trade

ABSTRACT: A growing number of countries are implementing greenhouse gas (GHG) emissions trading schemes. As these schemes impose a cost for GHG emissions they should increase the competitiveness of low carbon fuels. Bioenergy from biomass is regarded as carbon neutral in most of the schemes, therefore incurring no emission costs. Emissions trading schemes may therefore encourage increased use of biomass for energy, and under certain conditions may also incentivize the construction of new bioenergy plants. This paper first identifies design elements in emissions trading schemes that influence the use of biomass. It then discusses the experiences with the EU-ETS so far and compares the design elements of the EU-ETS with different existing and emerging trading schemes in the US, Australia and New Zealand, with focus on factors that may influence the use of biomass. Furthermore, the paper analyses how incentives for bioenergy change as the price of carbon changes and which trade offs may have to be considered, if emissions trading schemes are linked.

This publication provides the summary and conclusions from the workshop ‘Developing Sustainable Trade in Bioenergy’ held in conjunction with the meeting of the Executive Committee of IEA Bioenergy in Nara City, Japan on 12 May 2010.

The purpose of the workshop was to provide perspectives on bioenergy trade in a world where there are progressively more quantitative targets for bioenergy deployment, including incentives for production of biofuels on a sustainable basis. The aim was to stimulate discussion between the Executive Committee and invited experts and thereby enhance the policy-oriented work within IEA Bioenergy.

USDA Agricultural Projections for 2011-20, released in February 2011, provide longrun projections for the farm sector for the next 10 years. These annual projections cover agricultural commodities, agricultural trade, and aggregate indicators of the sector, such as farm income and food prices.

Important assumptions for the projections include:

* U.S. and world economic growth move back toward longrun steady increases in the aftermath of the global financial crisis and economic recession.
* Although global population gains continue to slow, growth in most developing countries remains above that in the rest of the world.
* Population gains in developing countries, along with higher incomes, increased urbanization, and expansion of the middle class, are particularly important for growth in global food demand.
* Continued expansion of biofuels further adds to world demand for agricultural products.

Key results in the projections include:

* Recent price increases for many farm commodities underlie record projected levels of U.S. agricultural exports and U.S. net farm income in 2011.
* Prices for major crops decrease in the early years of the projections as global production responds to current high prices.
* World economic growth and demand for biofuels combine to support longer run increases in consumption, trade, and prices for agricultural products.
* Thus, following the near-term declines, prices for corn, wheat, oilseeds, and many other crops remain historically high.
* After near-term reductions from projected 2011 records, the value of U.S. agricultural exports and net farm income each rise through the rest of the decade.

Energy security and environmental concerns about global climate change have lead to recent growth in the use of bio-fuels in the U.S. Brazil currently exports a substantial share of its sugarcane based ethanol to the U.S. to support the growing demand for bio-fuels. However, U.S. policies that exogenously affect the bio-fuel sector confound the understanding of the multi-market impacts of a growing bio-fuel demand. Moreover, the various forms of government intervention in the bio-fuel economy leave researchers with unclear conclusions about the prospects for bio-fuels. The indirect effects on related agricultural markets from increased bio-fuels consumption and the subsequent land use changes driven by expanded feedstock production also require more attention. To improve the understanding of these issues, we examine the market implications in the international ethanol sector by analyzing the equilibrium effects of bio-fuels policies. Additionally, we investigate land use change implications of an expanding Brazilian ethanol sector. In particular, the potential for livestock intensification of Brazilian pasture land grazing systems is considered as a prospective pathway for releasing new land for expanding sugarcane cultivation. We consider the related trade-offs in the Brazilian agricultural sector and their implications for trade with the U.S.