Transcript COUNTRY PROJECT Presentation: Jamaica Integrated Assessment of Trade-Related Policies in

COUNTRY PROJECT
Presentation:
Jamaica
Integrated Assessment of Trade-Related Policies in
the Agriculture Sector and Biological Diversity
Geneva, 1-3 July 2008
Objective of the assessment
Overall objectives:
 To field-test the UNEP IA manual
 To develop policy options for the future of Jamaica’s
sugar industry
 To
enhance national capacity to assess the
environmental, social and economic impacts of changes
in policy, in particular agricultural and trade policies,
with an emphasis on the protection of biological
diversity.
The problem:
 Jamaica’s sugar industry is the largest sector of
agriculture, but internationally uncompetitive, and
therefore now threatened by the loss of trade
preferences. But there are different possible solutions.
Focus of the assessment
Focus of the project
•The social, economic and environmental costs and
benefits of the sugar industry in Jamaica before,
during and after the phasing-out of trade
preferences.
•Identifying the main possible future scenarios,
with an emphasis on identifying the implications for
biodiversity.
Current position
“The state-owned Sugar Company of
Jamaica loses more than $1 billion a
year and now has accumulated losses
of around $18 billion.”
Jamaica Gleaner 29th April 2008
For comparison:
•Total government expenditure on housing 2008/9: $17.7 billion
•Total government expenditure on health 2008/9: $21 billion
Diagnosis
“Jamaica’s sugar industry has costs of production that are
among the highest within ACP countries…factors include low
land productivity, low cane quality and high content of
extraneous matter, inefficient field and factory operations,
high transportation costs, weaknesses in administration and
management structures, low capacity utilization and
maintenance in factories, and the loss of time due to
mechanical breakdowns at the mills and interruptions of cane
supply.”
Planning Institute
of Jamaica, 2007
How did this arise?
•Trade preferences shielded industry from competition
•Government ownership meant industry used to absorb unemployment
A long tradition of industry studies

(We recommend) the substitution of other tropical
products for sugar cane.
 British Sugar Commission Report on Jamaica, 1897.

This was the first in a long series of studies and
reports on the Jamaican sugar industry, most of
whose recommendations have been largely ignored
by successive administrations.
Conceptual framework
Driving force: phase-out of trade preferences.
Economic and social impacts: loss of €24 million per annum
in f/x export earnings by 2010; cumulative total of €184
million by 2015. Closure of inefficient cane farms, loss of
employment, producer and household income, reductions
in the purchases of goods and services,
loss of
government revenue.
Changes in incentives: end of preferences, loss-making
industry; now plus rising cost of energy and food - driving
current government policy; divestment and diversification
into ethanol.
Changes in environmental impacts: largely depends on
outcome of divestment plan.
Influence diagram
Changes in international trade
agreement (tariffs & quotas)
Other national to local drivers of
change in agriculture & land use
(Policies, laws, economy, demography,
culture, infrastructure, land availability,
farm type, etc.)
Status of PAs &
other areas of
biodiversity
importance
Changes in national prices of
agricultural products
Choice of
crops, extent
& intensity of
farming
Income of
farmers
Rural
employment
Agricultural
production
Area &
fragmentation of
land in natural state
& modified as agroecosystems
Poverty &
well-being
Non-farming
livelihoods
Ecosystem
services
Biodiversity
economic
social
environmental
Methodology
Baseline for the analysis of impacts: pre
& post 1st January 2008.
The main indicators: economic (f/x
flows, aid substituted), social (poverty
and HDI), environmental (environmental
indicators, as available).
Policy scenarios: 3 scenarios developed.
Data sources
Key data sources:
 Macroeconomic and social/poverty data from the
Planning Institute of Jamaica, World Bank, InterAmerican Development Bank
 Policy documents, consultancy reports and technical
assessments from the European Commission, the
Government of Jamaica and the Caribbean Regional
Negotiating Machinery
 Elite interviews with policy-makers
 Secondary research on environmental/biodiversity
impacts
 Advisory Committee
 Stakeholder workshop
Results
There were some unexpected findings....
The cost of sugar

Discharge of plant matter and sludge/silt; the BOD affects freshwater
streams, the sediment reduces light penetration and affects spawning
grounds, mangroves, suffocates coral reefs and seagrass beds.
 Contamination of surface and groundwater by fertilizers, insecticides,
herbicides, fungicides, nematocides and ripeners, some bioaccumulate.
 Soil compaction, loss of organic matter content

Impacts from milling and processing include:
 Wastewater from three areas; the water used to wash cane (from 3 to 10
cubic metres of water is needed to wash 1 tonne of cane), the water
from the boiler house used to concentrate the sugar, and the washwater needed to clean the equipment.
 Emissions include flue gases, soot and ash, ammonia is released
during the concentration process.

But main biodiversity loss is incurred during primary clearance of land
for cultivation
Possible future scenarios
Plan succeeds
•US
policies on tariff barriers
and CBI continued post-2009
•Oil price remains high
Current
diversification and
ethanol plan
•US
policies on tariff barriers and
CBI discontinued post-2009
•Oil price falls
Plan fails
14-16k ha (of 46k ha) of
sugar cane switched to
ethanol, output doubled to
300,000 tons, add 13k ha.
-ve for environment
+ve or -ve for environment
•Other
farming
•Housing
•Tourism
Land comes out of cane
Industry contracts, becomes competitive
Summary of scenarios
1.
2.
3.
Both current diversification and ethanol project succeed. Increase
in land utilized for cane production. Environmental consequences
include increased silt discharge, but offset by contribution to
mitigating climate change. Later options include a transition into
cellulosic production, which could use high-fibre cane or coppiced
trees, thus allowing land to be reafforested.
Diversification plan does not succeed, industry collapses. Land
becomes available for other agriculture, housing, tourism or
forestry. If food prices remain high, more land into agriculture. If
food prices fall, part of the land abandoned and reverts to scrub.
Reduction in EU subsidies forces inefficient farmers out of sugar,
but efficient producers modernize, mechanize, acquire land and
expand production. Sugar industry becomes competitive.
Scenario 1: outcomes and impacts
Scenario 1: Divestment and ethanol plans succeed.
 Economic impact: Positive. End of domestic subsidies,
reduction in import costs.
 Social impact: Low skilled jobs lost (inevitable), more
jobs created, overall positive.
 Environmental impact: Negative locally; expansion of
industry impacts inland & coastal waters and reefs.
Small positive contribution globally, tiny mitigation
of climate change.
 Biodiversity and associated ecosystem services:
locally negative.
Scenario 2: outcomes and impacts
Scenario 2: the plans fail
 Economic impact: negative, loss of f/x
 Social impact: negative, rise in unemployment, 10%
of 30,000 = 3,000 unemployable.
 Environmental impact: land available for other
uses, some reverts to scrub, impact depends on
outcome, but no primary intrusion.
 Biodiversity and associated ecosystem services:
reduced impact on inland waterways, coastal
waters and reefs.
Scenario 3: outcomes and impacts
Scenario 3: industry becomes smaller and competitive.
 Economic impact: positive, no further domestic
subsidy or use of aid.
 Social impact: rise in unemployment; labour would be
shed from the high-cost (public) estates.
 Environmental impact: positive; concentration of
production on most efficient estates would allow
some land to be diverted to other uses with lower
environmental impact.
 Biodiversity and associated ecosystem services:
positive, for same reasons.
Stakeholder assessment of impacts
Economic: f/x down, but by relatively modest amount, and largely
offset by increased development assistance. Projected loss of
€24 million p.a. by 2010 is just ~1.5% of revenue from tourism.
Social: minor. rhetoric implies the closure will lead to large-scale
layoffs of unskilled field-hands. But less than 10% of industry
employees are field workers, so relatively few unemployable
elsewhere, fate depends more on general economy.
Distribution of impact: rhetoric implies small farmers will be driven
out. But some small farms more efficient than large.
Environmental: could be positive or negative, depends on whether
divestment and ethanol plans succeed. Maximum expected
increase (13k ha) to 300k tons is still less than peak (500k tons)
Trade: industry given quota-free, duty-free access to EU markets,
reasonably satisfied.
The future trading relationship
The EU has committed to removing all export subsidies from
2013, but there have been some important changes in the postEPA discussions. The EU will be significantly increasing the
development funding to Jamaica and the Caribbean.
Under the former regime, Jamaica had two important
advantages; a quota (a tonnage that the EU was committed to
buy) and preferential prices, which were sometimes as much as
three times the world market price. Under the new regime,
Jamaica has quota-free and duty-free access to the EU market.
This still gives Jamaica an advantage, as non-ACP countries will
have to pay duty, but Jamaica will now have to supply at
competitive prices. It is for Jamaica to decide if they wish to
take advantage of these market access arrangements.
So the key now is the new competitive landscape, i.e. who else will
have duty free access for the exportation of sugar to the EU.
Environment
Farming that requires significant irrigation may be less
sustainable than rain-fed agriculture, as water supply can be
problematic in islands. Only 1/3rd of Jamaica’s cane production is
irrigated, 2/3rd is not irrigated, there are only a few alternatives
that can be grown in these areas without irrigation, so cane may
be more sustainable than some possible alternative crops that
would require irrigation.
Sugar cane production requires much less pesticide than e.g.
wheat, corn, cassava.
Sugar was introduced to Jamaica in 1493; Jamaica’s sugar
industry is not a driver of deforestation.
There is as much cultivatable idle land as there are lands in sugar
production, so there could be an increase in food production or
forestry without reducing the amount of land which is allocated to
sugar production.
Energy
Sugar farmers are specialized, and reluctant to diversify.
And farmers will not make any change unless they can
maintain their incomes. However, income from sugar cane
production could be increased by 30% by switching from
raw sugar to ethanol production at current prices for both
products. And it might not be necessary to change the
current cane varieties.
There are concerns in Europe about the use of banned or
potentially hazardous substances such as MTBE; ethanol is
therefore a preferable octane booster.
If there is an evolution in future from sugar to cellulose
industry could switch from high sugar to high fibre cane,
and use some of the same equipment and plant.
Feedback: many studies, little action
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Positive
Political leaders are sometimes incompetent, partisan or irrational;
there is a clear need for relevant research to inform decisions.
If there is no system of assessing the assessment then we won’t
learn. The process should be continuous. It is important that the
lessons learnt are incorporated in the next round of assessment.
It is crucial to clearly identify the overall policy goal, is it primarily
economic or are there other non-economic factors?
It is important to decide what we want to do, and not just let these
decisions be made for us.
Negative
Major decisions about the privatization of the industry must be
taken soon; these will be taken with no input from this study.
The EU is currently sponsoring (yet) another concurrent study to
assist the industry in making decisions. So there is an obvious
need to coordinate the various different initiatives.
Policy recommendations
1) Continue attempt to divest industry.
Reason: public ownership has been a disaster for the industry.
2) Energy crops possible alternative - but would only result in small
reduction of oil imports.
Reason: road transport = 19% of energy demand, ethanol replaces 10%,
10% of 19% = 1.9% (US$38-57m). Greater potential gains in
efficiency – in mid-1980’s took 3.5 barrels of oil to generate US$100
of GDP, in real terms; it now takes about 5 barrels of oil; return to
80’s level generates US$600-900m in savings.
3) Undertake technology foresight study.
Reason: biofuel technologies are evolving rapidly; algal or GMO bacterial
biofuel might represent radically superior technologies in future.
Local ethanol industry not expected to be competitive until 2030, so
timeframe is important.
4) Land-use decisions should take account of environmental impacts,
especially forestry and water.
Reason: Jamaica has high % degraded forest, water key issue on islands.
Next steps
Write penultimate draft of report and
recommendations by end August 2008.
 Circulate to advisory group and stakeholder
group, UNEP and project network in
September 2008.
 Write final report by end October 2008.

Main challenges
Sensitive
and
difficult
political
environment.
 Key data hard to get, large gaps in
available information (surprising, given
number of previous studies).

Main achievements to date
 Undertaking
the study in a
sensitive and difficult political
environment.
 Accessing hard-to-get data.
Thank you !