Biofuels from Marginal lands: Some insights for India Deepak Rajagopal Energy and Resources Group, UC Berkeley

Outline 1.Agricultural context for Biofuel in India 2.Comparison of major biofuel crops 3.Implications for welfare analysis Opportunity cost of marginal land Distributional aspects Electricity or Transportation fuel? 4.Conclusion

Agricultural Context for biofuel Vast differences in comparison with US/Europe/Brazil Food security barely self sufficient (considered an important policy goal) High income elasticity, population growth, plateau-ing yield Climate dry and semi-arid tropical (at least where low cost land exists) Water and Irrigation Dependent on seasonal monsoon rains (less than 30% irrigated) Size of land holding small and fragmented with mean land holding < 1 hectare subsistence farming Energy needs 60% of rural homes have no electricity connection 90% of rural homes have no cooking gas

Land allocation for agricultural crops These lands offer opportunities for sweet sorghum to produce biofuel without impacting food Source: Government of India, Ministry of Agriculture Sorghum, Millet, Maize and Cotton comprise about 21% of India’s cultivated land

Mean profit for various crops Source: Cost of Cultivation of Prinicpal Crops in India Survey, 2000, Govt. of India, Ministry of Agriculture

Semi-arid tropics Rain-fed areas, which were largely unaffected by Green Revolution, offer the most growth for an additional unit of investment compared to fertile and irrigated areas [Fan and Hazell, IFPRI 1999] Semi arid zone in south central and south India Source: Millienium Ecosystem Assessment 2005, Chapter 22 Climatic regions receiving low annual rainfall ( mm or in)

Targets for Biofuel 16 billion litres biodiesel by about ~ 20% of anticipated diesel demand expected to require about 11 million hectares of land devoted to Jatropha curcas (about 8 % of cultivated land today) in reality more land is need since assumed yield is high targeted lands are degraded forests, waste and marginal lands target not adopted by parliament unlike US or EU Source: Planning Commission Report 2003, Government of India

Marginal land Agricultural land is marginal due to several reasons Biophysical Water scarcity Soil fertility Drainage Slope Poor management practices Distance from market Several constraints can be overcome using investments in modern technology like drip irrigation, fertilizers and micro nutrients, improved crop varieties etc. credit better management practices

Comparison of oil seed crops Jatropha - Low water, high water productivity, moderate yield and is non-edible Perennial crop, requires 3 to 4 years to mature has not been grown commercially before

Simple cash flow analysis for hypothetical Jatropha farm on wasteland with no irrigation IRR based on point estimates is 25.6% Carbon and other externalities not monetized No land cost assumed

Waste (Marginal) land use Percentage of households reporting use of wastelands Source: National Sample Survey Organization 1999 as reported in Gundimeda 2005 Survey results indicate the importance of wastelands which are mostly common lands to rural households Jatropha plantations do not provide fuelwood or fodder and so they may be opposed by poor – requiring fencing and guarding which would increase cost

Wastelands have alternative economically viable options for regeneration Review of 18 afforestation projects under taken on degraded common lands shows high IRR (intercept = 25.9) Source: Balooni 2003

Sensitivity of NPV to land rent and oilseed price Jatropha not viable on sugarcane land Viable on land growing rice or wheat at higher output prices Viable on very low quality land Medium quality land seems “no cars land” Sugarcane Rice/wheat Edible oil seeds Coarse cereals Crops grown at these rents

Electricity or Transportation fuel? 2. LCA studies generally compare biodiesel with diesel If marginal capacity addition is coal then using biodiesel to offset coal power may have higher carbon benefit than offsetting diesel IPCC emission factor for coal = 96 g CO 2 per MJ for diesel = 74 g CO 2 per MJ => Additional offset = 22 g CO 2 per MJ Note: this is per MJ of fuel combusted, so will be different when we consider energy delivered Need to also look at social and economic net benefits of household electricity access versus transportation

Distributional implications For projects on common lands, need to compare the increase in surplus from labor with decrease in surplus from losing access to fuelwood and fodder - may worsen energy poverty in rural areas Adoption in private farms likely to be confined to large farmers early evidence from State of Maharashtra (Prayas 2005) barriers to small farms subsistence needs long growth phase risk and uncertainty lack of familiarity with cultivation practices market Economies of scale

Sweet sorghum for ethanol Sweet sorghum a variant of grain sorghum has - Low water demand, high water productivity, high yield - yields grain and fuel Grain sorghum is already grown on 10 million hectares mostly by small farmers in semi-arid areas under rainfed conditions (Sugar beet, switchgrass and Miscanthus are not viable in semi-arid tropics)

Sweet sorghum and Jatropha

Electricity or Transportation fuel? Calculation comparing approximate land for biodiesel and electricity

Electricity or Transportation fuel? 1.All rural homes can be provided electricity with less land than required to meet 20% of diesel demand But diesel demand growing at 5% per annum  Increasingly more land will be required unless yield increases at that rate too, which is unlikely

Conclusion 1.Jatropha on marginal land with low inputs will not affect food and water crop survives harsh conditions but yield is affected 2.Two different diffusion strategies to exploit economies of scale 1.Sweet sorghum on household farms for ethanol 2.Jatropha on industrial scale with modern inputs on marginal land for biodiesel but will have to impact on current uses 3.Use of biodiesel for local electricity may encourage people to cooperate in use of common land 4.Finally, extension is happening ahead of R&D

Acknowledgements Prof. David Zilberman Prof. Alex Farrell Prof. Dan Kammen Prof. Udipi Shrinivasa Energy and Resources Group EBI

Sorghum plot at Los Banos, Philippines

Land for Industry Singur – 400 hectares of agricultural land in the State of Bengal was allotted to Tata Motors Group for setting up a car factory Led to massive protests, hunger strikes, etc. Land acquisition declared as illegal by the court Nandigram – 5000 hectares of agricultural allotted to Indonesian Conglomerate for setting up a Special Export Processing Zone Led to massive protests, police firing resulted in the death of 14 villagers Led to major review of SEZ policy