation biofuels than what actually happened. They are on course to suspend the program because the industry didn’t deliver it. However, we learned that the industry had overcome some of the early learning pains. There is a new commercial facility in Italy that will be utilized in other countries like Brazil. People will use the residue of sugarcane production and biogas for second-generation biofuels. Actually, the second-generation will fulfill some of its promises with delay. Once second-generation will be able to produce extra ethanol in the US, the challenge will be to provide a larger infrastructure to utilize it. That means more gas pumps and flex fuel cars. Development of policy to enhance this activity is also a major challenge.

In the section on biotechnology, we learned that South Africa has a ninety-percent successful adoption rate of GM corn. It is grown by a lot of poor farmers and there also attempts to introduce new varieties for virus resistant. The big challenge is the issue of regulation. There was also a presentation that there are prospects of introduction of drought tolerant- and vitamin A enhanced- GMO, and while this product is economically viable, the registration and acceptance continue to be major challenges. The GMO debate continues.

Two interesting presentations were about future technology. The EU is working with African nations to develop a supply chain for solar energy.  Since solar energy is not always available, they started to combine solar and biofuels to have more reliable and viable systems of energy. The design of the system is a major policy challenge, but in the conference we saw the first model to assess its impacts and costs. Finally, there was an interesting presentation on the use of cassava, especially in Asia, as a biofuel feedstock. There were several other presentations on other biofuel stocks for developing countries. It seems that there was an initial hype of this concept and didn’t fulfill expectations. But there are some products that do and are very promising.

I think that the bioeconomy is essential for our future, especially given the threat of climate change and high environmental costs of fossil fuel reliance. But it requires investment in research, some small risks and significant regulatory reform. In the end, it will benefit humanity and, I believe, the people in developing countries.

Best,

David


On Life Economics and the Environment in China

by David Zilberman
Read the original article here.

Earlier this month, I had the pleasure of participating in the second Chinese Environmental Economics workshop in Shanghai. Professor Jinhua Zhao of Michigan State and Shanghai University, one of the best PhD students I have ever advised, organized the workshop in Shanghai.

The conference facilities were modern and impressive and most of our Berkeley facilities seemed obsolete in comparison. We had about 50 participants who were very serious and attentive. I felt an implicit social pressure to attend all of the sessions, which is unlike many workshops in the U.S., where participants may wander in and out of sessions.

The presentations are in English, and I think that the quality of the English of the Chinese speakers tends to improve the younger they are. One reason is the increased exposure to TV and the Web in recent years. The presentations and conversations with the participants and journalists were very valuable both in informing me on the environmental economics and policy in China, and on life and attitudes there.

The attitudes of many of the Chinese towards their nation and life reminded me of the attitudes I witnessed in Israel where I grew up. In both cases, people have a sense of national purpose, and both pride in recent achievements and modesty because of the apparent deficiencies. It seemed that people thought, “We are part of a great nation which has been humiliated for years. During the last few years we have made an incredible progress but we are still behind, and need to catch up, but we will be ahead one day.”

I was reminded that China was the world most advanced nation until 600 years ago, but now it is on the comeback trail. The Chinese people cannot wait when few years from now China will have the largest Gross National Product (GNP) in the world. But they are also aware that they will still be behind as long as GNP per capita trails the U.S. and Europe significantly. The new skyline of Shanghai, anchored around the magnificent Shanghai Pearl tower, seen here during the day and at night, is an apparent indicator of success and source of pride.

The Shanghai Pearl Tower

The Shanghai Pearl Tower

My student guide around the city

My student guide around the city

The urban life is Shanghai is much less glamorous than these pictures may portray. About 28 million people live in the city and the streets are very crowded. Smog is a constant even on good days, (the air quality though is much better than in Beijing) and people live in modest quarters in high rises, like Manhattan on steroids.

Smoggy skyline in daylight

Smoggy skyline in daylight

Bustling metropolis

Bustling metropolis

I learned that the Chinese are very serious in their intentions to solve environmental problems because air pollution makes breathing difficult and is killing millions. In many regions water quality is terrible and aquifers are disappearing, and many environmental and cultural treasures were lost in the race towards improving material well-being.

Congestion, GHG, air quality

The conference participants seemed to believe that they could have an impact on policy making.  The Chinese government has introduced regulations that aim to reduce congestion, green house gas emissions and especially improve air quality.

One concrete concern was about congestion. Every year, 19 million new cars are sold in China, new roads are being built, and more people are waiting for their turn at the wheel. Yet traffic jams and air pollution are afflictions associated with these developments and policymakers need to find a way to balance material well being with environmental quality protection.

China may use either auctions or lotteries to allocate car licenses, which will slow the large-scale adoption of cars, not prevent it. In China there are perhaps 80 cars per 1000 people, while in the U.S. and Western Europe 500-800 cars per 1000 — and this wide gap will be bridged.

The negative side effect of expansion of the car fleet can be reduced by effective policy design, which is a major priority item in the research agenda of transportation and environmental economists in China. Parts of China have already developed effective public transportation.

I was very impressed by the advanced subway system of Shanghai (especially in retrospect; when I returned to the U.S., the escalator in the L.A. Airport looked antiquated and did not even function), but much more is needed to address the growing demand for transportation.

I felt that climate change was not a major environmental policy priority in China. The main attention is given to the immediate air pollution, congestion and water availability and quality problems. I mentioned it to a participant and he was not surprised.

China does not perceive itself to be a big loser from climate change. Some regions may gain from warmer climate and others will lose, but the aggregate effect is perceived to be small. I mentioned to this individual that the differential regional impacts may cause significant hardships, conflicts and relocations — and he agreed, but suggested that the Chinese politicians and public are more concerned about the serious short-term environmental problems and they will be addressed first.

There is growing awareness and concern about the intensive use of coal and a desire to reduce it, which will address both climate change and air pollution concerns. One avenue is to take advantage of the vast natural gas reserves in Western China, which are the largest in the world. But this effort is not without its drawbacks.Natural gas emits half as many greenhouse gas emissions per unit of energy as coal, which is an improvement but still significant. Its use will require a large investment in pipelines and the use of fracking,even with all of its limitations. Thus while natural gas can improve air quality and reduce green house gas emissions, emphasis should be given to technologies and incentives for their development and adoption, which will conserve energy and increase its efficiency.

The Chinese I met have emphasized that some of the main challenges facing China will be dealing with growing population and building a more effective social-welfare net. For this to happen the state has to increase its revenue. Relative to GNP, tax earnings in China (around 11%) are much lower than in the West (27% in the U.S., 36% in the EU), and that limits the capacity to support the elderly and upgrade health and welfare services. The challenge is to find effective tax sources. This may bode well for the environment, and some Chinese economists envision that a carbon tax and other pollution and sin taxes may serve as source of income for the government.  I am curious whether, and to what extent, this will happen.

Reducing corruption

Another policy priority in the short run seems to be reduced corruption.

While China has a strong central government and the party’s presence and eyes are felt everywhere (but not discussed much), the government is not strong enough to prevent the widespread corruption which, like the weather, everyone complains about and no one can control. Perhaps bribes and side payments are mechanisms by which people in power are taking advantage of their positions, while society as a whole pays a price.

I understand that there is an ongoing campaign to reduce corruption and it is manifested in emphasizing frugality in public events. For example, the traditional lavish banquets celebrating Chinese New year in state-owned enterprises were eliminated. Perhaps as a result, the food offered in our conference — which included frequent, alcohol-rich, banquets — was decent but not as spectacular as the food and drinks offered in my previous visit to Beijing and Western China.

One strength of the Chinese system is the relative emphasis on merit in school and business. To a large extent people are promoted based on performance, in exams or in office. That leads to dedication to learning, and the Chinese PhD students I met reminded me of Jewish religious scholars in their 24/7 dedication to study to the exclusion of anything else. I actually told some students that for social scientists, experiencing life (e.g, visiting a museum, a new location, or having a relationship) should not be considered “wasting time” but rather “applied research”.

It was also suggested that the internal competition between bureaucrats may lead to cheating, as they want to be promoted and thus may cheat to look good and rise to the top, and amazingly new methods were presented in the conference, to quantify and detect such cheating. It was also emphasized that the bureaucratic competition is a barrier to regional cooperation and reduces the creation of public goods, and designing incentives and policies to overcome the negative side effect of this competitiveness is a major research and policy challenge. While I realize the high price China pays for the competition in schools and government service, the emphasis on merit is a major contributor to its recent successes.

Amidst beautiful gardens

Amidst beautiful gardens

While much of the trip was dedicated to modern China, I spent the last day touring some of the treasures of the past, treasures that seem to disappear. Balancing economic growth and preservation seems to be the major challenge facing China today.

dz4


Delaying Golden Rice: At What Cost?

In the latest issue of UC Berkeley’s Department of Agriculture and Resource Economics’ bimonthly publication, the ARE Update, Justus Wesseler[1], Scott Kaplan[2], and David Zilberman[3] analyze the economic impacts of regulatory decisions to delay the adoption of golden rice. This interesting discussion in “The Cost of Delaying Approval of Golden Rice” explores the controversial role of genetically modified (GM) crops in developing countries.

 

Every year, vitamin A deficiency causes 250,000 to 500,000 children to go blind, half of whom die within a year of losing their sight. The majority of people around the world who suffer from vitamin A deficiency live in countries, like India or Bangladesh, where rice is a staple crop. In addition to blindness, the 125 million children under the age of five who suffer from this deficiency have an increased vulnerability to common childhood infections, such as higher likelihood of anemia and poor growth.

 

A solution to this problem has been to add vitamin A to rice through genetic modification. The Golden Rice prototype was first developed in 1999. In 2000, the Golden Rice Humanitarian Project and Syngenta Corporation established a public-private partnership with the aim of Golden Rice passing regulatory approval process and bringing it to market. This goal hasn’t come to fruition, as India and Bangladesh still have not approved the product. Many opponents of Golden Rice fear that it’ll serve as a “Trojan Horse” for GM crops, leading to the wide-scale adoption of GE food in developing countries. A wide body of literature has shown that so far Golden Rice and other GE varieties do not produce greater health or environmental risks than non-GE varieties.

 

In order to assess the economic impacts, the authors have quantified the costs and benefits of the regulators’ decision to delay regulatory approval. If the regulators are indeed rational, then the benefits of improved information through delaying decision outweighs the cost of delay, which are the net benefits from adoption of Golden Rice. The net benefits are the sum of discounted net benefits of reduced incidents of vitamin A deficiency induced health problems minus the cost of introduction and adoption of technology. The estimated foregone benefits are measured starting in 2002 assuming an adoption rate of 30%.  The unit of measurement for foregone benefits is a disability-adjusted life year (DALY). The estimated number of DALYs lost due to lack of Golden Rice since 2002 is between 1.4 – 2 million people. If we assume the very low value of DALY at USD $500, then the net present value (NPV) of a ten-year delay is USD $707 million. This is a very conservative estimate; if we increased DALY to USD $2000, then the NPV would be USD $2.83 billion. The cost of introduction and adoption of technology is minimal compared to the benefit from improved health of Golden Rice adoption.

 

In comparison, the calculated benefits of delay (the perceived risks) are only USD $1.7 billion since 2002. This figure is lower compared to the cost of delay (net benefits) of USD $2.38 billion. So where does this irrational perceived cost of Golden Rice originate? As mentioned before, many environmental groups, such as Greenpeace, fear that introduction of Golden Rice would accelerate adoption of other GE crops. However, a growing body of literature suggests that GE varieties have produced significant benefits worldwide. Although the GE varieties are mostly limited to corn, soybean and canola in the US, Canada, Brazil and Argentina, it has had an immense impact in increasing productivity. In the absence of GE crops, soybean prices would have been 33% higher and corn prices 13% higher. GE adoption in African and European countries would lead to decreased land footprint and use of energy intensive inputs, such as fertilizer and water.

 

The full potential of GM crops to save human lives and benefit the environment has yet to be realized. Wesseler, Kaplan and Zilberman conclude that the delay in Golden Rice adoption has been costly in both economic terms and number of human lives. In this fight over GM crops, it has been the poor in developing countries who have paid the price.

 

What is your experience with Golden Rice? What are your thoughts on the introduction of GM crops in developing countries? Share your thoughts and comments below.

 

To read the original article, view it here at: http://giannini.ucop.edu/media/are-update/files/articles/V17N3_1.pdf



[1] Professor of Agriculture and Food Economics at Technical University Munich, Center of Life and Food Sciences Weihenstephen

[2] Research Assistant at Energy Biosciences Institute (EBI) at UC Berkeley

[3] Professor in the ARE Department at UC Berkeley


Jailing Greenpeace activists will harden attitudes to Russia

By Angelina Davydova, St Petersburg State University

This article was originally published at The Conversation.
Read the original article.

Russia’s overreaction in prosecuting Greenpeace protesters, including the two journalists, is set to unfold into an international scandal that will seriously damage country’s global reputation.

So far the situation is that 28 Greenpeace activists and two freelance photographers (one British, one Russian) will remain in custody in Murmansk for the next two months, on charges of piracy. The international reaction was muted at first. Despite worldwide public outrage, only the governments of Argentina and Ukraine voiced their protest. Finland, for example, while still opposing the charges of piracy, unofficially agrees the Finnish activist arrested (she was one of the few who actually made it onboard the platform) could serve her sentence at home.

Yet to what extent Russia is willing to yield to international pressure remains open. Domestically, public opinion is split on the matter. The state-controlled media has conducted a defensive campaign against foreign influence in Russia or any interference in the vital oil and gas sector, an industry considered sacred under the current state capitalism regime.

Last week Russian President Vladimir Putin called Sergei Medvedev, a professor at Moscow’s Higher School of Economics, a moron after he suggested turning the Arctic into an international nature reserve to save it from corporate and state interests. (more…)


Russia’s Silence on Climate Change Helps No One

By Angelina Davydova, St Petersburg State University

This article was originally published at The Conversation.
Read the original article.

Russia is the fourth largest producer of greenhouse gases, but has shown little initiative and remained quiet among the turmoil at the UN Conference of the Parties (COP) climate summit in Warsaw. The hottest issues under discussion – of compensation for loss and damage and historical responsibility – appear of little relevance to the country. Her delegation openly admits it prefers to concentrate on negotiating the terms of a new, post-Kyoto agreement. While experts claim climate negotiations have little economic and political importance for Russia’s transition economy, climate change is in fact set to deliver drastic damage to the country.

The current climate negotiations split between developed and developing countries in issues of loss and damage and climate finance. According to Alexey Kokorin from WWF Russia, one of the country’s leading climate experts, Russia feels it falls in between, neither a major donor nor recipient country. (more…)


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