Policies and Regulations for Sustainable Agrifood Systems

Introduction

The energy footprint of global food value chains accounts for about 30 percent of the total global energy use. However, the nexus between energy and agriculture holds also opportunities for synergies, which can raise agricultural productivity, incomes, and enhance food security. Renewable energy sources have a considerable potential for improving sustainability and incomes along agricultural value chains. However, this potential is often not utilised due to a lack of political will to challenge fossil-fuel based technologies. Political economy thus plays a key role in the development of the renewable energy sector. There are two approaches: a legalistic and an incentive-based approach.

In the context of renewable energy policies, a legalistic approach is based on regulations, which ideally aim to achieve efficiency in energy provision, fair pricing, equality of access and sustainability. These can be renewable energy mandates and targets, feed-in-tariffs, net metering and flexible grid access etc.

On the other hand, an economic incentive-based approach argues that the role of regulations is to create conditions for efficient functioning of markets. The main tools here are tax reductions, grants, subsidies and transfers as well as soft loans.

Transition to cleaner and more efficient energy sources can also be realized by following the energy ladder approach. The concept sees energy choice as a linear step by step process, which depends on the users’ income and which allows the abandonment of less efficient and cheap traditional sources such as wood, shifting to intermediate energy inputs from charcoal, to finally adopt modern, safer and more efficient energy sources such as electricity.

Another possibility for energetic transition is the socio-economic circumstance-dependent energy stacking. This option states that there is no unique and monotonic energy transition process, as energy consumers use multiple energy sources and their choice is dictated by a multitude of socio-economic and cultural preferences.

A fifth option, the energy leapfrogging, has gained increasing policy attention, and refers to a process of energy transition that involves a bypass of the conventional energy to more efficient, safe and environmentally friendly energy technologies. Here, emerging economies have the opportunity to borrow the advanced energy technologies from industrialized countries without the need to go through more pollutant energy sources. Energy technology leapfrogging appears to be especially challenging due to the simultaneously needed institutional leapfrogging and is often limited by lack of technological capabilities. Therefore, energy transition has been constrained in the Global South by interplay of various socio-economic factors, risk-averse behaviour, and lack of institutional and technical capabilities. Read more…

Comparison of various Policy Tools for Promoting Renewable Energies

The adoption of renewable energy systems requires either governmental action or markets that provide clear incentives and standards. Both involve strengths and risks, and therefore complement each other through a variety of policies and tools. Implementing innovative renewable energy policies requires a proactive government, societal support and the involvement of local communities. Depending on the specific case and the political and societal framework, some approaches may be more appropriate than others. A comparison of strengths and weaknesses allows analyzing which strategy, or combination of strategies is best suitable for each socio-economic environment:

Renewable Energy Mandates are legal requirements to produce a certain share of energy from renewable sources. Renewable energy targets are policy commitments to generate a determined share of total energy using renewable sources. Both are market-friendly and especially promote mature technologies. However, they require a high administrative and monitoring capacity, and are less efficient in case of weak enforcement and low penalties.

Feed-in-tariffs are policy tools designed to promote renewable energy generation by guaranteeing the purchase of the generated energy with a long-term contract and at cost-based purchase prices. While it can be very costly and requires complex administrative procedures, this approach provides legal security when well applied, and promotes different renewable energy technologies, including those less competitive at the beginning.

A less costly and technically easier approach is the net metering and flexible grid access. This mechanism enables small-scale renewable energy producers (for example, households with rooftop solar energy generation) to sell the amount of electricity beyond their own needs to the central grid. The only weakness is that it cannot be applied on large scales.

Transfers and subsidies are direct or indirect monetary support to producers or other actors involved in renewable energy production. They allow targeted development of these technologies, but once entrenched they are difficult to remove, even if there is no longer need for them.

Fiscal incentives are the reduction of taxes by various mechanisms, such as tax credits, deductions and exemptions, in order to stimulate renewable energy implementation by reducing investment costs. However, this can be a burden to public budget.

Grants are non-repayable monetary allocations for specific projects. They are targeted investments to specific renewable energy applications, especially when they are not yet attractive to private markets. Often used to promote research and development they encourage deployment of renewable technologies. However, long-term sustainability after completing the grant is often challenging, and payback and rate of return are uncertain.

Soft loans are credits with below market interest charges. This instrument is used by several governments and international donor organizations to promote renewable energies. However, they often only cover capital investment costs.

Choosing a particular tool in a specific country depends on the socio-economic environment, the stage of development of renewable energies and on the political framework. Read more…

Strengths and Weaknesses

Policy Tools	Strengths	Weaknesses
Renewable Energy Mandates and Targets	Market-friendly Promotes especially more mature technologies	Requires high administrative and monitoring capacity Less efficient in case of weak enforcement and low penalties
Feed-in-tariffs	To promote different renewable energy technologies, including those which are less competitive due to early stage in their development Provides legal security when well applied Predictable revenue streams	Can be very costly Appropriate design may require continued adjustments through complex administrative procedures
Net Metering and Flexible Grid Access	Generally less costly Technically easy	Not applicable for large scales
Transfers and Subsidies	Allows for targeted development of renewable energy technologies	Once entrenched, could be very difficult to remove even when there is no longer need for them
Fiscal Incentives	Provides incentives especially for new renewable energy projects, by reducing investment costs	Can be a burden to public budget Lower certainty due to changing political context
Grants	Allows for targeted investments to specific renewable energy applications, especially when they are not sufficiently attractive to private markets Particularly applicable for research and development into renewable energy innovations Facilitates renewable energy deployment especially in riskier environments	Long-term sustainability after grant is over may often be problematic Payback and rate of return may be uncertain
Soft Loans	Many agri-/food chains and their sites for processing agro-products or food/ beverages	Often cover capital investment costs only

Source: Comparison of various Policy Tools for Promoting Renewable Energies

Publications & Tools

Bioenergy Decision Support Tool

Developed by the Food and Agricultural Organization (FAO) and the United Nations Environment Programme (UNEP), the Bioenergy Decision Support Tool (DST) provides stepwise guidance to decision makers in governments to adopt sustainable bioenergy policies and strategies, and to assess investment proposals. The tool compilation includes chapters on theTechno-Economic Background, on Designing a Strategy, Implementation and Operation, Project Screening, Land Resource Management, on People and Processes, on the Deployment and Good Practices, and on the Evaluation of Impacts. It introduces important aspects of bioenergy such as developing the supporting policy framework, linking the strategy to existing/potential programs and organizing the set-up in order to successfully interact with technical, financial and administrative stakeholders. Read more…