Government Strategies For Bio-Fuel Production To Reduce Oil Imports: Opportunities And Challenges

One of the OECD countries has a well-developed industrial and agricultural sector. It is self-sufficient in food. It imports 50% of its Oil & Gas requirements. The balance 50% is met by its own Oil & Gas industry – it has considerable reserves as well as a drilling, refining and distribution infrastructure.

Of late there has been a Government led push to cut down on the Oil import bill. Currently the country cannot expand its output – new investment into the Oil sector will take 5-6 years to add to local production.

Strategic Planners in the Government have recommended development of bio-fuels / bio-diesel given that the country has vast agricultural lands that could be utilized. There has also been an increased expectation from its population to diversify its energy sources and develop / adopt new and more environmentally friendly Greener / renewable energy. The country is a signatory to the Global Climate Control protocol.

As a result of discussions with the major Oil & Gas Corporations in the country – the government has offered the firms large concessions [tracts of land], and tax holidays where they can initiate bio-fuel

farming and incrementally increase local Oil production. The Government hopes to lower dependence on its imports to under 30% in the next 10 years. The Oil firms have been quick to move to acquire the lands on long lease and develop their production and refining facilities.

One of the issues Oil firms face in the land acquisition process is that many of the lands offered by the Government are run as large cooperatives consisting of hundreds / thousands of small farm holdings. Acquisition means the livelihood of these small farmers [who have been farming for generations] would disappear. It is unlikely that these farmers would be able to be “retrained” to work elsewhere. Of major concern is that their lifestyle and tradition would be lost. Necessarily -- they would have to be relocated with a very uncertain future. The prospect of high rural unemployment looms large.

Another issue is related to food prices. With less land devoted to food production for human consumption – and more for bio-fuel farming -- it is inevitable that food prices would rise in the near and long term. This would affect consumption across the country.

The Government is committed to reducing the Oil import bill. Yet it is conscious of the consequences of pursuing the bio-fuel option. It would like to avoid the dual pitfall of higher unemployment and rising food prices.

How should the Government proceed to successfully resolve this predicament?

In a bid to cut down on the expenditure on imports, the government has decided to encourage the local production of biofuels as a substitute to bridge the demand gap by offering large tracts of land for acquisition and production of biofuels. However, the government faces challenges in the process due to the possible consequences of high unemployment and reduced food supply resulting from the acquisition of land occupied by cooperatives made of small-scale producers. On the balance, the advantages of the large-scale production of biofuels will far outweigh the negatives as it will support rural jobs creation, generate savings in foreign exchange through a reduction in oil imports, and promote economic diversification.

Opponents of the government’s policies and proposals on the best means of ensuring the country reduce its expenditure on oil imports argue that the acquisition of the land from the small-scale producer cooperatives will inevitably result in the loss of livelihood for the affected people. They argue that the relocation of the people who have lived and made their living on land for generations is tantamount to deporting them to a foreign land where they do not know anyone and they cannot communicate due to their language and cultural differences (Kuchler, & Linnér, 2012). In effect, the compensation and forceful acquisition of their land will decrease their production capacities, and eventually affect the overall food production in the country (Arndt, Msangi, & Thurlow, 2011). The reduced food production capacity coupled with the appropriation of the land from food production for biofuel production purposes will reduce the supply of food products in the market and the prices of the available food products will shoot through the roof. Also, the dislocated people are unlikely to acquire new skills that can support them after the transition.

Viewed from a narrow point of view, the opponents have valid concerns. However, the continued overreliance on oil imports will eventually have the same impacts devoid of the advantages that could accrue with the proactive government measures to reduce the oil imports. First, increased oil importation will eventually lead to a rise in inflation and a consequent increased in the prices of goods and services in the country. Initially, the cost increases will affect the products directly related to imports, but eventually the knock-on effect will spread to every aspect of the society leading to a higher cost of living (Bailis & Baka, 2011) Secondly, continued reliance on imported fossil fuels will lead to climate change which will sooner rather than later affect the productivity of the small-scale producers being protected by the opponents (Hertel, Golub, Jones, O’Hare, Plevin, & Kammen, 2010). Climate change causes unpredictable climatic conditions resulting in episodes of drought and flooding leading to the destruction of livelihoods. In such situations, the small-scale farmers will suffer reduced productivity, and there will be a scarcity in the food market leading to food price hikes. The suffering feared by the opponents of biofuel production will happen with the added disadvantage that the benefits that could have been offered by the proposed policies will not be available to deal with some of the pains.   

Challenges Faced by Government

The editorial board would recommend that the government moves full steam ahead and facilitate the firms to acquire the proposed lands at the earliest possible opportunity. The secret to getting ahead is getting started and the earlier the production of the Biofuels commence, the earlier the benefits will accrue to the citizens, the economy, and the earth.  Once the process gets underway, it will be easier to solve the merging issues as they arise.    

Conclusion

Biofuel production and use will lead to sustainable development both at the micro and the macro-level, and the pains associated with the acquisition of the land for its production will be at worst temporary. First, the reduction of importation of biofuels will lower the inflationary pressures on the economy and the government will save on foreign exchange. The result of a low inflation regime is that citizens will have more disposable income to spend thus further spurring the economy. Secondly, Biofuel production will lead to the development of supportive industries ranging from agricultural to manufacturing of products or use in the new sector. AS the biofuel industry develops more employment opportunities will arise who will support the development of other sectors such as the food industry.

The government has proposed to lower the oil import bill by allowing big corporations to forcefully acquire land from small-scale farmers’ cooperatives so that they can use the lands to farm products for biofuel production. The idea of biofuel production is timely and appropriate, but the proposals are likely to cause a lot of pain to the farmers, their families, and the local economy. The loss of livelihoods for the small-scale farmers operating under cooperatives in the lands slated for the forceful acquisition will not be easy to handle. Furthermore, in the short and the long run, there will be increased cases of unemployment and increased cost of food products.

The move to reduce the importation of fossil fuels and increase the production of biofuels is a commendable step in the right direction as it will solve the twin problem of reducing negative climate change the depletion of the foreign exchange. The proponents’ arguments have merit, especially when considered in terms of long-term benefits to the economy as a whole. Biofuel farming and production will lead to the sprouting of related and supportive industries with the consequent increases in employment. Also, the reduction of overreliance on fossil fuel will promote climate change mitigation measures which will, in the long run, be beneficial to the whole world. However, in the short and medium term, the move will be prejudicial to the welfare of the affected individuals, their families and the local economy (Hodbod & Tomei, 2013).

First, the acquisition of the lands will displace people with families and cause loss of livelihoods to hundreds of families (Borras & Franco, 2012). Irrespective of the amount of compensation offered, the people concerned will take time before they can settle into a different way of life from the one they have practised for generations. Secondly, the people being displaced are farmers mainly dealing with substance farming, while they are being replaced by multinational firms dealing with industrial farming for the production of biofuels. The food production in the whole country will be affected causing the demand to outstrip supply and consequently, a spike in the prices of products will be witnessed. Third, the multinationals engaged in the production of the Biofuels rarely create direct employment for the local people and they import qualified and skilled labour from other countries. The only employment likely to result from such investments is low and unskilled labour. The other employment opportunities in supportive industries which might not be well-paying to the extent of compensating for the lost livelihood.

One of the recommendations is for the government to take time to provide alternative training for the families which will be displaced to reduce the impact of displacement and loss of livelihoods. Second, the government should ensure that there is proper public participation for the people concerned in order to arrive at a sustainable solution that ensures that the current generation does not pay a steep price for the comfort of the future one.

Conclusion

The present is as important as the future and it beats logic to cause suffering of a group of people so that the future generation can benefit. It is important for the government to create a balance between the needs of the current generation and the aspirations of the future generation through sustainable development.  

References

Arndt, C., Msangi, S. Thurlow, J., (2011). Are biofuels good for African development? An analytical framework with evidence from Mozambique and Tanzania. Biofuels 2 (2), 221–234.

Bailis, R., Baka, J. (2011). Constructing sustainable biofuels: governance of the emerging biofuel economy. Annals of the Association of American Geographers 101 (4), 827–838.

Borras, S.M., Franco, J. (2012). Global land grabbing and trajectories of agrarian change: a preliminary analysis. Journal of Agrarian Change 12 (1), 34–59.

Hertel, T.W., Golub, A., Jones, A.D., O’Hare, M., Plevin, R., Kammen, D.M. (2010). Global land use and greenhouse gas emissions impacts of U.S. maize ethanol: estimating market-mediated responses. Bioscience 60 (3), 223–231.

Hodbod, J., Tomei, J. (2013). Demystifying the social impacts of biofuels at local levels: where is the evidence? Geography Compass 7 (7), 478–488.

Kuchler, M., Linnér, B.O. (2012). Challenging the food vs. fuel dilemma: genealogical analysis of the biofuel discourse pursued by international organizations. Food Policy 37 (5), 581–588.