________________________________________________________________________________ Key messages on “How to design, implement and replicate sustainable small-scale livelihood-oriented bioenergy initiatives, based on the Technical Consultation held in FAO, Rome, 28-29 October 2009 1. Some facts and figures on rural energy situation in developing countries are daunting and show that something has to be done about it. Three billion people rely on unsustainable biomass-based energy resources (UNDP/WHO 2009 1) and 1.6 billion people), mostly rural poor lack access to electricity (IEA 2002 2). This situation entrenches mass scale poverty and perpetuates the unsustainable use of traditional solid biomass (wood, charcoal, agricultural residues and animal waste), in particular for essential cooking and heating energy services. Two million people die every year due to indoor burning of solid fuels in unventilated kitchens . Some 44 percent of these deaths are children; and among adult deaths, 60 percent are women (UNDP/WHO 2009 3) .This makes indoor air pollution the fourth leading cause of premature death in developing countries. National policies and programs aimed at providing broader access to energy services for the rural poor will significantly contribute to sustainable development and achievement of the Millennium Development Goals . This can be significantly supported and partially achieved through the design and implementation of livelihood-oriented, gender sensitive small-scale bioenergy schemes, adapted to local conditions. 1 UNDP/WHO 2009 report, The Energy Access Situation in Developing Countries, A Review Focusing on the Least Developed Countries and Sub-Saharan Africa, http://www.undp.org/energy. 2 IEA 2002. World Energy Outlook. Chapter 13. Energy and Poverty. http://www.iea.org/weo/database_electricity/WEO2002-Chapter%2013.pdf 3 UNDP/WHO 2009 report, The Energy Access Situation in Developing Countries, A Review Focusing on the Least Developed Countries and Sub-Saharan Africa, http://www.undp.org/energy. 1 2. Experience and studies show that small scale bioenergy can really improve the livelihoods of rural people in a sustainable way and with limited risks. Box 1: What do we mean by “small-scale”? Small-scale bioenergy should not focus on the geographical scale of the bioenergy system or the scale of production. Rather it should be defined by two other criteria, i.e. • small-scale farmers are adequately involved in decisions and benefits along the value chain, and • rural communities benefit from the bioenergy development initiative This definition allows for the inclusion of co-operatives and outgrower schemes, whereby small-scale farmers supply the feedstock to a large processing plant, thereby reducing risks of land losses and guaranteeing an additional source of revenues to local farmers. Another advantage of this broader scope is that collective action by a large number of small farmers can deliver big results. So “Small Scale” does not always mean “small impact”. Recent studies on small scale bioenergy development schemes by UN agencies e.g. UNDESA, UNEP, FAO 4, and experience from other organizations like SNV, Practical Action, GVEP-I and FACT Foundation, show that, with the right design and support, Sustainable Small-Scale Livelihood-oriented Bioenergy (SSLB) initiatives can provide improved access to sustainable and affordable energy services and enhance livelihoods for rural people and resilience to climate change, without negative impact on food production and the environment. Appropriately developed and affordable small-scale bioenergy can increase local people’s resilience – hence adaptation to climate change - by reducing their dependence on external and expensive fuel, and through raising rural income by providing new value chains for agricultural products. On the other hand, they also limit the use of firewood and traditional stoves, thereby contributing to food security, improved health and climate change mitigation (examples include use of ethanol or biogas cook stoves and biodiesel to propel food processing units or water pumps). Therefore small scale bioenergy can contribute significantly to climate change mitigation and adaptation as well as to food security and poverty reduction with limited risks compared to other types of bioenergy development schemes. Several recent reports have emphasised the need to promote the use of bioenergy for poverty reduction. Examples include the recent report by the German Advisory Council on Global Change (WBGU) on "Future Bioenergy and Sustainable Land Use" 5 and USAID-Asia report on “Biofuels in Asia - An analysis of sustainability options” 6 4 See for instance a recent study on ”Small-scale bioenergy initiatives: Brief description and preliminary lessons on livelihood impacts from case studies in Asia, Latin America and Africa” - available at http://www.fao.org/docrep/011/aj991e/aj991e00.htm 5 German Advisory Council on Global Change (WBGU) 2009 "Future Bioenergy and Sustainable Land - Earthscan – available here http://www.wbgu.de/wbgu_jg2008_en.pdf 6 USAID-Asia 2009 Biofuels in Asia- An analysis of sustainability options – May 2009 – Available here http://www.cleanenergyasia.net/upload/resources/file/file_510.pdf 2 3. However developing and replicating SSLB initiatives is easier said than done. Despite promising examples, many challenges lie ahead to scale up SSLB in order to reach significant impact. But many of these challenges are similar to those of other commodity chains, for which significant experience on how to address them already exists. The Technical Consultation on sustainable small-scale livelihood-oriented bioenergy (SSLB) held by FAO in October 2009 identified a series of success and constraining factors regarding the implementation and replication of SSLB initiatives. The main lessons drawn from these factors can be summarised as follows: (i) SSLB should not be considered in isolation, but rather as part of sustainable livelihood and rural development strategies . This integration of bioenergy in a broader perspective has many advantages, i.e. • In particular it is more likely to foster virtuous circles between household and productive uses of bioenergy. In that way, it better grasps the role of sustainable energy supply in the achievement of most of the MDGs, and climate change adaptation and mitigation. • It ensures that the issue of competitive use of biomass for energy and other key local needs such as animal feed, soil management and/or construction material is given appropriate consideration. • It favours the use of by-products in line with a ‘zero waste approach’. This brings about advantages in terms of energy efficiency, GHG emissions, income generation opportunities, and reduction of energy-food competition through more integrated food-energy systems. • It ensures that comparison between different renewable energy options is carried out as part of the local decision-making process. • It might allow for the use of perhaps more attractive entry points – in terms of external support – for SSLB, such as sanitary purposes of biogas promotion. • It forces consideration of the impacts of SSLB initiatives outside the initiative itself and its players - for instance the food security and other indirect impacts of the SSLB operation impacts on people and natural resources outside its coverage. (ii) Get the financial mechanisms right. While profit-making/entrepreneurial character is an essential ingredient of success and sustainability, some financial incentives for SSLB (donor grants, tax breaks, government subsidies, etc) are often needed in the early phases, while subsidies to conventional energy sources need to be reviewed. Grant funding will never be sufficient to cover the programmatic and capital investment costs of achieving universal access to clean energy services in low income countries. For this reason, organisations involved in small enterprise support programs must themselves have a business model that is financially viable, and can be scaled up using as much local capital and local capacities as possible. But finding the right balance at the right time between grants and profit-making business is especially crucial and complex when dealing with the rural poor. A commonly accepted concept in the rural energy sector is that subsidies should be transparent, linked to the economic development they are supposed to promote, and include an 3 exit strategy. More details on the role of subsidies, drawn from the technical consultation and recent studies, are summarised in Box 2. Box 2: The balancing act regarding the role of subsidies in SSLB initiatives Effective subsidy-type incentives should have the following features (ESMAP, 2005): • If incentives are intended to increase energy access for poor households, they should be carefully targeted so that they are efficient and effective. An example is the so called lifeline rate, whereby a subsidised rate is offered to households for a “subsistence” level of consumption, for example up to 50 kWh per month or a few kilograms of fuel. • Subsidies should be suitably long-term and predictable to provide the intended incentive, but with a sunset clause which phases them out and encourages developers to continue to advance the technology until it is cost competitive with conventional alternatives without subsidies. • Incentives should not impose a fiscal obligation that is likely to compromise the financial stability of the responsible agency. Incentives must not be so large as to be a serious drain