Biofuels, poverty, and growth: a computable general equilibrium analysis of Mozambique

Abstract

ABSTRACT. This paper assesses the implications of large-scale investments in biofuels for growth and income distribution. We find that biofuels investment enhances growth and poverty reduction despite some displacement of food crops by biofuels. Overall, the biofuel investment trajectory analyzed increases Mozambique's annual economic growth by 0.6 percentage points and reduces the incidence of poverty by about 6 percentage points over a 12-year phase-in period. Benefits depend on production technology. An outgrower approach to producing biofuels is more pro-poor, due to the greater use of unskilled labor and accrual of land rents to smallholders, compared with the more capital-intensive plantation approach. Moreover, the benefits of outgrower schemes are enhanced if they result in technology spillovers to other crops. These results should not be taken as a green light for unrestrained biofuels development. Rather, they indicate that a carefully designed and managed biofuels policy holds the potential for substantial gains.

Are biofuels good for African development? An analytical framework with evidence from Mozambique and Tanzania

“…As shown in Table 1, a majority of their populations are smallholder farmers living in rural areas, where they rely on rainfed agriculture and are subject to frequent weather shocks and food shortages. The main food crops are maize and cassava, which Arndt et al (2010aArndt et al ( , 2010b.…”

“…Investors are particularly interested in Mozambique. By 2009 the country's government had received requests for 12 million hectares of state-owned land to produce feedstock, of which two million hectares of requests were considered credible (Arndt et al 2010a). By contrast, the interest in Tanzania has been more modest.…”

“…Key considerations are discussed at the firm/farm, macroeconomic and household levels. To illustrate these, we draw on the findings from two recent studies for Mozambique and Tanzania (Arndt et al 2010a(Arndt et al , 2010b. We discuss suitable analytical methods for evaluating the socioeconomic impacts of biofuels expansion within these countries and, finally, consider some implications for the environment.…”

Industrial Ecology in Policy Making: What is Achievable and What is Not?

“…Additionally, the assumption that prices in other markets stay unchanged and that income effects are negligible, is questionable. Especially when questions about economic growth or income distribution are addressed, a general equilibrium framework seems more appropriate (Arndt et al, 2010).…”

Sustainable development: biofuels in agriculture

“…Furthermore, biofuels may support agriculture by providing job opportunities, new investment and revitalization of rural areas (Klenschmit, 2007). Arndt et al (2010) found that biofuels production increased economic growth by a half a percentage point each year highlighted that developing countries can take this as an opportunity to promote development. While there is a growing body of literature on the usefulness of biofuels, a number of criticism have been recorded as well.…”