Pros & Cons of Counting Indirect Land Use Change Ron Plain, Ph.D. Professor of Agricultural...

Pros & Cons of Counting Indirect Land Use Change

Ron Plain, Ph.D.Professor of Agricultural EconomicsUniversity of Missouri-Columbiahttp://web.missouri.edu/~rplain

“More Perspectives on Indirect Land Use Change Effects” by William K. Jaeger, Oregon State University

“Indirect Land Use: The Folly of Over-Indulgent Environmentalism?” by Mark Edelman, Iowa State University

Source: Agricultural Marketing Resource Center, Renewable Energy Newsletter, Dec 09 & Jan 10

Indirect Land Use Change

Indirect Land Use LogicU.S. biofuels production uses a lot of corn and some

veg oil that otherwise would be available for other uses (feed, food, etc)

This causes crop prices to rise and world crop acreage to increase

More cultivated acres means less carbon sequestration since CO2 is released when land in permanent vegetation (grass or trees) is converted to annual crops

Biofuels should be “charged” for this reduced CO2 sequestration

Indirect Market ImpactsThe way that changes in supply or demand in

one market effects other markets

Are Indirect Impacts Important?

Can’t we just ignore them?

The 2007 Renewable Fuels Standards Act mandates the consideration of indirect land effects

3 Indirect Impacts of Biofuels

Fuel: Increased biofuel production will decrease fossil fuel use (not 1 to 1 relationship)

Feed: Increased distillers grain production will decrease corn use (not 1 to 1 relationship)

Land: Converting land from food/feed production to biofuel production in one location will cause acres to move into food/feed production elsewhere (not 1 to 1 relationship)


Let’s just ignore the indirect land use impact, it’s less precise and harder to calculate

One can clearly identify cars that are burning E10 ethanol rather than 100% gasoline

One can clearly identify animals that are eating DDGS instead of corn and soybean meal

One can never be certain which acres or even how many were brought into production because U.S. crops were used for biofuels


We should ignore the indirect land use impact because it threatens the continuing expansion of the biofuels industry

Replace imported energy with domestic Increase the energy supply

More energy = lower energy prices Improve the environment

GHG

Why does policy encourage biofuels?

Are biofuels part of the GHG solution?

or Are biofuels part of the GHG problem?

Why the Indirect Land Use Question?

Which fuel type is a bigger contributor to GHG, gasoline/diesel or ethanol/biodiesel?

The answer depends on what you count

Indirect Land Use Question

Greenhouse Gas Emissions

CornBiomass

Gasoline Ethanol Ethanol --grams of GHG/MJ of

energy-- Feedstock + 4 + 24 + 10 Refining fuel +15 + 40 + 9 Vehicle +72 + 71 + 71 Feedstock Uptake 0 - 62 - 62 Sub-total +92 + 73 + 27

Source: Searchinger, et al, Science, February 29, 2008

Greenhouse Gas Emissions

Corn Biomass Gasoline Ethanol Ethanol --grams of GHG/MJ of energy-- Feedstock + 4 + 24 + 10 Refining fuel +15 + 40 + 9 Vehicle +72 + 71 + 71 Feedstock Uptake 0 - 62 - 62 Land use change 0 +104 +111 Total +92 +177 +138

Source: Searchinger, et al, Science, February 29, 2008

Threatens public support for biofuels Puts at risk billions for U.S. farmers

Why the Indirect Land Use Question Is Important

U.S. Soybean Price, 1970-11

0

2

4

6

8

10

12

70-7

1

72-7

3

74-7

5

76-7

7

78-7

9

80-8

1

82-8

3

84-8

5

86-8

7

88-8

9

90-9

1

92-9

3

94-9

5

96-9

7

98-9

9

00-0

1

02-0

3

04-0

5

06-0

7

08-0

9

Dol

lars

Per

Bus

hel

U.S. Corn Price 1970-11

0.00.51.01.52.02.53.03.54.04.5

70-7

1

72-7

3

74-7

5

76-7

7

78-7

9

80-8

1

82-8

3

84-8

5

86-8

7

88-8

9

90-9

1

92-9

3

94-9

5

96-9

7

98-9

9

00-0

1

02-0

3

04-0

5

06-0

7

08-0

9

10-1

1

Dol

lars

Per

Bus

hel

U.S. Corn Production, 1970-10

0

2

4

6

8

10

12

1470 73 76 79 82 85 88 91 94 97 00 03 06 09

Bill

ion

Bus

hels

Production is increasing by 190 million bu/year

CORN DISAPPEARANCE AND STOCKSCrop Year

0

2

4

6

8

10

12

14

16

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

Bil. Bushels

Stocks

Exports

Food, Seed& Industrial

Feed &Residual

Value of U.S. Corn Crop, 1970-10

0

10

20

30

40

50

6019

70

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

Bill

ion

Dol

lars

Value of U.S. Corn Crop

2004 2009 Change -------billion dollars-------- U.S. feed 12.7 19.3 + 6.7 U.S. ethanol 2.7 15.8 +13.1 U.S. food, seed, other 2.8 4.8 + 2.0 Exports 3.7 7.0 + 3.3 Inventory 2.4 0.2 - 2.2 TOTAL 24.3 47.2 +22.9

Source: USDA/NASS

U.S. Net Farm Income, 1949-2010

$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

$100

49 53 57 61 65 69 73 77 81 85 89 93 97 01 05 09

Billio

n $

0

500

1000

1500

2000

2500

50

54

58

62

66

70

74

78

82

86

90

94

98

02

06

$/acre

U.S. Farmland Values, 1950-2009*USDA/NASS

The key question: How much more land will be cultivated in a world with biofuels than in a world without biofuels?

Indirect Land Use Measurement

2007 Renewable Fuels Mandate

05

10152025303540

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

Billion G

allons

Corn ethanol Cellulosic Bio-diesel More non-grain

Corn for ethanol needs to increase 220 million bushels/year

Corn Milled for Ethanol

0.00.51.01.52.02.53.03.54.04.55.0

90-9

1

92-9

3

94-9

5

96-9

7

98-9

9

00-0

1

02-0

3

04-0

5

06-0

7

08-0

9

10-

11

Bill

ion

Bus

hels

Forecast

% corn for ethanol:

2000-01: 6%

2005-06: 14%

2007-08: 23%

2009-10: 33%

2010-11: 34%

After 2014, 5.4 billion bushels per year will be used for ethanol

This year roughly 4.4 billion bushels of U.S. corn will be used to make ethanol. How much indirect land use does this cause?


30% of the corn (the non-starch portion) used to make ethanol becomes DDGS and is used as livestock feed


This year roughly 4.4 billion bushels of U.S. corn will be used to make ethanol.

3.1 billion bushels less feed


Higher crop prices lead to a less profitable and smaller livestock/poultry industry, thus not all the 70% of the corn used to make ethanol will be replaced with more feed from elsewhere


US Red Meat & Poultry Production, 2000-10

7678808284868890929496

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

Bill

ion

Pou

nds

US Feed & Residual Use of Corn, 1975-10

0

1

2

3

4

5

6

774

-75

76-7

7

78-

79

80-8

1

82-

83

84-

85

86-

87

88-

89

90-9

1

92-

93

94-

95

96-

97

98-

99

00-

01

02-

03

04-

05

06-

07

08-

09

10-

11

Bill

ion

Bus

hels

This year 4.4 billion bushels of U.S. corn will be used to make ethanol.

3.1 billion bushels less feed 2.1 billion bushels of feed will be replaced


Higher crop prices lead to higher yields which holds down world crop acres


U.S. Average Corn Yield, 1970-10

0

20

40

60

80

100

120

140

160

18070 73 76 79 82 85 88 91 94 97 00 03 06 09

Bus

hels

Yield is increasing by 2 bu/year

U.S. Corn Crop

Source: USDA/NASS

Average increase in corn yield 1970-06 2.13bu/year 2006-10 3.60bu/year


3.1 billion bushels less feed 2.1 billion bushels of feed will be replaced Assuming an extra 1.5 bu/acre/year 1.6 billion bushels replaced on extra acres



3.1 billion bushels less feed 2.1 billion bushels of feed will be replaced Assuming an extra 1.5 bu/acre/year 1.6 billion bushels replaced on extra acres Assuming 160 bu/acre land 10 million extra cultivated acres


Where are these extra cultivated acres? What were these acres used for before?


Source: Takle & Hofstrand, Iowa State University

Markets adjust – using 5 billion bushels of corn annually for ethanol has impact on land use

2 to 3 million acres of increased cultivation per billion gallons of annual ethanol production

Calculating this impact on GHG is inexact Indirect land use shifts focus away from

renewable energy

Summary

Questions?

Pros & Cons of Counting Indirect Land Use Change Ron Plain, Ph.D. Professor of Agricultural...

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