July 2010

Overview of Special Issue from the 2009 ICABR Conference
Justus Wesseler, Wageningen University
Stuart Smyth, University of Saskatchewan Sara Scatasta, University of Hohenheim

1. Policy Recommendations from the 13^th ICABR Conference on the Emerging Bioeconomy
Stuart J. Smyth (University of Saskatchewan) et al.
The International Consortium on Agricultural Biotechnology Research held its 13th annual conference in Ravello, Italy in June 2009. The theme of the conference was the bioeconomy, and this topic was addressed through research presentations from academia, government, and industry. Numerous presentations from developing countries highlighted the benefits of agricultural biotechnology in these nations. The broad range of presentations provided a wealth of insights, resulting in three policy recommendations regarding future funding, international regulation, and technology transfer.

2. Turning Black Swans Green: The Vittorio Santaniello Memorial Lecture
Odin K. Knudsen, J.P. Morgan
This article argues that the severe (or Black Swan) event of a financial crisis provides the opportunity to address other threatening issues--energy insecurity and climate change with the associated extreme weather events. The financial crisis has been catalytic in reassessing risk and the likelihood of extreme eventsówhether in finance or energy or climate. Already, a large part of expenditures from the global stimulus has been directed to diversifying the energy base of economies toward less carbon-intensive energy. Public expenditures, in an attempt to compensate for the fall in consumer spending, are stimulating a reformation of the capital and energy infrastructure of nations toward a lower carbon path of growth. Likewise, and consistent with this reassessment and transformation in energy, are the efforts to combat climate change and the prospects of extreme weather events. International negotiations and domestic legislation for cap and trade are moving towards providi!
ng more market-based incentives for this diversification of energy and at the same time stimulating lower-cost solutions for reducing carbon emissions. In both energy and climate, it is increasingly recognized that the economies of the world need to move to even greener technologies, which offer zero or even negative emissions. The 50-80% reduction in carbon emissions by 2050 currently called for by scientists can only be achieved through using energy-rich crops as a major source of fuels. Biofuels and biomass offer near zero emissions and when combined with carbon capture and sequestration could result even in negative emissions--providing energy while capturing carbon from the atmosphere. But advances in biotechnology are needed to reengineer plants to become more fuel rich and have lower cost in harvesting and processing if these ambitious reductions in carbon emissions are to be attained by mid-century.

3. The Effect of Biofuels on Crude Oil Markets
Gal Hochman, Deepak Rajagopal, and David Zilberman, University of California-Berkeley
To quantify the effect of biofuel on global oil markets, we extend the optimal export tax model to the global fuel market (henceforth, denoted as the Cartel-of-Nations model), recognizing that crude oil extraction and production are concentrated in a few countries (namely, the Organization of the Petroleum Exporting Countries), and that there is a wedge between fuel prices in oil-exporting and oil-importing countries. We calibrate the Cartel-of-Nations model to include biofuel using 2007 data. We show that the introduction of biofuel reduces international fuel prices by between 1.07 and 1.10%, as well as reduces the quantity of fossil fuel (i.e., gasoline and diesel) consumed by oil-importing countries by between 0.3% and 0.7%. The global amount of fuel consumed (gasoline, diesel, and biofuels), however, increases by 1.5-1.6%. This outcome suggests that although the introduction of biofuels changes the composition of the fuel consumed (resulting in less carbon emissions per !
gallon of fuel consumed), it also increases global fuel consumption (resulting in more carbon emissions). The magnitude of these two opposing forces, and therefore the environmental benefits from biofuels, depends on the supply elasticity of fossil fuel and on the pollution intensity of the biofuel feedstock used. Finally, the introduction of biofuels causes welfare in oil-exporting countries to decline by 1.05-1.76%, but it causes welfare in oil-importing countries to increase by 2.92-4.10%.

4. The Economics of Microalgae Oil
James W. Richardson, Joe L. Outlaw, and Marc Allison, Texas A&M University
A Monte Carlo simulation model for a commercial-scale microalgae farm in the US desert Southwest was developed and used to compare costs of producing algal oil with two levels of technology. Ranges of input and output coefficients in the microalgae literature were used to simulate a farm using conventional wisdom regarding production and extraction. An alternative scenario was simulated using experimental data for an actual microalgae farm in the Southwest. The total costs of algal oil ranged from $0.85 to $3.67/pound, with an average of $1.61 (with by-product credits) for the conventional wisdom input/output coefficients. The costs using the test farm's coefficients ranged from $0.15 to $0.45/pound, with a mean of $0.25 (with by-product credits). Improvements in algae strains, feeding, CO2 efficiency, and harvesting are responsible for the improved cost efficiency on the test farm.

5. Policies to Support Biofuels in Europe: The Changing Landscape of Instruments
Augusto Ninni, University of Parma and IEFE/Bocconi University, Milan, Italy
Until 2008/2009, biofuels were considered among the best alternatives to oil consumption in a captive market such as transport fuels. Improvement of security of supply through partial substitution of imported oil, reduction of GHG emissions, improvement of income, and employment in the agricultural and rural sectors were quoted as the main drivers of the promotion of biofuels in Europe, as well as in the United States and Brazil. In the European Union, biofuels policy was supported mainly through Directive 2003/30. This article deals with the biofuel experience in Europe, providing a general analysis of the 2003/30 Directive. It includes an evaluation of the difficulties experienced in satisfying the requested targets, plus an assessment of the member states' policies to support biofuels. Social and political consensus about biofuels decreased sharply when their ability to strongly decrease overall GHG emissions was questioned, and mainly when they were blamed of being respo!
nsible for the 2007-2008 food-price increase. Finally, a new Directive was approved on April 23rd, 2009, including the request for various certifications to prove the environmental sustainability of biofuels.

6. The Adoption and Diffusion of GM Crops in United States: A Real Option Approach
Pasquale L. Scandizzo and Sara Savastano, University of Rome "Tor Vergata"
The article aims at modelling adoption and diffusion decisions of farmers towards genetically modified crops under a real option framework. Modern GM crops help farmers to resolve two main sources of uncertainty: output uncertainty and input uncertainty. Those crops represent a revolutionary form of farming compared to the technology adoption studied in the literature in the late '70s and early '80s. The article develops a theoretical model of adoption and diffusion of new GM crops under uncertainty and irreversibility. We test our theoretical predictions using data from 2000 to 2008 of a panel dataset constructed for 13 US states involved in the production of four different GM crops. These conclusions may appear to contradict the general perception of a delayed penetration for the GM crops, whose success seems to be retarded by lack of information, mistrust, and an exaggerated perception of risks. GM crops tend to be invasive, in that their short-term profitability is so hi!
gh as compared with the investment needed, that once the hump of uncertainty is overcome, they operate a veritable takeover of agriculture.

7. Is Agricultural Biotechnology Part of Sustainable Agriculture? Different Views in Switzerland and New Zealand
Philipp Aerni, University of Bern and ETH Zurich, Switzerland
Most countries claim to be committed to sustainable agriculture. Yet, the meaning of the term 'sustainable agriculture' is largely shaped by influential stakeholders in the public debate and their respective agendas. The resulting national policies to promote sustainability may therefore not always be conducive to improving the economic, social, and environmental conditions of the farming sector. Two recent surveys on sustainable agriculture conducted with stakeholders in Switzerland and New Zealand highlight how such political interests and attitudes determine the role of technology in promoting sustainable agriculture. Whereas stakeholders in Switzerland largely consider precision agriculture and agricultural biotechnology to be a threat to sustainable agriculture, their counterparts in New Zealand think these factors must be essential components of the future of sustainable agriculture. The progressive attitude about sustainable agriculture in New Zealand is related to th!
e influence of innovative food research organizations and entrepreneurial producer associations in public policy. The defensive attitude in Switzerland is largely due to the importance of government institutions, NGOs, and large retailers in particular.

8. Low-Level Presence of New GM Crops: An Issue on the Rise for Countries Where They Lack Approval
Alexander J. Stein and Emilio Rodriguez-Cerezo, European Commission, Joint Research Centre (JRC), Institute for Prospective Technological Studies (IPTS)
This study addresses a new issue in the commercialization of GM crops, namely the occurrence of traces--or "low-level presence" (LLP)--of nationally unapproved GM material in crop imports. The commercialization of GM crops is a regulated activity, and countries have different authorization procedures. Hence, new GM crops are not approved simultaneously. This "asynchronous approval" (AA), in combination with a "zero-tolerance" policy towards LLP, is of growing concern for its potential economic impact on international trade. To forecast the future evolution of this issue, we compiled a global pipeline of GM crops that may be commercialized by 2015. This pipeline is analyzed by crop and likely LLP scenarios are discussed. While currently there are about 30 commercial GM crops with different transgenic events worldwide, it is expected that by 2015 there will be more than 120. Given that problems of LLP have already occurred with the 30 current events, these issues are likely to!
intensify when more events become available in more countries.

9. Facilitating Innovation in Agricultural Biotechnology: An Examination of the Ag-West Biotech Model, 1989-2004
Camille D. Ryan and Stuart J. Smyth, University of Saskatchewan
Innovation is more than just science. Innovation encompasses a diversity of disciplines, such as law (patents and freedom to operate), economics (spill-over benefits and returns to investment), political science (government policy and international trade barriers), and psychology (consumer responses). Clearly, the multiple disciplines that can--and have--investigated aspects of cycles of innovation or innovation systems indicate that the concept of innovation is extremely broad. In the same stream, innovation is more than simply firms commercializing new products. It also involves public research institutions, federal regulators, and organizations representing stakeholders from farmers to consumers. In their role to facilitate innovation, governments have developed arm's-length organizations to advocate, support, and service the agricultural biotechnology industry. This article examines Ag-West Biotech, a non-profit venture funded by the Saskatchewan government. Ag-West Biot!
ech has delivered a wide range of services to the Saskatchewan biotechnology industry by acting as a mediator between business and government, as project facilitator and financier, and by offering visible leadership and direction for the biotechnology sector.

10. Economic Analysis of the Impact of Cloning on Improving Dairy Herd Composition
Leslie J. Butler, University of California, Davis Marianne McGarry Wolf, California Polytechnic State University
While the potential for cloning animals has been realized for at least the last 25 years, it is only recently that sufficient advances have been made to allow the technology to advance to a stage where it is possible that widespread commercial applications of cloning may become a reality in the next few years. But much has yet to be accomplished before the farming of cloned animals and their offspring become as familiar as genetically modified plants are today. From a practical point of view, cloning could be used to increase the number, distribution, and availability of cows and bulls with superior genetics for increased milk yield, increased availability of stock with resistance to common diseases like mastitis, and increased availability of stock with desirable genetic traits associated with milk quality. Using a spreadsheet model of a "typical" dairy operation and simulation techniques, this study shows that the revenues generated by increased growth in milk production p!
er cow were substantial and that producers may be willing to invest in such a technology. It was also found that the net present value (NPV) generated by the stream of increased net revenues created by the increased milk yields varied widely and depended on the genetic gains achieved relative to the price of the genetically superior animals. The increase in NPV from break-even is relatively rapid and indicates that there may be conditions under which dairy producers find it justifiable and profitable to invest in advanced breeding technologies like cloning in order to improve the genetic superiority of the herd.

Website: http://www.agbioforum.org

Published: July 19, 2010