Indirect Land Use Change: landmark test of ILUC biofuels theory finds "negligible or no effect"

 

MSU Professor Bruce Dale, a co-author of the study

Do biofuels encourage rainforest deforestation through indirect land use change? The effect is negligible or non-existent, concludes a landmark test of ILUC theory against hard data, as the biofuels hammer gets hammered.

In Michigan, Dr. Seungdo Kim and Dr. Bruce E. Dale of Michigan State University have published a study in the July 2011 issue of Biomass and Bioenergy Journal, that concludes that on indirect land use change (ILUC) due to biofuels production, domestically and internationally, is negligible or nonexistent.

Using historical data to investigate ILUC effects, Dale and Kim reported in “Indirect land use change for biofuels: Testing predictions and improving analytical methodologies” that they found no statistical evidence of the changes predicted by ILUC theory in any of the 18 world regions.

Looking at the historical data

The new study used 1990 — when the U.S. biofuels industry was very small — as its baseline and then measured crop changes against that as U.S. ethanol production grew rapidly in subsequent years. In order to test the hypotheses that ILUC had occurred, the authors searched for actual land use change in 18 regions around the world where corn and/or soybeans are produced.

Had ILUC occurred, use of crop land and arable land would have increased while the area of natural ecosystem land would have declined. Further, grain shipments from the U.S. to the other regions would decline. Finally, cropland in other regions would positively correlate with changes in harvested areas for corn and soybeans in the U.S.

“It is the first evidence-based evaluation of ILUC utilizing historic data, employing a ‘bottom-up’, data-driven, statistical approach based on individual world regions’ land use patterns and commodity grain imports,” stated Dr. Roger Conway, senior partner at Rosslyn Advisors LLC and former director of the United States Department of Agriculture’s Office of Energy Policy and New Uses.

“Unlike most other ILUC work this study relied on very few assumptions and did not attempt to quantify nor to predict ILUC effects,” commented Bruce Dale, coauthor of the study. “We searched for direct historical evidence for ILUC in relevant world areas rather than attempting to project or predict what course ILUC might take. Projecting forward can force scientists to make untestable assumptions.”

Testing and verifying models

“Prior modeling studies that relied on many assumptions have led to inflated projections for indirect land use change,” added Dr. Steffen Mueller of the Energy Resources Center at the University of Illinois at Chicago. “Some work has substituted other data, such as the price of corn, to project ILUC. Modeling is important, but all models need to be tested and verified.  These findings show that there is no substitute for using actual historic data when investigating ILUC.”

According to the authors, one interpretation of no ILUC effects is that U.S. crop intensification absorbed and exceeded new ethanol production demand. It is also possible that the effects of biofuels production expansion on ILUC may simply be negligible.  Past studies based on economic model assumptions often do not take into account new agricultural techniques that allow for greater crop yields on existing U.S. lands where biofuel corn is produced.

Because other studies based their projections on economic model assumptions rather than empirical land use data their predictions on the effects of ILUC due to increased U.S. ethanol production varied widely.

No correlation between crop prices and conversion of historic US prairie, either.

In July 2009, the Digest undertook a (far less rigorous, but similar) look at the historical data, examining the US General Land Office sales between 1869 and 1935 as a record of land use change from that period. At the time, we found no correlation between crop prices and the conversion of virgin prairie to cropland.

High crop demand, and increased prices flowing from that demand, are the theorized trigger for indirect land use change.

As we noted in our look at the historical data, “Corn prices (in 2007 dollars) were on the decline for decades while land use conversion soared. When corn prices finally took off after the turn of the century, land conversion slowed to a crawl. The same is true of soy, although the crop price data only dates back to 1913.”

Land use change flowing from low land prices, not high crop prices?

At the time, we advanced a theory that “Land use change does not flow from a rise in crop prices, but a fall in land prices,” theorizing that a rise in crop prices, without a corresponding fall in land prices, instead produces crop intensification.

“When there is an arbitrage between the cost of increasing productivity and the cost of new land, ILUC can and will occur. But that will generally be the result of falling prices. So what’s happening down Amazon way? Seems to us that land pirates are converting land illegally, on the whole – at the ultimate falling land price of zero. I doubt they are looking at timber, crop or meat prices, but rather looking out for the sheriff.

Preventing ILUC: higher land prices

“What’s happening in Africa? Swathes of land available on the cheap from national governments desperate for foreign direct investment. Result? Conversion of virgin land.

“So, what to make of all this. Option one, call me crazy. Option two, support high land prices and sound enforcement of laws banning illegal seizure of virgin land. High land prices make wealthier citizens out of small landholders all around the world, and give them more resources, borrowing power, and incentive to invest in land improvement.

“Of course, high land values flow from long-term improvements in crop prices, and that flows from adding strategies like biofuels into the mix. Biofuels are, as far as I can tell, not a creator of indirect land use change but rather a preventer, insofar as they help support crop prices.

“Does a high crop price automatically mean unaffordable food for the world’s hungry? No, and again no. High prices will encourage the investment in productivity that will restart the African Green Revolution. 30 bushels of corn per acre is an unacceptable yield in this day and age. A generation before, productivity saved Africa from the threat of starvation. The stagnation in global crop prices did much to cause the very starvation that cheap food was supposed to prevent.”