Policies and Regulations for the Energy-Agriculture Nexus

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Global demands for both food and energy are increasing rapidly due to population growth and rising incomes. On the other hand, however, land degradation, climatic changes, and decreasing growth rates in agricultural productivity are limiting the expansion of food production.[1] Moreover, mitigating global warming and climate change requires reducing carbon emissions from using fossil fuels and from agricultural production, primarily through a transition to cleaner renewable energy sources, and resource conserving and more efficient agricultural practices.[2][3]

There is a need for a massive deployment of renewable clean energy sources in rural areas and agricultural value chains. Energy is directly used in agricultural production such as for irrigation, crop cultivation in greenhouses, ground water pumping, mechanized agriculture, post-harvest processing and transportation.[4] In fact, the energy footprint of global food production value chains is substantial, accounting for about 30% of total global energy use[5], with significant impacts on ecosystems.[6] At the same time, crops and agricultural residues are also used for energy production. Energy and food production activities often compete for scarce land, water, labor and capital resources that may, consequently, lead to fuel-food trade-offs.

Fortunately, the nexus between energy and agriculture is not only that of trade-offs, there are also ample opportunities for synergies. For example, if smallholder farming households have access to cleaner energies for cooking, they could use animal dung for fertilizing fields, rather than as fuel, and obtain higher crop yields.Another example is if farmers have access to clean cooling technologies for their produce (e.g. milk, fruits), using biogas or solar panels, post-harvest losses could be decreased, improving product quality and farmer incomes. Exploiting such opportunities in the Energy-Agriculture Nexus can, thus, allow for raising agricultural productivity, incomes, and hence, enhance food security. Moreover, the use of renewable and clean energy sources will help in decarbonizing the global energy mix, including in agriculture, thus, contributing to climate change mitigation.

Last but not least, better access to energy can also stimulate the expansion of productive uses of energy for rural development[7][8](video), through expanding agricultural and non-farm income generating activities by helping to create new small and medium-sized businesses along the agricultural value chains and also through re-location of manufacturing industries into rural areas with more favorable access to land and labor resources, thus energizing a broad rural development (video).

Check out the video lecture about Policies and Regulations for the Energy-Agriculture Nexus by Alisher Mirzabaev, Senior Researcher at the Center for Development Research (ZEF), University of Bonn

Further information on the mentioned MOOC: Powering Agriculture – Sustainable Energy for Food and related materials you can find here.

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Policies and Politics of Renewable Energy

Renewable energy sources, as we have seen above, have a considerable potential for improving the sustainability and incomes along the agricultural value chains. However, this potential is not always utilized due to a lack of sufficient political will to challenge fossil-fuel based technologies.[9][10][11] Political economy plays a key role in the development of the renewable energy sector. Enabling policies and regulations are often essential for promoting renewable energy technologies, especially during their early stages, when they lack large commercial scales.[11] For example, the success of bioenergy in a major producing country such as Brazil is linked to the policies promoting biofuel production (video). However, there are many politically sensitive issues in energy policies and regulation regarding, for example, ensuring food security, the premise of job creation, reducing the dependence on fossil fuels, climate change mitigation, preserving the ecological integrity and concerns over large scale land acquisitions in developing countries, and many more.

In this regard, we can distinguish two ways through which regulations could be viewed.[12] The legalistic approach to regulations considers them to consist of laws, rules and decrees by all levels of government, and by non-governmental bodies which are vested with regulatory power.[12] The major objectives of regulation, then, ideally, target achieving efficiency in energy provision, fair pricing, equality of access and environmental sustainability. On the other hand, the economics-based definition advances that the role of regulation is to create conditions for efficient functioning of markets.[12]

There are often risks associated with government failures while trying to solve complex resource allocation problems in renewable energy, which calls for the use of markets and setting clear incentives and standards[13] (video). At the same time, government action is needed to overcome market failures. Accordingly, implementing the innovative renewable energy policies requires a proactive government action, societal support and involvement of local governments and communities.[14]

There are different classifications of these tools into separate categories. [11][15] Here for convenience, we can separate them into regulation-based:

  • renewable energy mandates and targets,
  • feed-in-tariffs,
  • net metering and
  • flexible grid access;

and incentive-based:

  • tax reductions,
  • grants,
  • subsidies and transfers,
  • and soft loans.

Find a comparison of the various policy tools for promoting renewable energies here.

Among the policy instruments listed above, transfers and subsidies, fiscal incentives, grants, and soft loans are presently more widely applied to promoting the renewable energies in the agricultural sector in numerous countries. For example, China is a prime example of a country strongly promoting biogas production through various national plans and initiatives, such as the National Rural Biogas Construction Plan (2006-2010), Development Plan for the Agricultural Bioenergy Industry (2007-2015) which involve various subsidies and fiscal incentives.[16] The United States provides producer grants for farmers wishing to establish solar energy production in their farms.[17] Ethiopia instituted the Rural Electrification Fund to promote off-grid renewable energy adoptions in rural areas, and since 2010, also provides exemptions of import duties to renewable energy equipment. In many developing countries, international donor grants serve as important sources for promoting renewable energies in the rural areas and agricultural value chains.[18]

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Regulations of Energy Use

Major objectives of regulation of energy use are increasing energy use efficiency and promotion of the transition to cleaner energy sources. The policies promoting energy efficiency are highly diverse and numerous. The regulations targeted at increasing the energy efficiency of the residential sector represent a major section of these measures. The policy tools used include eco-labels which certify environmental friendliness of various consumer and industrial products, elaboration of more energy-efficient building codes, various incentives for retrofitting existing buildings for higher energy efficiency, including in farm buildings by heat insulation, more efficient lighting, heating, cooling and ventilation systems, public campaigns at promoting positive behavioral change for reducing the waste of energy. There are vast opportunities for improving energy efficiency of agriculture as well, considering that agricultural value chains are major consumers of energy. For example, even beyond more energy efficient farm buildings, there is a significant scope for reducing the energy consumption in crop production by conservation agricultural measures such as zero tillage, which reduce the amount of fuel consumed, and precision agriculture, which helps in applying the exact amounts of fertilizers needed by each patch of cropped land.

Macro-economic and sectoral policies promoting the transition to cleaner energies include regulations limiting polluting sources of energy such as coal, setting limits to carbon emissions, instituting cap and trade mechanisms, imposing environmental taxes. On the other hand, the transition to cleaner energies is not only a global or national level process. The stakes from using cleaner energies are not less, but arguably, they are even more vital at the household and community level. Household transition to cleaner and more efficient energy sources can follow two approaches: energy ladder or energy stacking.

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Energy Ladder

The energy ladder, as the name implies, conceptualizes energy choice as a linear step by step transition process: with increase in income, energy users abandon less efficient and cheap traditional biomass and shift to intermediate energy sources (charcoal and coal); and then to modern, safer and more efficient energy sources, such as electricity.[19] In contrast, the energy stacking states that there is no unique and monotonic energy transition process, but energy consumers use multiple energy sources and their choice is dictated by multitude of socio economic and cultural preferences. [20][21]

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Energy Leapfrogging

Recently, the “energy leapfrogging” has gained increasing policy attention. It refers to a process of energy transition that involves a bypass of the conventional energy and a leap directly to the more efficient, safe and environmentally friendly energy technologies.[22] Accordingly, developing countries have the opportunity to borrow the advanced energy technologies from industrialized countries to make a “leapfrog” from less sophisticated energy technologies to modern, cleaner energy alternatives without the need to go through the more pollutant energy sources such as coal and oil. In practical terms, however, a rapid and fast energy transition from traditional biomass and coal to electricity may be difficult to take place.[20] The most successful “leapfrogging” has taken place recently in the mobile phone technology as the millions of people in developing countries have bypassed the landline technology and skipped directly to the use of mobile phones. Energy technology leapfrogging, however, appears to be much more challenging.[22] Energy leapfrogging needs a simultaneous “institutional leapfrogging”.[23]

Energy leapfrogging is often limited by lack of technological capabilities.[22][24] Therefore, in developing countries energy transition has been constrained by interplay of various socio-economic factors, risk-averse behavior, and lack of institutional and technical capabilities. [20][25][22] Thus, energy transition may often be an ‘incremental’ or ‘gradual process’ that requires technical capacity development, awareness raising and improvements in purchasing power.[22]

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  • Renewable energy regulations and policies are often outcomes of complex political and social bargaining
  • Policy tools promoting renewable energies are numerous and varied, and include such options as renewable energy mandates and targets, feed-in-tariffs, net metering and flexible grid access, transfers and subsidies, fiscal incentives, grants and soft loans.
  • The choice of any policy instrument depends on the context of each country, as each of these tools has its own advantages and disadvantages.
  • Regulation of energy use pursues two objectives: increasing energy efficiency and transition to cleaner energy technologies.
  • Energy use efficiency measures include eco-labels, energy-efficient building codes, various incentives for retro-fitting existing buildings for higher energy efficiency, public campaigns for reducing energy waste.
  • Energy transition can follow energy ladder, energy stacking or energy leapfrogging approaches.
  • Rapid transitions to cleaner renewable energies may require a similar rapid progress in the institutional frameworks governing energy production and use.

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Further Information

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  1. von Braun, J. (2007). The world food situation: new driving forces and required actions. Intl Food Policy Res Inst., Washington, USA.
  2. Edenhofer, O., Pichs-Madruga, R., Sokona, Y., Seyboth, K., Matschoss P, Kadner, S., Zwickel, T.,Eickmeier P, Hansen G, Schloemer S, and von Stechow C (Eds.). (2011). Renewable energy sources and climate change mitigation: Special report of the intergovernmental panel on climate change. Cambridge University Press, UK.
  3. Branca, G., McCarthy, N., Lipper, L., & Jolejole, M. C. (2011). Climate-smart agriculture: a synthesis of empirical evidence of food security and mitigation benefits from improved cropland management. Mitigation of climate change in agriculture series, 3.
  4. Stout, B. A. (2012). Handbook of energy for world agriculture. Elsevier, Essex, England.
  5. FAO (2011). Energy-smart food for people and climate – Issue Paper. The United Nations Food and Agriculture Organization, Rome, Italy.
  6. Khan, S., and Hanjra, M. A. (2009). Footprints of water and energy inputs in food production–Global perspectives. Food Policy, 34(2), 130-140.
  7. Cabral, R. A., Barnes, D. F., & Agarwal, S. G. (2005). Productive uses of energy for rural development. Annu. Rev. Environ. Resour., 30, 117-144.
  8. Source: GIZ Energy Newsletter 2013 https://www.giz.de/fachexpertise/downloads/GIZ_Energy_Newsletter_2013-08_no_31.pdf
  9. Anthoff, D., and Hahn, R. (2010). Government failure and market failure: on the inefficiency of environmental and energy policy. Oxford Review of Economic Policy, 26(2), 197-224.
  10. Lehmann, P., Creutzig, F., Ehlers, M. H., Friedrichsen, N., Heuson, C., Hirth, L., & Pietzcker, R. (2012). Carbon lock-out: advancing renewable energy policy in Europe. Energies, 5(2), 323-354.
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  12. 12.0 12.1 12.2 Minogue, M. (2013). Regulatory Governance of Off-Grid Electrification. In: Bhattacharyya (ed). Rural Electrification through Decentralised Off-grid Systems in Developing Countries (pp. 253-270). Springer London.
  13. Purkus, A., Gawel, E., Thrän, D. (2012). Bioenergy governance between market and government failures: A new institutional economics perspective. UFZ Discussion Papers Departments of Economics and Bioenergy 13/2012.
  14. Beltramello, A., Haie-Fayle, L., Pilat, D. (2013). Why New Business Models Matter for Green Growth. OECD Green Growth Papers, 2013-01, OECD Publishing, Paris.
  15. Azuela, G. E., and Barroso, L. A. (2012). Design and performance of policy instruments to promote the development of renewable energy: emerging experience in selected developing countries. World Bank Publications, Washington, USA.
  16. Qui, C. (forthcoming, 2016). Evaluating the impacts of biomass utilization on rural livelihoods in China. Doctoral dissertation, University of Bonn.
  17. Xiarchos, I. M., and Vick, B. (2011). Solar Energy Use in US Agriculture: Overview and Policy Issues. US Department of Agriculture, Office of the Chief Economist, Office of Energy Policy and New Uses., Washington, USA.
  18. Hosier, R. H., & Dowd, J. (1987). Household fuel choice in Zimbabwe: an empirical test of the energy ladder hypothesis. Resources and Energy, 9(4), 347-361.
  19. 20.0 20.1 20.2 Guta, D. D. (2014). Effect of fuelwood scarcity and socio-economic factors on household biobased energy use and energy substitution in rural Ethiopia. Energy Policy, 75, 217-227.
  20. Heltberg, R. (2004). Fuel switching: evidence from eight developing countries. Energy Economics, 26(5), 869-887.
  21. 22.0 22.1 22.2 22.3 22.4 Murphy, J. T. (2001). Making the energy transition in rural East Africa: Is leapfrogging an alternative?. Technological Forecasting and Social Change, 68(2), 173-193.
  22. Han, J., Mol, A. P., Lu, Y., & Zhang, L. (2008). Small-scale bioenergy projects in rural China: lessons to be learnt. Energy policy, 36(6), 2154-2162.
  23. Gallagher, K. S. (2006). Limits to leapfrogging in energy technologies? Evidence from the Chinese automobile industry. Energy policy, 34(4), 383-394.
  24. Mirzabaev, A., Guta, D., Goedecke, J., Gaur, V., Börner, J., Virchow, D., Denich, M. and von Braun, J.. 2014. Bioenergy, Food Security and Poverty Reduction: Mitigating Tradeoffs and Promoting Synergies Along the Water-Energy-Food Security Nexus. ZEF Working Paper Series (135). Bonn, Germany.