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Alternative energy sources could fuel global prosperity

The growing appetite for alternative fuels worldwide could bring about a development that has eluded mankind for most of recorded history — truly global prosperity.

But achieving that goal depends on whether or not world leaders can “create a climate that allows them to mobilize capital and advance technology — while taking account of environmental and other social concerns.”

Robert W. Lane, chairman and CEO of Deere and Co., says it comes down to a matter of “political will” in many countries whose economies remain largely isolated and filled with internal disincentives that stymie progress.

“The global agriculture industry — led by many of the very people who are attending this congress — has a unique opportunity in the near future,” said Lane, speaking at the World Agricultural Forum's World Congress in St. Louis. “Through our investments, we can significantly alleviate poverty and improve the lives of untold millions.”

One of the keynote speakers at the three-day conference, Lane cited figures that demonstrate the growing chasm between affluent residents of developed countries and near-subsistence level farmers in the Third World.

Of the 6.5 billion people in the world today, some 1.25 billion live on less than the equivalent of $1 per day and 850 million (67 percent) of those are malnourished and hungry, according to Lane. At least 3 billion live on less than $2 per day.

“Embedding the right mix of policy and regulations will enable appropriate investment in agriculture to improve incomes for hundreds of millions in rural areas,” he said. “And, a more efficient, fully functioning food system will benefit hundreds of millions more in the vast urban centers that will see higher quality, less expensive food.”

Finding that mix will require a political resolve that many of those countries with hundreds of millions of rural poor have not yet displayed, he noted.

“There must be a strong exertion of ‘political will’ to assemble the ingredients and apply the process — and, thereby create the political and economic conditions that can attract capital investment, facilitate the unimpeded flow of technology and information and empower local entrepreneurs.

“This political will must be national in the many countries whose economies remain largely isolated with internal artificial incentives and disincentives that stymie modernization and progress,” he said. “Sad to say, these often are the very countries most in need of progress but also the most difficult to reform.”

While some might question how familiar the CEO of a Fortune 500 company could be with poverty in Third World countries, Lane noted his position with Deere has allowed him to travel throughout the world.

Currently, Deere does business in 130 countries. Almost 40 percent of revenues from the agriculture side of its business come from outside the United States. And, about 40 percent of its 46,500 employees work outside its home country.

“Deere's interests and activities are illustrative of how individual companies — of how the entire system — responds when the business conditions are right,” he said. “When appropriate economic returns can be realized, opportunities are found in the challenges, and workable solutions to the looming problems are devised.”

Lane said Deere believes a number of opportunities exist for it and other companies to invest in global agriculture today, including continued productivity improvement, developing new sources of renewable energy, increasing water availability and minimizing adverse environmental impacts.

For now the renewable fuels market seems to be commanding the most attention — not only in the United States but in other countries, as well.

“While the challenge of producing food for growing markets remains, the news reflects the fact that agriculture is also providing pathways to both cleaner air and energy diversification,” said Lane

“These ideas have taken hold at an astonishing pace in response to terrorism and higher energy costs, and to growing evidence of climate change. Already, a new, strong and rapidly growing market has emerged in several parts of the world, with its effects now noted everywhere.” Among those:

  • Brazil, which today utilizes just over one-half of the sugar cane output from 17.8 million acres to produce some 5.33 billion gallons of ethanol annually.
  • The European Union, which already has some 120 biodiesel plants in production with an annual capacity of over 6 million tons.
  • Asia, where biofuel programs now operate in Japan, China, India, Indonesia and elsewhere throughout the region. Significant biodiesel production already exists in several locations, and some are now exporters.

Output in the United States continues to expand dramatically and already approaches the 7.5-billion-gallon target set for 2012. Lane said Deere expects more than 3 billion bushels of corn to be used for ethanol in 2007.

“Some experts suggest U.S. ethanol output could exceed 16 billion gallons by 2015 and utilize 40 percent of a greatly expanded annual corn output,” he notes. “The story is similar all across the world — biofuels production is beginning, expansion is under way and much research is being devoted to finding potentially more efficient feedstock.”

Lane says those visions of both greater energy diversity and cleaner fuel are increasingly confronting real, immediate constraints: Arable land is scarce; competition for water is growing; and capital has many competing uses. And environmental concerns continue to be raised.

“As we ramp up the use of agricultural resources for both food and fuel, there is growing recognition of environmental degradation across much of the world,” he notes. “Agriculture has been an important player in efforts to reduce soil erosion, improve water and air quality, and enhance wildlife habitat.

“Ameliorating these problems while increasing cropping intensity will continue to require new technologies, added investment, and new farming practices. And, now the problem of climate change creates impetus for all industries, including agriculture, to reduce the size of their carbon footprint.”

Those challenges are global in scope and will demand mobilization of resources globally, not just those in a few developed countries, he said. “We are actively expanding into emerging markets where we produce and offer products and services that fit there and contribute to their agricultural productivity.”

Despite the increased economic openness that has been a key driver of the global growth of the past 15 years, many barriers that remain limit trade and increase costs, said Lane.

“Multilateral trade negotiations — the Doha Development Agenda — have been under way now for almost six years. A key part of the right economic policy mix I've mentioned is pulling down those barriers to trade in a rapid conclusion to the round with a robust, ambitious agreement.”

Such an accord would be highly beneficial to the global manufacturing, services and agricultural sectors and would mean better protections for intellectual property and streamlining trading rules, he noted.

“I cannot emphasize enough: Such an agreement is not yet out of reach, although it is threatened. Its completion would be enormously helpful in meeting the challenges to global agriculture.”

Lane believes the world community can mobilize global agriculture to meet these needs and do so on a sustainable basis. “And, because of the world's interest in renewable fuels, we can achieve even more — we can improve global prosperity in the process.”

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