Identifying the potential monetary and non

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Modelling payments to the
Benefit-sharing Fund
http://www.planttreaty.org
Identifying the potential monetary and
non-monetary benefits arising from
the utilization of plant genetic resources
under the Multilateral System
The questions
Is it possible to predict:
•How much money could become
available to the Benefit-sharing Fund, as a
result of the use of materials under an
SMTA?
•And when and at what rate this money
would become available?
We have made a model to do this,
but:
• A model is only a theoretical construct that
produces hypothetical estimates
• The currently available data is very weak
• Plant breeding will change rapidly and in
unpredictable ways in the medium and long term
Caveats
• The model cannot propose changes to the
Treaty or the SMTA, or alternative benefitsharing systems
• This the prerogative of Contracting Parties
• And there are no indications from the Governing
Body on which such speculation could be based
• The model therefore strictly reflects the actual
provisions of the Treaty and the SMTA
The concept is simple
• The current annual commercial value of the
world’s seed market can be estimated
• So the model first estimates what part of the
world seed market will contain SMTA-materials
at any time
• And applies this ratio to empirical market values
Basic assumptions
The Treaty’s scope is all plant genetic
resources for food and agriculture
So, we model five crops/crop groups
separately:
• Wheat
• Rice
• Maize
• Other Annex 1 crops, taken together
• Non-Annex 1 food and agriculture crops, taken
together
Basic assumptions
• We start from the world ex situ holdings
•
•
•
(accessions), as at December 2009, listed in
The Second State of the World’s PGRFA. This
covers all countries, and all International
Institutions
For each country and institution, we set a
performance factor, i.e., the part of their
holdings that they are currently making
available under SMTAs
Some countries are already making non-Annex
1 materials available under SMTAs
Materials held by natural and legal persons are
not included, because of a lack of data
World crop holdings and holders,
and SMTA use
Crops
SMTA use
PGRFA holders
π
HI: Contracting Parties Performance Annex 1
Non-Annex 1
C1: Wheat
C2: Rice
H2: Article 15
Institutions
π
Annex 1
Voluntary
Performance
Non-Annex 1
C3: Maize
C4: Other Annex 1
crops
All crops
H3: States, not CPs
Obligatory
C5: Non-Annex 1
crops
H4: Institutions.
not Article 15
All crops
Material really
available
Basic assumptions
• A certain amount of material enters the
Breeding Pool annually, both SMTA and nonSMTA material
• Over time, the ratio of SMTA to non-SMTA
materials in the Breeding Pool will build up to
the ratio of these materials in genebanks
• And the crossing of SMTA and non-SMTA
materials (“diffusion”) will increase the ratio of
materials in the Breeding Pool that are subject
to SMTA conditions
• A factor allows for the possible avoidance of
SMTA materials
Growth of SMTA materials
in the Breeding pool
Access
Factors influencing
the growth of A/B
υ : Avoidance of
SMTAs
λ : Diffusion
Factors influencing
use of SMTA
material
Without
SMTAs
With
SMTAs
World Holdings
Annual
increment
Material
subject to SMTAs
Breeding Pool
time
Basic assumptions
• The ratio of products subject to SMTAs to
products not subject to SMTAs in the Product
Pool will parallel the ratio of SMTA to nonSMTA materials in the Breeding Pool, after the
average development time of a variety
• Factors that influence the build-up of products
are research intensity and the ratio of improved
to unimproved materials
• From the Product Pool, we can estimate the
build-up of moneys due to the Benefit-sharing
Fund
Growth of SMTA materials
in the Breeding Pool
Factors influencing product development
Access
Product development
Factors
influencing
use of SMTA
material
Without
SMTAs
With
SMTAs
World Holdings
Factors influencing
product
development
β : Research intensity
γ : Ratio of improved/unimproved materials
Consequences of γ
δ1 : Speed of uptake of material
δ2 : Proportion of material leading to products
Annual
increment
Products
subject to SMTAs
Material
subject to SMTAs
Product Pool
Breeding Pool
time
Payments due
to the Benefit-sharing Fund
Access
Product development
Factors
influencing
use of SMTA
material
Without
SMTAs
With
SMTAs
World Holdings
Factors influencing
product
development
Payment obligations
Factors
influencing
payments due
Benefitsharing
Fund
Annual
increment
Products
subject to SMTAs
Material
subject to SMTAs
Product Pool
Breeding Pool
time
Basic
assumptions
Mandatory and voluntary payments
• The ratio of products subject to SMTAs to
t
products not subject
to
SMTAs
is
applied
to
the
time
ρ values
empirical current market
Effective
Levels of payment
• The use of IP decides whether payment is
payment
mandatory or voluntary
Voluntary
Q1
• The mandatory payment rate (SMTA Art. 6.7) is
Maximum
Minimum
Q2
1.1% - 30% = 0.77%
of annual sales
Mandatory
ι
• The voluntary payment rate (SMTA Art. 6.8) is
IP status
Q1 : Available without restriction
Q2 : Not available without restriction
assumed to be the same, and a performance
factor is applied to simulate real payment
The effect of IP:
voluntary and mandatory payment
Commercialized
products
Wheat
Rice
Maize
V1
V2
V3
V1
V2
V3
Other Annex 1
crops
V4
V4
Non-Annex 1
crops
V5
V5
T
Annual payment
obligations
T
Mandatory
T
ι
IP
status
Q1: Article 6.7
Q2: Article 6.8
T
Voluntary
T
μ
Payment
rate
ρ
Effective
payment
Benefitsharing
Fund
Values of the international seed
market
US$ billion
V1: Wheat
3.07
V2: Rice
1.87
Genetically modified maize
Conventional maize
V3: Total Maize
5.06
3.80
Other Annex I (genetically modified)
Other Annex I (conventional)
V4: Total Other Annex I
0.26
5.34
Non-Annex I (GM)
Non-Annex I (no GM)
V5: Total Non-Annex
V1>V5: TOTAL
8.86
5.60
5.25
12.15
17.4
36.8
SUM C1–C5
TOTAL
643
846
1,610
2,044
3,654
402
583
402
985
861
1,577
627
2,502
3,129
5
79
92
84
176
6,457
27,038
38,647
38,153
76,800
10,016
12,262
85,823
126,722
212,545
3,813
7,241
11,054
π (%)
2,965
H5 * π
Accessions
available
SUM C1–C4
Annex 1
H
Non-Annex 1
(C5) holdings
2,926
π (%)
39
H4 * π
Accessions
available
√
H
(other A1) (C4)
holdings
Algeria
997
π (%)
555
101
H3 * π
Accessions
available
√
102
H
Maize (C3)
Albania
π (%)
1,726
H*π
Accessions
available
√
H
Rice (C2)
holdings
H
Wheat (C1)
holdings
Afghanistan
π (%)
Treaty
member
COUNTRIES AND
INTERNATIONAL
INSTITUTIONS
H*π
Accessions
available
World crop holdings, and material available under SMTAs
Andorra
Angola
√
20
44
Antigua and Barbuda
Argentina
4,657
Armenia
√
4,777
Australia
√
24,740
Austria
√
1,263
Azerbaijan
1
152
3.18
21
1,723
1,323
104.75 1
3,314
14
66.67
1,330
387
5,218
1,287
24.66
98,929
60
15.50
5,590
4,150
74.24
2,246
12
0.01
1,046
2,237
7,330
6,597
13,927
69
8,622
17,978
16,062
34,040
77
101
77
178
1,000
4,938
1,866
7,747
9,613
28
25
59
89
112
201
597
668
5,173
492
6,438
6,930
48
40
88
14,265
3,492
17,757
Bahamas
Bahrain
Bangladesh
√
565
6,806
Barbados
Belarus
Belgium
√
1,809
Belize
Benin
√
Bhutan
√
Bolivia
40
100
1,480
1,912
Bosnia and Herzegovina
31
Botswana
31
13
3,497
1,031
3,510
4,541
Brazil
√
31,913
23,497
11,241
138,710
141,726
205,361
347,087
Bulgaria
√
16,662
913
4,697
25,885
14,005
48,157
62,162
Burkina Faso
√
531
201
1,150
638
1,882
2,520
Burundi
√
Cambodia
√
2,131
2,131
Source
Holdings:
WIEWS
Availability:
2,131
Second State of the World’s PGRFA =
Reports to Treaty Secretariat
The model can investigate
• The effects of Parties effectively making or not
making available their holdings
• The effects of the number of Parties increasing
• The relative values of Annex 1 and non-Annex 1
materials in world holdings
• The value of non-Annex 1 materials that some
Parties are already making available under
SMTAs
• The relative values of mandatory and voluntary
payments
• The effects of avoidance of SMTA-materials
Holdings made available and income
Annual income at 2081
US$ millions
With current holdings
At 33% availability
At 66% availability
At 100% availability
60
28
38
49
Current membership, current availability, 50% voluntary payments, Non-Annex 1 currently available
Holdings currently available and
income, by crop
Annual income at 2081
US$ million
Wheat
5.7
Rice
2.6
Maize
10.2
Other Annex 1
8.9
Non-Annex 1
0.7
Current membership, current availability, 50% voluntary payments, Non-Annex 1 currently available
Expanding membership and income
Annual income at 2081
US$ millions
With current membership
With three largest non-members
With all possible members
100% availability, 50% voluntary payments
60
73
93
Countries and International
Institutions
Annual income at 2081
US$ millions
International Institutions,
100% availability
21.4
Countries, current availability
8.2
Countries, 100% availability
100.0
This under-represents the IARCs, as only their
ex situ holdings are covered, while most of
their distributions are of improved materials
from their breeding programmes.
2011:
For Annex 1:
71% of distributions
For Non-Annex: 31% of distributions
100% availability, 50% voluntary payments
Mandatory and voluntary payments
Annual income at 2081
US$
million
0%
23.0
33%
47.4
66%
69.4
100%
97.0
Current membership, 100% availability, Non-Annex 1 currently available
Mandatory and voluntary payments
A GAMES THEORY ANALYSIS
Company 2
cooperates
Company 2
defects
Company 1
cooperates
0,0
-,+
Company 1
defects
+,-
0,0
If Company 1 pays a voluntary payment (cooperates), and Company 2 does not (defects), Company 2 has a
strategic advantage over Company 1, which can:
•be taken as increased profit,
•provide an R&D advantage, or
•be used to lower the sales price of a competitor product
The advantage is always to the company that defects, and represents a substantial part of profits.
•Profit in plant breeding is low. If we assume a profit range of 4% to 6%, 0.77% of sales equals 19.25% to
12.83% of profits.
No Company can therefore make the first move and cooperate, because of the risk that other companies
defect.
Mandatory payments only (0%
voluntary payment), and income by
crop
2081, 0% voluntary payment
US$ millions
Maize
21.0
Other Annex 1
1.5
Other Non-Annex 1
0.3
Current membership, 100% availability, Non-Annex 1 currently available
Avoidance of SMTA-materials
Annual income at 2081
US$ millions
At higher avoidance
56
At lower avoidance
60
In other scenarios, avoidance is:
Wheat, Rice, Other Annex 1
5%
Non-Annex 1 It is important to consider avoidance
0%
in
Maize
13%
combination with the effective
voluntary
i.e., half the market
share of GM maize
payment
In this scenarios,
avoidance
is: the area under the
In this
graph, ALL
Wheat, Rice, Other
Annex
1
10%
green
line derives
from voluntary
Non-Annex 1 payments
0%
Maize
26%
i.e., all the market share of GM maize
Current membership, 100% availability, 50% voluntary payment, Non-Annex 1 currently available
Annex 1 & Non-Annex 1 values
This scenario shows the theoretical
maximal annual income values for the
Treaty, because it assumes 100% availability
and 100% effective voluntary payment
US$ millions
Annual income at 2081, by increased
membership and possible expansion of Annex 1
100% availability, 100% voluntary payments
Members
Availability
Voluntary
payment
Avoidance
Summary
How long would it take under these assumptions?
Current
Current
50%
Lower
Members
Current
Current
All
Current
Availability
Current
Current
Current
100%
All
100%
Current
100%
All
100%
100%
Annex 1
100%
Yes
100%
Yes
100%
Yes
50%
Non-Annex 1
50%
No
100%
No
50%
No
US$Yes
millions
Yes
Lower
US$ millions
Higher
28
Lower
60
Lower
93
Yes
100
Yes
176
Voluntary payment : 50%
Annual income at 2081, by increased membership and
possible expansion of Annex 1
2030
2050
The Time Factor:
Years to current annual target
Years to 50% of theoretical maximum
Income at 2081 , under various scenarios
2081
All at 50% voluntary payments
Conclusions
“Essentially, all models are
wrong,
but some are useful.”
Box, George E. P.; Norman R. Draper (1987)
Empirical Model-Building and Response
Surfaces
Conclusions
With the strong caveat that this is only a model!!!
•Possible annual income is large, if all factors are
favourable, but after many years
•If current Parties’ Annex 1 materials were
available today, US$ 24 million could be reached
by 2030
•With current availability, only US$ 10 million
would be reached by 2030
•If all possible countries joined and made their
materials available today, US$ 39 million could be
reached by 2030
Conclusions
The model has shown:
•The key importance of the ex situ collections of
International Institutions in the current situation
•The substantial value of the non-Annex 1
materials that some members are already making
available under SMTAs
•That a decision by the Governing Body to expand
Annex 1 could greatly expand the flow of income
to the Benefit-sharing Fund.
Conclusions
These projections are crucially dependent on two
factors:
•Substantial voluntary payments actually being
made, and this seems very unlikely, for valid
games theory reasons
•Avoidance of SMTA materials crops that use
IPRs (almost entirely maize), which seems to be
happening
Conclusions
So:
•Build-up of income will be slow
•The potential income is high
•But current projections are low, unless the
Governing Body can address the main bottlenecks: avoidance and low voluntary payment
THANK YOU
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