Giacomo Branca
1
, Luca Cacchiarelli
1
, Irini Maltsoglu
2
,
Alessandro Sorrentino
1
, Stefano Valle
1
1
University of Tuscia – Viterbo
2
FAO- Rome
Icabr. 17th Conference “Innovation and Policy for the Bioeconomy. Ravello June 18-21

•
•
•
•
•
•
Icabr. 17th Conference “Innovation and Policy for the Bioeconomy. Ravello June 18-21

• The linkages between biofuels and social welfare are complex.
• On one hand biomass production competes with food production for land and other inputs.
• On the other hand, biomass production for bioenergy use may contribute to rural development by increasing household incomes, local employment and energy supply.
• One key element is that these potential benefits crucially depend on the role of smallholder in the biofuel economy and on the associated institutional set up (Arndt et al. 2010)
Icabr. 17th Conference “Innovation and Policy for the Bioeconomy. Ravello June 18-21

 Build and test a model to provide a rapid assessement of the socio-economic impact of investments in biofuels production, under minimum (agronomic, engineering and economic) data requirement.
 Profitability indicators, based on the comparison between production cost and the relevant diesel or gasoline equivalent prices are computed for several production scales and different feedstock-based liquid biofuel options.
 The potential impact of biofuel production on employment opportunities and smallholder involvements is estimated with reference to different institutional arrangement options.
Icabr. 17th Conference “Innovation and Policy for the Bioeconomy. Ravello June 18-21

• The model estimates key profitability indicators at feedstock and processing level for different production pathways (crop technology level, processing scale and contractual agreements)
• it relies on “default value” reported in global dataset which are integrated by “ad hoc” national data
• estimate socio-economic impacts (labour demand and smallholder involvement) and financial assessment(economic returns of the investment)
• it also allows for sensitivity analysis with respect to several exogenous variables such as input prices, factory costs, crop yields and land management practises
Icabr. 17th Conference “Innovation and Policy for the Bioeconomy. Ravello June 18-21

• the crop budget calculates production costs for the crop considered under different technology levels (low, intermediate and high input)
• The processing budget computes costs of biodiesel and ethanol production for varying plant capacities (in analysis two representative plant sizes from 5 and 100 million litres)
• the model considers different institutional arrangements (“indipendent producers”, “outgrower” and “estate farming”)
Contractual arrangement Technology level
Independent Low
Outgrower
Estate farming
Farmer typology
Subsistence farmer
Intermediate Market oriented small farmer
High Commercial farmer
Smallholders
Icabr. 17th Conference “Innovation and Policy for the Bioeconomy. Ravello June 18-21

3 U NDERLYING M ETHODOLOGY
FARM
(Crop Budget)
OUTGROWER SCHEME (market price of feedstock)
Market Price
($/t)
Production Cost
($/l)
PROCESSING
(Processing Budget)
Total Production
Costs ($/t)
Comparison with:
• International Price of liquid biofuels
• Fossil fuels Equivalent
Prices
ESTATE SCHEME (production cost of feedstock)
Transport – Malawi (Dry Run)
Icabr. 17th Conference “Innovation and Policy for the Bioeconomy. Ravello June 18-21

• a global database with technical coefficients related to feedstock and liquid biofuel production has been built
• Crop potential yields are derived from Global Agro ecological Zone database (IIASA/FAO) and are classified according to the level of inputs for rain fed agricultural production and different land suitability classes
• data on fertilizers are computed through a simple agronomic model
• national wage values for agricultural labour, national average values for land rental, Inputs data include seeds and seedlings of traditional and improved varieties, labour required for field operations.
• energy and mass balance data for biodiesel and ethanol production are derived using the model ASPEN Plus V7.3
• international prices of fossil fuels and liquid biofuels and appropriate conversion factors are used to express all prices in fossil fuel equivalents
Icabr. 17th Conference “Innovation and Policy for the Bioeconomy. Ravello June 18-21

•
•
Contractual arrangement
Independent
Outgrower
Estate farming
Technology level Farmer typology
Low Subsistence farmers 30
Intermediate Smallholders (market oriented) 70
High Commercial farmers 0
Scenarios
A B
(% feedstock biomass)
0
0
100
Icabr. 17th Conference “Innovation and Policy for the Bioeconomy. Ravello June 18-21

crop-biofuel Scenario Plant size sunflowerbiodiesel cassavaethanol
Production costs are bigger in A scenario (outgrower involvement) and in a small scale
A
B
A
B
5 MLN
100 MLN
5 MLN
100 MLN
5 MLN
100 MLN
5 MLN
100 MLN feedstock energy
0.56
0.56
0.38
0.38
0.96
0.96
0.70
0.70
0.19
0.25
0.19
0.25
0.08
0.03
0.08
0.03
other input costs
0.04
0.04
0.04
0.04
0.19
0.17
0.19
0.17
labor
0.01
0.00
0.01
0.00
0.01
0.01
0.01
0.01
other processing costs
0.38
0.16
0.37
0.15
0.45
0.19
0.43
0.17
co-products
-0.02
-0.02
-0.02
-0.02
-0.08
-0.07
-0.08
-0.07
net production cost
1.16
0.99
0.97
0.79
1.62
1.28
1.34
1.00
Source: own elaboration
Icabr. 17th Conference “Innovation and Policy for the Bioeconomy. Ravello June 18-21

With respect to cost of imported biofuel only biodiesel from sunflower is
With respect to market price, biofuel production is not competitive for any competitive for large scale scenario
Table 2. Biofuel production costs and comparison with imported biofuels and equivalent fossil fuels prices in Tanzania ($/litre
crop-biofuel Scenario sunflowerbiodiesel cassavaethanol
A
B
A
B
Plant size net production cost
5 MLN 1.62
100 MLN 1.28
5 MLN 1.34
100 MLN 1.00
5 MLN 1.16
100 MLN 0.99
5 MLN 0.97
100 MLN 0.79
cost of imported biofuel
1.43
1.43
1.43
1.43
0.64
0.64
0.64
0.64
difference
0.19
-0.15
-0.09
-0.43
0.52
0.35
0.33
0.15
price in diesel equivalent market price of diesel/gasoline difference
2.22
1.84
1.91
1.54
2.22
1.96
1.92
1.66
1.45
1.45
1.45
1.45
1.60
1.60
1.60
1.60
0.77
0.39
0.46
0.09
0.62
0.36
0.32
0.06
Source: own elaboration
Icabr. 17th Conference “Innovation and Policy for the Bioeconomy. Ravello June 18-21

The land needed to
Scenario A implies a implement the plant sizes greater number of jobs and is bigger in scenario A smallholders
(outgrower involvement)
Table 3. Labour, land and number of smallholders involved in biofuel economy
Cropbiofuel
Scenario
Sunflowerbiodiesel
A
B
A
Cassavaethanol
B
Source: own elaboration
Plant size
(million litres biofuel)
5
100
5
100
5
100
5
100
Land Labour demand Smallholders
(ha) (man days/year)
9,340 1,983
186,807
4,158
83,158
2,828
72,990
1,370
39,668
38
753
496
9,928
102
16,440 2,348
(n.)
7,784
155,672
0
0
2,356
47,125
0
0
Icabr. 17th Conference “Innovation and Policy for the Bioeconomy. Ravello June 18-21

Sunflower (plant from 5 millions litres)
Production cost sensitivity analysis from 100% estate to 100% outgrower schemes (independent or outgrowers % – estate %)
The competitive of biofuel prodution can support until
30% of feedstock produced by outgrower
Source: own elaboration
Icabr. 17th Conference “Innovation and Policy for the Bioeconomy. Ravello June 18-21

Sunflower (5 millions litres)
Labour requirement sensitivity analysis from 100% estate to 100% outgrower schemes
Source: own elaboration
Icabr. 17th Conference “Innovation and Policy for the Bioeconomy. Ravello June 18-21

Sunflower (5 millions litres)
Smallholder involvement sensitivity analysis from 100% estate to 100% outgrower schemes
Source: own elaboration
Icabr. 17th Conference “Innovation and Policy for the Bioeconomy. Ravello June 18-21

biodiesel production from sunflower
Plant size (million liters)
Technology Unit of measure 5 mln 100 mln
Revenue (final energy product + co-product)
Biodiesel processor
Costs of feedstock conversion
Costs of feedstock purchase
Feedstock requirement
Maximum purchase feedstock price
Sunflower producer
Minimum selling biomass price
000$
000$
000$ t
Low-input
$/t
$/t
Intermediate $/t
High-input $/t
7,150
3,306
3,844
11,962
298
398
342
292
143,000
31,305
111,695
239,234
432
Source: own elaboration
Icabr. 17th Conference “Innovation and Policy for the Bioeconomy. Ravello June 18-21

 feedstock purchase represents a major cost in liquid biofuels production
 moving from pure estate farming towards scenarios that foresee a bigger involvement of smallholder produce social benefits in term of labour demand and number of farmers involved
 neverthless, social benefits may be gained at a cost of reduced international competitivness
 biofuel investments could increase natural resource (land) exploitation, with possible negative consequences in term of reduced food security and environmental esternalities
 failed markets need governement intervention to generate the expected social benefits which can only be realised under carefully designed and managed biofuel policies
Icabr. 17th Conference “Innovation and Policy for the Bioeconomy. Ravello June 18-21

Icabr. 17th Conference “Innovation and Policy for the Bioeconomy. Ravello June 18-21