Assesment of socioeconomic impacts due to sugarcane ethanol production in Brazil: the strategy of CTBE s Sustainability Program

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1 Assesment of socioeconomic impacts due to sugarcane ethanol production in Brazil: the strategy of CTBE s Sustainability Program Marcelo Pereira da Cunha Pedro Gerber Machado EUROCLIMA Project Agro-environmental impact of biofuels and bioenergy CTBE, Campinas Brazil 30 November 1 December 2011

2 Outline Integration of the CTBE s research programs Socioeconomic impacts in the Sustainability Research Program Objectives and strategies Research activities Some results Ongoing activities Final remarks

3 Integration of the CTBE s research programs

4 Impacts on biodiversity Sustainability Research Projects

5 Objectives and strategies On short-term, the aim is evaluating the sustainability of bioethanol production from sugarcane, considering current technology and all changes that can be implemented in the years to come; The mid-term aim is on evaluating the bioethanol production from a sustainability point of view, taking into account all science and technology innovations that shall be incorporated to the production chain, and that will be developed by the CTBE in its Research Programs (e.g., low impact mechanization in the agricultural side, ethanol production through hydrolysis of the bagasse, diversification of products, etc.); CTBE s priority has been on evaluating the impacts at the level the production activity takes place; i.e., in the places where sugarcane and ethanol are being and will be produced, and considering the social groups directly involved with the production; Part of the work is being developed by the staff of the CTBE s research group, and part by CTBE s partners;

6 Research activities Currently, research activities are focused on defining indicators, doing assessments and on applying models (e.g., input-output matrix) at the lowest aggregated level (e.g., municipalities). Initially, in the short term, the lines of research were defined as follows: (a) assessment of the socio economic impacts positive and negative of the sugarcane and ethanol production; the evaluation would be done using time series of different indicators (e.g., income, wealth distribution, alphabetization, demography, infra-structure) in the counties where the production takes place; (b) the same aim mentioned above, but doing the assessment based on input-output analysis (that would be applied to the smallest possible level of spatial desegregation); (c) assessment of the impacts due to the introduction of the sugarcane/ethanol activities in a new production area; (d) assessment of the working conditions in the sugarcane/ethanol production.

7 Research activities Part of the work (particularly the activities identified as (a) and (b) before) will be done by the staff of the CTBE s research group. The work related to (a) has been done in a Doctor Thesis that has a CTBE researcher as adviser (the Thesis was presented on February 2011), while the work related to (b) is being done by CTBE; The aspects to be explored in the short term (i.e., the first two years of activities) are presented below. In the case of the work that corresponds to (a), some of the questions to be answered are: 1) In counties where the sugarcane/ethanol activities are important, there are some that present better welfare indicators than the others. What are the factors that explain these differences? 2) What are the impacts of the verticalization level of the sugarcane/ethanol production (i.e., land ownership more concentrated or the opposite, i.e., larger participation of small holders as cane growers) from the point of view of these indicators? 3) What are the impacts of the diversification level of the economic activities from the point of view of the indicators (that is, in counties highly dependent of the sugarcane/ethanol production)?

8 Research activities With respect to the work related to (b), the questions to be answered by the research work are: 1) What is the reliability of the input-output matrix models used to evaluate the local socio economic impacts of the sugarcane activities? 2) Is it possible to reproduce with precision what has happened in a certain period of time (that is, what is the model accuracy)? If yes, how the models could be used to analyze the impacts of the expansion (or of the introduction) of sugarcane in a region, with the displacement of other crops? 3) What future changes in the production process could be modeled and evaluated using these models? In case the models based on the input-output matrix are judged adequate for that use, in the medium term they could be used to analyze the changes that will take place in the ethanol production path. Somehow, the results of the work related to the topics (a) and (b) could be compared. The works related to (c) and (d), as mentioned before, should be executed by CTBE s partners. The group led by Prof. Marcia Azanha Moraes (USP Piracicaba) would do the research previously mentioned in the topic (c), while a NGO would do the research presented in the topic (d). Both research projects were predicted to be developed in one year.

9 Research activities Synthesis of information Project Action Aims (synthesis) CTBE's role Partnerships Socio-economic impacts Fostering research activities in this area, advancing on the knowledge of positive/negative impacts for the population directly involved with ethanol production Advance on the assessment of the impacts of large-scale ethanol production, subsidizing public policies in order to minimize drawbacks Development of research on specific subject and fostering activities in research groups with previous background Still being discussed Availability of information Data basis should be organized in order to be publicly available Dissemination Predicted results within the period Papers should be published at high level journals Attendance at conferences and workshops The assessment that corresponds to welfare indicators at municipal level (research line that corresponds to the topic (a) in the list presented above) will be finished for the most important produce states. Evaluation, using Input-Output Analysis, of socioeconomic impacts (at the most disaggregated regional level possible) due to the expansion of bioethanol production from sugarcane in Brazil during this decade. Assessment of the impacts due to the introduction of the sugarcane/ethanol activities in a new production area. Assessment of the working conditions in the sugarcane/ethanol production. Overall analysis of the results obtained and definition of priorities regarding socioeconomic impacts for the period

10 Some results Socioeconomic impacts at regional level Study is based on Doctor Thesis of Janaína Oliveira (State University of Campinas Unicamp 2011) Indicators assessed: HDI (Human Development Index); Percentage of illiterate people; Life expectancy; Infant mortality; Poverty (% of poor people); Income inequality (Theil Index); Households with access to electricity, and Households with sanitary facilities.

11 Some results Socioeconomic impacts at regional level States studied : São Paulo, Minas Gerais, Alagoas, Pernambuco e Paraná. These states are responsible for 80% of the Brazilian sugarcane production. Comparison between Producing and non- producing municipalities; For the years 1970,1981, 1990 and 2000; Main conclusion: 2 Groups are statistically different in São Paulo state; all indicators are better for cities where agroindustry sugarcane sector is the predominant activity

12 Input-output analysis Factors of production embodied in all products and services supplied by economic system to be consumed for final demand agents (household consumption, government consumption, exports and investment). Factors of production, natural resources (among them renewable and no renewable primary energy), Labor and Capital Production chain in whole economic system Goods and services to be consumed by final demand agents (Household, Government, Exports and Investment) Input-Output Analysis computes all direct and indirect effects involved in the whole production system observed in a certain economic area during a specific period (usually one year); The necessary data are the flows of products from each of the sectors (or activities) as a producer, to each of the sectors as a purchaser; Data: Brazilian Input-Output Matrix, from National Accounting System (IBGE Brazilian Bureau of Geography and Statistics).

13 Some results Study of the sector s expansion in Northeast region Study is part of Master Thesis of Sara Herreras (The Utrecht University 2011) It was developed an inter-regional input-output model able to combine different tecnologies considering changes in agriculture phase and in industry phase to find: Changes in activities output level, GDP, employment (jobs and wages) and Imports; Areas considered in the inter-regional I/O analysis: Traditional areas (Alagoas, Pernambuco e Paraíba); Expansion areas; Rest of Brazil.

14 Some results Study of the sector s expansion in Northeast region Scenarios Included in the study Scenario BaU No productivity or Yield improvement, except for the annual increase already noticed of 0.9% (sugarcane) Inclusion of mechanization due to change in legislation. (slopes higher than 12%) Scenario A Productivity in Agriculture: Increase 7% a year, or 4% in small properties ( ). Increase 4% and 2% in Yields in Industry: 6% a decade for ethanol 3,5% a decade for sugar Scenario B Same assumptions than scenario A. PLUS: Expansion in areas with proper water availability, temperature and soil for cane cultivation.

15 Some results Study of the sector s expansion in Northeast region 1.2 million ha

16 Some results Study of the sector s expansion in Northeast region

17 Ongoing activities Socioeconomic impacts in Bambuí MG ( ) A modern distillery was recently installed in the city, producing ethanol and electricity There was no sugarcane cultivation until 2006 The previous dominants activities were livestock and other crops Bambuí has good socioeconomic indicators Considering just direct effects, sugarcane and ethanol production will double local GDP The work force in the city is not sufficient to attend labor demand by sugarcane and ethanol production We re implementing an interregional input-output model, including Bambuí region, to evaluate socioeconomic impacts in and outside the region

18 Ongoing activities Assessment of the working conditions in the sugarcane production (The study is being done by Repórter Brasil 2011 and 2012) What are the good and bad practices regarding working conditions? Work conditions and welfare indicators are connected? Comparison in sugarcane sector and among other crops (e.g., soybeans); Comparison among three selected areas in three different states: São Paulo, Alagoas and Goiás Literature review Labor conditions notices of violation analysis (journey excess, rest, contracts, payment, proper infrastructure, individual safety devices, housing, transport) Interview with workers, sector executives, social leaders

19 Integrated sustainability assessment Integrated assessment (IA) can be defined as an interdisciplinary process of combining, interpreting and communicating knowledge from diverse scientific disciplines in order to evaluate the whole cause effect chain of a problem (van der SLUIJS, 2002); As an immature field of research, Integrated Sustainability Assessment is not precisely defined theoretically, nor there are well developed, well-documented, standard methods ((BRINSMEAD, 2005); Some general methodological principles for Integrated Sustainability Assessment have begun to emerge. These principles refer to criteria for satisfactorily integrated descriptions of different aspects, broader evaluations and definition of approach strategies (BRINSMEAD, 2005).

20 Integrated sustainability assessment Project submitted to FAPESP (public foundation to foster research), in partnership with Brazilian institutions and University of Utrecht ( ) Economic shocks PAEG Model (with LUC) N BR IO BR Matrix N BR NE BR QUI BR GHG and energy balance, water resources, soil quality and biodiversity USA NE BR RGO BR EU CO BR RCO BR LUC exogenously determined by satellite images analysis ROW SE BR PPRU BR S BR PIR BR RSP BR RSE BR Socioeconomic impacts S BR

21 Integrated sustainability assessment

22 Final remarks Assessment of socioeconomic impacts due to sugarcane and ethanol production at local level Technology improvements in agriculture and in industry connection between Sustainability and Virtual Sugarcane Biorefinery Programs Two challenges Data at local level to allow the use of economic models, such as input-output and general equilibrium Develop and apply a methodology to better evaluate the interaction among the sustainability aspects - Integrated Sustainability Assessment

23 Thank you!

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