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Biofuel Regulations Could Hinder Global Market Development

Biofuel Regulations Could Hinder Global Market Development

FAO report warns that wide differences in global biofuel certification schemes could become indirect trade barriers if not properly managed

A report released this week by the United Nations Food and Agriculture Organization has found that the way certification schemes for biofuels are structured globally makes it difficult for smallholder producers and many developing countries to participate in export markets.

FAO report warns that wide differences in global biofuel certification schemes could become indirect trade barriers if not properly managed

The certification schemes, which offer a way for public and private companies or coalitions to govern how biofuels are produced, lack uniformity across the industry, FAO says. The varying regulations might exclude small-scale farmers because the schemes are generally designed for large-scale agro-industry. Additionally, FAO says, many certification schemes are data or information intensive and require costs and capacities that are out of reach for most smallholders.

"As structured, these schemes would tend to favor big players and provide incentives for scaling up production to absorb certification costs," the report says.

Market access

At the same time, when the schemes are established to control imports, they "can hinder trade and reduce market access – especially for developing countries with comparative advantages in business production," the FAO report says, "and which see in this industry a real opportunity for development and for overcoming rural poverty and high unemployment".

Many developing countries express concern that certification schemes can become indirect trade barriers when not managed properly. For example, while it is easy for producers in industrialized countries to comply with the demand for education opportunities to be provided for employed farmers, it could be much more difficult for small-scale producers in developing countries.

Similarly, big companies routinely keep financial records needed for audits while smallholders tend to keep information in their heads on data such as yields, fertilizers and other inputs needed for Greenhouse Gas Emissions estimations, FAO says.

National legislation

The report suggests that, to increase certification uptake, governments and international organizations in consumer and producer countries should establish complementary mechanisms to create an enabling environment.

"Such mechanisms could include national legislation, public procurement policies, tax incentives and tax relief and start-up grants. Financial institutions also have an important role to play to support and enable schemes," the report says.

One way to reduce costs for smallholders is to promote local inspection bodies, the report adds, which involve lower costs for the producers, are better able to conduct spontaneous examinations and are generally better informed about on-site characteristics.

"There are positive, negative and mixed impacts of biofuel certification," the report concludes. "Environmental impacts for certification can bring positive benefits if they facilitate forest planning and inventory, silviculture, biodiversity protection and monitoring and compliance."

Economic impacts can also be positive if certification can generate price premiums for suppliers, ensure decent wages for workers and ensure market access, FAO says.

Read the report, Biofuels and the Sustainability Challenge, by clicking here.

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