Speech at the Lecture on New Scarcities, VU University Amsterdam

Toespraak | 30-10-2007

Ladies and gentlemen,

Society today is constantly faced with different forms of scarcity - not just economic, but also social and ecological scarcity. In economics, scarcity is linked to the nature of the commodity. For example, biodiversity and climate are regarded as public goods and land and water resources as semi-public. On the other hand, food and fuels may be regarded as private resources, which are subject to market forces. In a perfect market supply and demand are balanced. However, markets are not always perfect, and governments sometimes have to intervene and regulate.

As we are faced with these scarcities it becomes more evident that economic, social and ecological scarcities are interconnected, and interact with each other. The theme of 'competing claims' refers to the claims that different, competing uses make on both private and public resources.

We are well aware of this interaction at the Ministry of Agriculture, Nature and Food Quality (LNV). Since the creation of the Ministry in its current form our dilemma has been to find a balance between agriculture and nature. And between non-agricultural land uses such as urbanisation and infrastructure on one hand and green functions such as landscape and recreation on the other. As Minister of Agriculture, Nature and Food Quality, I am continually faced with this kind of dilemma, at both national and international level.

This evening I want to focus on three LNV policy areas where various developments, particularly in the international context, are challenging agriculture and society to find a new balance between social, economic and ecological interests.

I will now consider these issues with regard to food, biofuels and biodiversity.

Food
Over 800 million people in the world are structurally food insecure. Of these, 60% live in South East Asia and Sub Saharan Africa. And things are not really improving. Indeed, despite huge investment, we have been unable to counteract the problem. In fact things have got worse. The number of people in Sub Saharan Africa classed as 'food insecure' rose from 125 million in 1980 to 200 million in 2005.

Ladies and gentlemen,

If the inputs for food production were distributed evenly throughout the world, these would be less severe. Farmers would be able to grow enough food, and deliver it to where it was needed. In terms of grain, this would require just a 2 - 5% increase in current world production. It would certainly be possible to achieve the UN's first millennium goal, to eradicate extreme hunger in the world by 2015. But this is not a perfect world. It is a stubborn problem and there are no simple solutions. Hunger is often found where people are marginalised, as a result of poverty and war, disasters and poor governance. Only structural developments of sufficient impact can offer any relief. However, there are some rays of light. In recent years there have been great improvements in the food security situation in Asia and Latin America, thanks to all-round economic growth in these regions. Agriculture has also contributed to this social and economic development and shows that investing substantially (10 - 15%) in the primary sector pays off. Unfortunately Africa is lagging behind in this respect. Despite the fact that 65% of the working population is engaged in agriculture and related activities, only 4% of the budget is spent in the sector.

As the world population has increased from 2.5 billion in 1950 to over 6.5 billion today, the area of irrigated agricultural land has doubled and water withdrawals have tripled. World food production has outstripped the enormous growth in population. In just 40 years the average grain yield has doubled from 1.4 to 2.8 tonnes per hectare. New crop varieties, fertilizers and other quality inputs have boosted agricultural productivity: it has been a 'green revolution'.

The green revolution seems to have had the desired effect in its time. However, the cost of inputs, such as seed and fertiliser, is rising, and there is little scope to increase the area of land or the amount of fresh water available for agriculture. As a result we still cannot be sure we will be able to feed the projected population of 9 billion in 2050. Looking to the future, there is once again a real need to invest in agriculture.

And when I talk about investment, I don't mean investment in machinery or new irrigation systems. If we want to find effective solutions to the problem of food scarcity, we need to find many more innovative solutions in relation to production. We need to be intelligent here. To make agricultural production sustainable we have to invest in management, knowledge and human capacity. Such solutions do not just appear out of thin air. They require significant investment. Local agriculture and local conditions will determine the best mix of investment, policy and research. It is a matter of improving productivity, facilitating chain development (from growing to processing to sale), stimulating local and regional markets and improving access to the international markets. We have to design a global policy and create an economic environment to allow this new strategy to be brought into practice.

In its recent World Development Report, the World Bank supported this view and called for joint action by the public and private sectors. This report, called "Agriculture for Development", clearly indicates that agriculture is vital for development, and what we need to achieve is a smallholder-based productivity revolution for Africa, in order to trigger growth.
The report also calls for greater investment in agriculture in developing countries, and warns that, if the goals of halving extreme poverty and hunger by 2015 are to be realised, the agriculture sector must be placed at the centre of the development agenda.

The re-discovery of agriculture as a main driver of economic development is very important, especially for developing countries. Allocating development funds and other resources to agriculture, even at local level, can have a huge impact on relieving poverty and hunger.

The Minister for Development Cooperation, Mr Koenders, and I recognize this necessity and this challenge. Innovative agriculture is regarded as an important driving force for rural development. The Dutch government will therefore reinforce its investment in applied agricultural research and in education programmes in developing countries.

For example, in providing assistance for the establishment of innovation centres and advisory services. Or contributing to research into smart solutions, green (gene) technology, better use of the plant properties that enable them to grow under difficult conditions. And encouraging more careful use of phosphates - essential building blocks for plants - to counter the impending phosphate shortage. We can also engage in non-technological cooperation, for example in WSSD (World Summit on Sustainable Development) partnerships, where we work with companies, NGOs and the governments of partner countries on market access, by introducing sustainable forms of agricultural chain management.

We also need investment by business in both local producer holdings and the processing industries (SMEs). Foreign Direct Investments and micro-credits could play an important role. There may be a role for Dutch companies in joint ventures. And there is also a role for the governments of the countries concerned, particularly when it comes to commitment to good governance and infrastructure.

However, what will happen if the cultivation of fuel crops has to compete with food production in developing countries? The impact of the potential competition between food and fuels is still unresolved. There is concern that unbridled, worldwide demand for biomass to generate energy could threaten the process of sustainable development. It will take a great concerted effort from all the players involved to amalgamate production for food and production for energy. In any case it can only be done on the basis of sustainable and chain-based agriculture.

In this context, let me take a closer look at a relatively new LNV policy area: biofuels. Part of the world is dependent on oil, or as Al Gore says, addicted to it. It is the same part that is largely responsible for CO2 emissions and that contributes to climate change. Certain regions in the world are already experiencing many negative effects of climate change. Rising sea levels endanger alluvial areas around the world. These deltas are often densely populated and the fertility of the soil makes them indispensable for food production.
The increasing scarcity of fossil fuels also affects our economic prospects. Furthermore we are confronted with the impact of CO2 emissions on our planet. In the Netherlands we have recognized this problem. The Dutch government is committed to making the Netherlands less dependent on fossil fuels and to reducing the emissions. Amongst other initiatives it is our vision is to encourage the intelligent use of biomass. Intelligent use of biomass means a co-production of foods and non foods. Non-food production is not only for biofuels. As a government we are also in favour of the use of biomass for chemicals and materials currently based on fossil feedstock. Further scientific research is required and industry will be encouraged to convert from fossil-based to bio-based production.

The Dutch government is also looking at wind and solar power and other forms of renewable energy. We need to use them all to counter climate change. The objective must be to produce biomass in a cost effective way somewhere in the world. It doesn't have to be in Europe. I will work with Ministers Cramer and Koenders on projects to assist developing countries in the production of sustainable biomass.

The question is, to what extent will structural agricultural feedstock prices increase as a result of the additional demand on the feedstock market?

Leading research bodies like FAO-OECD and the Dutch Agricultural Economics Research Institute have studied the economic impact of biofuels on agricultural markets. Most studies indicated that the long-term effects on agricultural product prices will be relatively small. The conclusion is that other effects - like economic development in Asia and other regions - will have a much larger impact on the agricultural feedstock market. In the long run most studies forecast low real price increases. In real terms, agricultural prices on the world market have been stable, or even decreasing, for decades. Only 0.2 % of the CAP budget goes into support for fuel crops on set-aside land. And intervening on the demand side of the market, by making the admixture of biofuels compulsory, means governments need not engage in enhancing supply: that is primarily the responsibility the market. In our opinion Europe must not become a fortress to protect its own farmers from imports of SUSTAINABLE biomass, especially from developing countries.

The Dutch government is in favour of implementing sustainability criteria for biomass. We made proposals for these criteria to the European Commission through the project group 'Sustainable production of biomass', headed by my collegue Mrs Cramer, in her previous capacity. I would especially mention the added value in terms of reduced CO2 emissions, and the prevention of negative impacts on biodiversity and food security. Sustainability is not only an issue for the Dutch.

The US also underlines the importance of sustainability. Robert Zoellick - until recently the US lead negotiator in WTO - referring to sustainability, talked about "an inclusive and sustainable globalization" - to overcome poverty, enhance growth with care for the environment, and create individual opportunity and hope." This approach will in time impact on the concept of 'like products', that has been at the basis of most WTO jurisprudence until now.

The demand for biomass and the development of biofuels present opportunities to the developing countries. Thirty-eight of the 47 poorest countries are net importers of oil. It is estimated that some countries spend six times as much on oil as on health. In this light, the development of biofuels can offer an opportunity to developing countries. We can already see some of the results. For example, in 2006, Senegal and 12 other African countries set up the Pan-African Non-Petroleum Producers Association.
And on a smaller scale: a Dutch business has been working with an NGO in Mali since 1999 to promote Jatropha as a raw material for bio energy. This development offers a chance to break the dependence on oil and develop the rural economy. Another example is the proposed cooperation, supported by the Netherlands, between Brazil and Mozambique in producing bio-ethanol from sugar cane in the African region.

So there are opportunities. But when we consider the future use of biofuels, we have to make sure that they come from sustainable sources.

Ultimately the impact of biofuels on impoverished people will vary from country to country, and it will be different in urban and rural areas. Of course, the quantity of biomass available in the world is also a factor. In the coming years we need to look at how far fossil fuels can be replaced by sustainably produced biomass. I do want to stress here that biomass is not the only option. To achieve sustainability we need to make full and intelligent use of available resources, waste and residual flows.

Fermented organic waste, for example, could be used as an alternative to first generation biomass.

And now, Ladies and Gentlemen, I come to the third LNV policy area: biodiversity
Biodiversity is important for the three Ps - people, planet and profit. We need biodiversity for all three. We also need ecosystems and the benefits they provide. However biodiversity is under heavy pressure from those same people, and the profit we hope to generate.

The Millennium Ecosystem Assessment, drawn up by 1,300 researchers from 2001-2005, makes it very clear: never in the history of humanity have species and habitats declined as much as in the last 50 years. And that decline continues. We use our ecosystems so intensely that we now have a scarcity. Our own actions have placed so much pressure on the planet and its natural functions, that there is a real danger that ecosystems will not be able to address the needs of future generations. In this sense there is already a scarcity of biodiversity.

The scarcity of biodiversity is not only due to human activity: it is also linked to the way we have dealt with biodiversity around the world, without sound economic foundation. We do not generally have to pay for the services we get from biodiversity, and the gifts that nature gives us (clean air, raw materials, food, cultivation, recreation, pollination). It is therefore remarkable that we are not used to paying for something that is so important for all of us, and that we have simply taken it for granted.

As yet there is very little in place to counter-balance certain human activities to cancel out the negative effects on biodiversity. Therefore it would be useful to develop better mechanisms to compensate for the impact of our activities on biodiversity.

We have often failed to apply the precautionary principle to our use of biodiversity. We have not counted the costs associated with loss of biodiversity. And of course the costs are not just economic. Biodiversity satisfies many different requirements, including quality of life and a good living environment. Our cultural, social and religious values are also affected by the loss of biodiversity.

My policy therefore aims to improve the sustainability of international raw material chains; to create ways of paying for biodiversity, partly by means of compensation mechanisms, and to reduce the impact that our country has on biodiversity in other countries.
But a country like ours cannot achieve these goals on its own. International cooperation is essential, to support developing countries with a rich biodiversity and to strive for sustainable land use and management, and sustainable development. It is also vital to raise awareness among the business community and the wider public. I will do my best to gain national and international support for this approach.

Conclusion
I hope I have given you some insight into the dilemmas and challenges facing us concerning the desirable and necessary development of agriculture. In relation to the problems of scarcity, too, it all comes down to sustainability.

We must show that we can be good stewards, and accept responsibility for future generations. We must take a sustainable approach to biodiversity, both in use and conservation. We cannot continue to compromise biodiversity, while its many benefits are so vital to us. We have to realise that we cannot sustain socio-economic development at the expense of biodiversity and natural resources, which are the very basis of our existence.

We now finally understand that what we invest in agriculture, food, and biofuels also has a cost in terms of biodiversity, and that that is often seen as an obstacle to economic growth. We have to find a way to disengage our claim on biodiversity from the economic development that we also keenly desire. This requires sustainable agriculture, not just in the Netherlands or Europe, but on a world scale. And this in turn requires many different types of agriculture, suited to local conditions and capable of satisfying local and regional demand and local requirements.

Much needs to be done. We need investment, innovation and policy change, and the government must take the lead. We see this as an important task for the coming years. But we cannot do it alone: it's a matter of all hands on deck. Everyone must do what they can. Our success will require the cooperation of all responsible partners in society, including the academic community.