“Certification Strategies, Industrial Development and a Global Market for Biofuels”
by Ricardo Hausmann and Rodrigo Wagner (Harvard University Belfer Center for Science and International Affairs) A disproportionately large amount of the world’s agronomic potential for the production of bio-ethanol is concentrated in a subset of developing countries. This phenomenon represents a rare opportunity to help countries that rank among the poorest in the world to make progress towards industrialization and export-led growth. The list of potential biofuel competitors includes small, tropical economies where the current denominator of total exports is low, so the development of even a small biofuel industry could represent a large proportion of exports. By creating demand for relatively complex inputs and capabilities, the industry’s development may also make it easier for these countries to develop other more sophisticated industries in its wake. The emergence of a biofuels industry, therefore, may not only be meaningful for global energy supply, but may also promote the competitiveness of some of the world’s most vulnerable communities.
This opportunity is being threatened, however, by the complexity of the coordination challenges, like standardization and the building of an integrated supply chain, as well as by the large number of policy priorities that are shaping the industry’s emerging structure. This paper will discusses all these tensions in the context of the international policy debate.
Creating a viable global biofuels market depends on a range of both local and global policy inputs. Translating the biological potential for biofuels into an economically exploitable opportunity requires a business ecosystem that provides the intermediate inputs and market structures that maintain the private cost of production below the sale price. Since this complex network of requisite conditions – infrastructure to connect agricultural land with ethanol processing plants, a logistic system to move the ethanol to port or to market, ports that can handle ethanol, a car fleet that can use the ethanol, refineries that mix ethanol with gasoline in known ratios, a network of service stations that sell the mix, etc. – can neither be developed quickly nor provided by a single firm, it is crucial to coordinate entrant entrepreneurs by providing certainties. READ MORE Download paper
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