Introduction

The agricultural sectors of developing Asian countries are experiencing two important new developments: the growth of organic agriculture (OA) and the increasing use of land to grow energy crops (biofuels). This policy brief summarizes the pros and cons of OA and biofuel and makes policy recommendations based on a detailed investigation for Cambodia and the Lao People's Democratic Republic.

Organic Agriculture: Pros and Cons

A substantial body of literature indicates that organic methods are often beneficial to small, resource-poor farmers. Conversion to market-oriented and certified organic agriculture often leads to improved income due to an organic price premium as well as to yield improvement, especially in marginal areas.

Other advantages widely reported from organic practices include improved soil fertility, enhancement or preservation of biodiversity, and improved health from absence of chemical pesticides. OA also leads to improved sanitation, purifies water, and may contribute to the prevention of health problems. In addition to mitigating greenhouse gases and sequestering carbon in the soil, OA has been shown to produce crops that are more resilient than their conventionally farmed counterparts to floods and droughts. OA is also a highly effective market-based development strategy that contributes significantly to the income and non-income poverty reduction targets of the Millennium Development Goals.

Critics argue that a significant shift toward OA would result in the world not being able to feed itself, since yields from OA are sometimes lower than those from conventional agriculture (CA). However, this is a misplaced concern; yields may decline in the case of conversion to OA from input-intensive systems mainly in developed countries. In developing countries, where inputintensive systems are not as widespread, introduction of OA will lead to more sustainable yield improvement without dependency on chemical inputs from faraway places. A study by Badgley et al. (2006) showed that OA could produce enough food to sustain the current human population and potentially more without an increase in the agricultural land base.

Another common concern is whether enough organic fertilizer that meets phytosanitary standards is available for such a massive shift in production. Again, the same study by Badgley et al. showed that leguminous cover crops could fix enough nitrogen to replace the synthetic fertilizer currently in use. These results need confirmation, but they offer encouraging evidence that OA on a global scale is not impossible.

Developing countries can also gain other secondary benefits from OA. The diversification of smallholder farms into growing a variety of crops and multipurpose trees combined with livestock enterprises and/or fish culture has been shown to enhance the overall yield stability (so-called resilience) (Economic and Social Commission for Asia and the Pacific 2002) and therefore the food security of organic farmers. Thus, there are reasons to believe that smallholders and resource-poor farmers may improve their asset building and livelihoods through participation in certified organic production schemes.

Biofuels: Pros and Cons

On economic grounds, the arguments for more biofuel use are based on its potential to (i) substitute for gasoline and diesel, (ii) generate employment and economic growth by replacing imports with domestic production, and (iii) provide energy security by reducing dependence on imported fuels.

Biofuels' competitiveness depends critically on the world price of oil and on the taxation regimes for oil products relative to biofuels. Even at the price of US$90 per barrel, some subsidy is needed to allow the market to adopt biofuel. As far as developing countries are concerned, the potential for exporting biofuels to the more industrialized countries will depend on the amount of subsidy those industrialized countries provide to domestic producers and on the market access afforded to the developing country producers.

While the potential for biofuels in most developing countries depends heavily on the openness of the developed markets, there are also important local opportunities for biofuels. These opportunities are based on replacing imported oil and using locally produced biofuels for rural purposes, such as pumping and operating agricultural machinery. Policies that encourage local farmers to produce oil seeds such as jatropha can yield local economic and social benefits. For example, India is developing a program to cultivate 8,000 hectares of unused land that will produce 9 million liters of biodiesel a year.

The major economic concerns about the expansion of biofuels are at the global level. Increasing land areas for biofuel will reduce the amount of land for food production. In addition, it may lead to clearance of rainforest or peat land, which can be environmentally detrimental.

Whatever view one takes on the potential for biofuels, the studies to date suggest a need to be much more careful about how future energy demands are to be met from this energy source, and at what pace and to what extent such fuels can meet our energy demands. For example, meeting biofuel targets by producing one crop inside a major fuel consuming area is undesirable and other, more efficient sources must be exploited as international trade in fuels expands. Governments must allow for and expect increases in efficiency in crop production as well as in the technologies that will allow a wider range of crops for biofuel production (especially second-generation cellulosic ethanol). The extent to which these new sources of biofuel can change the potential for biofuels and the comparative advantage of different countries in producing them is not known. It is therefore desirable to be cautious in setting medium- to long-term goals for biofuels.

Another major argument against biofuels is based on their social consequences, arising from the fact that the growth in demand for feedstocks is fueling increases in food prices, which has a negative impact on the welfare of consumers, especially those in developing countries. Estimates by the International Food Policy Research Institute (von Braun and Pachauri 2006) indicate that the rapid increase in biofuel production will push global maize prices up by 20% by 2010 and 41% by 2020. In sub-Saharan Africa, Asia, and Latin America, where cassava is a staple, its price is expected to increase by 33% by 2010 and 135% by 2020.¹ The World Bank (as cited in von Braun and Pachauri 2006) has estimated that the increased use of food crops for production of biofuels is an important factor that led to large increases in the prices of vegetable oils and grains in 2007, which in turn contributed to an overall 15% increase in the index of agricultural prices and a 20% rise in food prices.

Finally, there are the environmental impacts of a shift to biofuels. Careful calculations show that the savings in greenhouse gases produced from a switch to biofuels will depend on the source of the biofuel crop, where it is cultivated (e.g., whether land has been cleared to plant it), and the processes used to produce the final biodiesel or ethanol. The opening up of protected land or forestland for biofuel leads, moreover, to further loss of land and of biodiversity—not to mention the social consequences of such land use. The relative amount of local air pollution produced by the use of biofuels can also be greater or less than that produced by the use of conventional fossil fuels. It is also important to take note of the high cost per ton of greenhouse gases reduced from switching to biofuels. Cheaper means for reducing greenhouse gases include demand-side management; improved efficiency in fossil fuel generation; more efficient lighting, electric appliances, and heating and cooling devices in buildings; and more fuel-efficient vehicles.

The social and environmental record of biofuels suggests that a labeling system is needed for biofuel products to inform consumers of their environmental impacts.

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