Falck Zepeda Presentation MSU Course 2011

8/6/2019 Falck Zepeda Presentation MSU Course 2011

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Socio-Economics Considerations, Biosafety and Decision Making

Jos Falck ZepedaResearch Fellow / Leader Policy Team Program for Biosafety Systems (PBS)

IFPRI

Presentation made at the Michigan State University Short Course Environmental Biosafety August

2011

From left to rigth: a) Damage by Asia corn borer and b) Bt maize plot in Barangay Conel, Mindanao, The Philippines, c) Bt/RR maize Isabelaprovince, North Luzon


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Outline1. Introduction and

Background2. Economics of GE

biotechnologies andbiosafety

3. Experiences with socio-economic assessments

4. Cost of compliance withbiosafety regulations

5. Practical socio-economic

assessmentsimplementation

6. Concluding comments


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Limits to resources and other trade-offs

We have limited Resources Capacity for risk and risk

taking

Technical capacity We learn over time

Trade-offs and alternativesStatus quo is not

necessary risk-lessTechnology deployment

and precautionaryapproaches to regulation


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Why Genetically Engineered cropsand other biotechnologies?

Embodied technologies Address specific productivity

constraints not easilyaddressed by conventional

means Can be deployed in low

resource use productionsystems

Flexible fit with otherproduction systems

Impacts can be non-monetary,indirect, and scale neutral

Scalable


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2. Economics of GE

biotechnologies and biosafety


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The basic decision making rule ineconomic impact assessment of anynew technologies

Sum ofAllBenefits

Sum ofAllCosts


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Several issues with the basic rule

We may have winners and losers at

the same time

Costs/benefits may not be monetary

Quantification issues

Externalities => persons benefitingfrom intervention may not endure allcosts


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What are socio-economicconsiderations (SEC) assessments?

Diverse research focus

Household, Farm, Communities,Industry, Consumer, Trade

Gender, health, age, institutionalissues

May be done before(ex ante) or

after adoption of the technology(ex post)

Contrast effects of interventionagainst an alternative


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Impact assessment is a scientificprocess that significantly incorporates artin its implementation

The practitioner has to in many casessubjectively address many problems

with data, assumptions, models anduncertainties


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A paper by Gruere and Pal suggests

Well conducted socio-economicassessments can

Objectively weigh benefits and cost for better

decisions Provide useful lessons that may avoid costly

mistakes

Suggest management practices to increasebenefits from use

Support economically beneficial applicationsand pave the way for promising new tech


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What drives SEC inclusion?

Knowledge creation

Understanding role oftechnology

Regional considerations

National laws and regulations

International agreements Other political, institutional and

stakeholder interests


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Socio economic considerations and Article 26.1of the Cartagena Protocol on Biosafety

1 . The Parties, in reaching a decision on import under thisProtocol or under its domestic measures implementing the

Protocol,

may take into account,

consistent with their international obligations,

socio-economic considerations arising from the impactof living modified organisms on the conservation andsustainable use of biological diversity,

especially with regard to the value of biological diversityto indigenous and local communities

Applies to decisionon import only

National measures

Voluntary NOTmandatory

Especially WTO

Strictly a specificfocus and targetgroup

Explicit impact

indicator


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Objective driving socio-economicconsideration assessments

For biosafety regulatory processes one needs to

understand: the impact of the inclusion of socio-economic issues in

decision making

The relationship / interaction with the risk assessmentprocess

Technologyassessments

Technology assessmentwithin biosafety regulatoryprocesses that lead to an

approval or rejection


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Consider impacts on

innovation,opportunities lost

due to additional regulatory hurdles

andwho

is impacted more by regulatory

actions and technology decisions


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Biosafety regulatory design impliesestablishing a balance between

Democratic societies right to know

vs.Freedom to operate

vs.

Freedom to choose


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Important distinction

What are the goal and objectives for socio-economic assessments as related tobiosafety or technology decision making?

An impact assessmentduring the biosafetyregulatory stage needsto be ex ante

For monitoring orstandard technologyevaluation purposes this

is a conventional ex-post assessment


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Specific questions about potential socio-economic consideration inclusion

Feasibility Can all socio-economicconsiderations be assessed exante and/or ex post?

Fit with decision making

process

How are assessment outputs

going to be used in a decisionmaking process?

Utility Does inclusion of socio-economic considerationsimprove societys welfare?

Regulatory impacts Are we considering allbenefits, costs, risks andpotential outcome from theinclusion of socio-economicconsiderations


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3. Experiences with socio-

economic assessments


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What do we know from the economic impactassessment literature to date?

A review of 137 peerreviewed studies

Examined studies with a

focus on: Farmers, household and

community

Industry and markets

Consumers

Trade

Citation: Smale, Melinda; Zambrano, Patricia; Grure, Guillaume; Falck-Zepeda, Jos; Matuschke, Ira; Horna, Daniela; Nagarajan, Latha;Yerramareddy, Indira; Jones, Hannah. 2009. Measuring the economic impacts of transgenic crops in developing agriculture during the first

decade: Approaches, findings, and future directions. (Food policy review 10) Washington, D.C.: International Food Policy Research Institute(IFPRI) 107 pages


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Food Policy Review 10 conclusions

On average profitable but averages maskvariability by agro-climate,

host cultivar, trait, farmer Too few traits, too few

cases/authorsgeneralizations should notbe drawn yet...need moretime to describe adoption


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Food Policy Review 10 conclusions

Next decade

Cross cutting issues forfurther study including

impacts of poverty,gender, public health,generational

Need improved

methods to examinebroader issues

R l i hi b d


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Relationship between genderdifferentiated adoption and impact

Farmers

Technology

developers

Regulators

Attitudes

Perceived and actual risk

Social norms

Gender roles

Access and control

Time

AssetsInputs

Credit

Market

Prices

Technolo cost

Knowledge

Crop and trait

Economic

Health

Nutrition

Labor

Farming practices

Impacts

By crop- trait

Economic

Health

Nutrition

Labor

Social norms

Policy

Regulations

Governance

Institutions

A joint study onthe Bt/RR maizein the Philippinesdone by UP-LBand IFPRIexaminingrelationshipbetween gender

andbiotechnologyadoption andimpact


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Impact on Farmers / Household / Community

Value of biodiversity to indigenous communities

Value of biodiversity to individual farmers, households, and communities

Profits and benefit/cost ratios

Net income

Use of productive inputs (pesticides,)

Production practices

Gender differentiated access and control, knowledge and/or attitudesHealth impacts

Safety first, downside risk, minimum production for survival

Irreversible costs and benefits

Freedom of choice and freedom to operate

Potential issues for a socio-economic assessment


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Lists of potential issues should not beviewed as check lists

Prudent to carefully choose whichissues are relevant to the technologydecision making process


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How does a producer benefit? Insectresistance and herbicide tolerant traits

The case of Bt/RR maize

Impacts on:

Producer Profit

Producer Surplus

Cost to Benefit

LivelihoodsAdditional

cost ofusing the

Technology

Tech fee

0

+

-

Decrease

pesticide

application

cost-Insecticide

-Machinery &

Equipment

Increase

Yield

-Timing

applications-Reduced

damage bolls

Price change

due to increase

in supply

Additional

cost of

controllingsecondary

pests

Amenable to

IPM and/or

controlled

easily

Labor

Labor

The

management

conveniencefactor

Allow use of

alternative

productiontechnologies

- No-till low-till


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A bit of historyThe case of Bt

cotton in the U.S.

-22 -12 -14

58 37 37

141

80

97

63

8593

-50

0

50

100

150

200

250

300

1996

Industry

US Farmers

Consumers

Foreign Farmers

1997 1998

Industry

36%

Consumers19%

US Farmers

45%

Total benefit estimates(Millions US $)

Falck-Zepeda, Traxler & Nelson 1999, 2000


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Black Sigatoka Resistant Bananas in Uganda:An ex antestudy

One year delay foregopotential annual (social)benefits of +/- US$200million

A GM banana with tangiblebenefits to consumersincreases their acceptancefor 58% of the population

Photos credits: Kikulwe 2009 and Edmeades 2008

Citations:Kikulwe, E., J. Wesseler and J. Falck-Zepeda. 2008. Introducing a Genetically Modified Bananain Uganda: Social Benefits, Costs, and Consumer Perceptions. IFPRI Discussion Paper 767,Environment and Production Technology Division, International Food Policy Research Institute,Washington, D. C. USA.

Kikulwe, E.M., E. Birol, J. Wesseler, J. Falck-Zepeda. A latent class approach to investigating

demand for genetically modified banana in Uganda Agricultural Economics. 2011.
http://www.gmo-compass.org/features/zoomimage.php?image=/data/imagescontent/grocery_shopping/017_banana-blacksigatoka_zoom.jpg&width=500&height=332


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Bt cotton in West Africa: An ex antestudy

Impact of adoption in Burkina Faso, Benin, Mali,Senegal and Togo

Conclusions

West African countries are worse off by not adopting

Bt cotton

Smaller Net Benefits than other studies

Negotiating downward the technology fee is key

Larger share of benefits tends to be captured by

developers based on conservative assumptionsused in the model

Citation: Falck-Zepeda, Horna and Smale, African Journal of

Agricultural and Resource Economics, 2008


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Bt maize in the Philippines: An Ex poststudy

Growing Bt maizesignificantly increasesprofits and yields

Significant insecticide usereductions

Adopters tend to: Cultivate larger areas

Use hired labor

More educated

have more positive perceptionsof current and future status

Change in economic surplus

(mill pesos)

Producer Surplus 7906

Seed Innovator 703

Total Surplus 8609

Producer Share (%) 92

Innovator Share (%) 8Bt maize studies in Philippines led by Dr. Jose Yorobe Jr. with 466 farmers in16 villages Isabela Province, Luzon, South Cotabato Province, Mindanao


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Bt maize in Honduras: Ex post study

Excellent insect control

Bt yield advantage 893-1136 Kg ha-1 yield (24-33%)

Bt maize yieldspreferred even by riskaverse producers

100% higher seed costthan conventional hybrid

Institutional issuesimportant

Photos credit: Sanders and Trabanino 2008

Small Resource-Poor Countries Taking Advantage of the New Bioeconomyand Innovation: The Case of Insect Protected/Herbicide Tolerant Maize inHonduras. Jose Falck Zepeda, Arie Sanders, Rogelio Trabanino, Oswaldo

Medina and Rolando Batallas-Huacon. Paper presented at the 13th ICABRConference The Emerging Bio-Economy, Ravello, Italy June 17-20, 2009.


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4. Cost of compliance with

biosafety regulations


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Tension between safety andinnovation

Innovation as a path to address poverty andpromote sustainable growth

How precautionary an approach is

necessary/sufficient for society to accept atechnology?

All biosafety processes/regulations are bydefinitionprecautionary

Precaution is really a matter of degree Need clear bounds, decision making rules, time

limitations


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Biosafety as a process

Contained Use

Experiments

Confined

Field Trials

Deliberate

Release

Post

Release Deregulation

Regulatory decision points


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R&D and product development lifecycle

1 3 years 1 3 years 1 3 years

Product

Concept

Discovery Early Product

Testing &Development

Integration

& ProductSelection

Product

Ramp Up

Market

Introduction

1 2 3 4 5 6

Confined Field Trials

Author: Ramaeker-Zahn


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Why study the cost of compliance?

Focus is to explore balance between a country-defined acceptable level of safety and thenecessary cost to achieve it

Critical to include all direct and opportunity

benefits and costs of adopting and not adoptingbiotechnologies and alternatives

Identify which areas contribute more overall tosafety and net benefits in order to focusinvestments

Avoid investing (good) money in issues that

are trivial, manageable or irrelevant


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An (old) compilation of cost studies


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Cost of Compliance with Biosafety Regulationsin Indonesia and the Philippines: A PBS study

Citation: Falck Zepeda et al. 2007


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Opportunity and direct costs ofregulation are important to society

Direct and indirect effects High costs are a special concern

for Public sector

Small private (domestic) firms Crops and traits of interest to

developing countries

Countries without significantinnovative capacity


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5. Practical socio-economic

assessments implementationissues and implications


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Considerations for regulatory design

Issues OptionsType of inclusion No inclusion vs. Mandatory vs. Voluntary

Scope Narrow interpretation article 26.1 Narrow set of socio-economic issues Broader set of assessments (SIA or SL)

Approach Concurrent but separate vs. Sequential vs. Embedded Implementation entity

Assessment trigger Each submission vs. Event-by-event

When Laboratory/greenhouse vs. CFTs vs. Commercialization For post release monitoring At all stages?

How? Choice of methods for ex anteassessments is much more limitedthan for ex post Decision making rules and standards Method integration, standards, tolerance to errors


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My blogSocio-economics, biosafetyand Decision Making

http://socioeconomicbiosafety.wordpress.com/

P i l i li i f SEC


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Potential implications from SECinclusion into decision making

Potential for introducing uncertainty that canlead to an unworkable system if rules andstandards are not clear

Gain more and/or better information abouttechnology impacts for decision making

Balance gains in information, additional costs &

effort, and innovation What to do with SEA results?

What can a decision maker do with the results


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What can a decision maker do with the resultsa socio-economic assessment?

ASSESSMENT

OUTCOME

Negative SocioEconomic

Assessment dueto institutional

issues

Biosafety rendersproduct to be

safe

Not approve

Require moreinformation

SEC assessment

Approve afterresolving

institutional issues

Biosafety assessment(environmental and

food/feed safety)

REGULATORY

DECISION

?

?

?


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Potential implications from SECinclusion into decision making (cont..)

Cost of compliance will increase

Time to completion may increase

Reduction in the ability for the country toinnovate

Consider impacts on public sector and crops

and traits of interest to developing countries Difficulties for private and public sector

investments


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Contrasting benefit levels from GE crop adoption withhigher costs and regulatory lags in the Philippines

Bt eggplant MVR tomato Bt rice PRSV resistantpapaya

Net Benefitsbaseline (NPVUS$)

20,466,196 16,748,347 220,373,603 90,765,793

Impact on net benefits due to an increase in the cost of compliance with biosafety

75% higher 0% -1% 0% 0%

200% higher -2% -3% 0% 0%

400% higher -5% -7% -1% -1%

Impact on net benefit due to an Increase regulatory time lag

1 year longer -28% -36% -12% -27%

2 years longer -56% -71% -23% -49%

3 years longer -79% -93% -34% -67%

Notes: 1) Source: Bayer, Norton and Falck Zepeda (2008), 2) Discount rate for the estimation of NPV = 5%, 3) Changein Net benefits defined as the total benefits estimated using the economic surplus minus total regulatory costs.


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6. Some concluding reflections

Adoption of GE biotechnologies has beenoverall positive, but not in each and everycase

Benefit variability a function of institutionalissues rather than the technology itself

Prudent to judge technology by its own merits

Think about crops and traits of interest todeveloping countries

N d t ffi i t d t ti


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Need smart, efficient and protectiveregulatory systems

Match the level of regulation to the level ofrisk

Introduce and promote system flexibility

Innovative approaches to assessmentsPerformance rather than prescriptive

regulations

Rationalize and streamline application and

decision making processes

Ensure understanding of regulatory impacts

Pursue regional approaches


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Jos Falck-ZepedaResearch Fellow / Leader PolicyTeam PBS

IFPRI2033 K Street NWWashington, DC 20006-1002USA

[email protected]

Tel. +1.202.862.8158Fax. +1.202.467.4439Skype: josefalck

Honduras
mailto:[email protected]:[email protected]:[email protected]:[email protected]

Falck Zepeda Presentation MSU Course 2011

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