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New Delhi Workshop

Economic Models for Human Welfare Analysis: Applications to Crop-based Biofuels
IFPRI, New Delhi, 27-31 July 2009
Overview

While economic modeling techniques have become an increasingly important component of policy analysis in government ministries, research institutes, and in academia, formal training in particular tools has been relatively limited. However, improved capacity building in modeling techniques is an important component in enhancing the quality of decision making at a policy level and in conducting state-of-the-art academic and policy research.

This course provides intensive training in the use of different economic modeling tools, including multi-market models, in the context of biofuels production and policies. The course is motivated by the recent rapid global expansion in the demand and supply of crop-based biofuels production, which is reshaping agricultural markets by linking food prices to energy prices. Such growth in biofuels can be both alternately viewed as a beacon of hope or a message of despair for the world’s billion poor people – with little existing quantitative analysis to support either position.

The four-day course combines a review of economic theory and practical modeling approach with training in GAMS to provide participants with the basis to utilize such tools in their own research. By the end of the course, participants will be able to:

(i) understand the basics of partial-equilibrium multi-market analysis
(ii) independently develop a structure for a multi-market model;
(iii) have knowledge in data requirement for developing multi-market model;
(iv) have facility in the GAMS programming language;
(v) implement a simple multi-market model in GAMS, including the design of policy scenarios to assess market responses to and welfare impact of biofuels policies in major producing countries.

Intended participants for this course are economic researchers, graduate students, and policy analysts. A background in microeconomic theory at the undergraduate level is required. Programming experience in GAMS is not necessary, though past experience with the use of computing software and other programming languages is recommended.

Course Outline

Day 1: Global Biofuels production expansion

  • Overview of development and main issues (food prices, environment, energy, etc.)
  • Impact on the poor: opportunities and threats
  • Overview of how biofuel interactions with market models are typically covered

An introduction to multi-market models of agricultural policy
• What are multi-market models?
• How can multi-market models inform policy?
• Course outline and objectives

An introduction to partial equilibrium policy analysis
• Tools and concepts for policy analysis
• Consumer and producer surplus
• Deadweight loss

Day 2
Analysis of policy instruments (taxes, tariffs, quotas, price supports, investments, combinations)
• Single-market analysis
• Multi-market analysis
• Multi-region analysis

Development of Multi-Market Models for Agricultural Policy Analysis
• Issues in the development of a multi-market model, including data requirement and assumptions
• Structure of multi-market models
• Development and specification of a simple multi-market model of biofuels production

Day 3
An introduction to GAMS (interactive computer based exercises)
• Overview of GAMS
• Uses of GAMS
• GAMS commands and syntax
• Simple examples in GAMS (interactive)

Implementation of a Multi-Market Model in GAMS (interactive computer based exercises)
• Construction of multi-market in GAMS (interactive)
• Discussion and development of policy simulations
• Extensions to the model

Day 4
Policy Analysis with Multi-Market Models using GAMS
• Policy simulations with GAMS (interactive)
• Interpretation of results
• Possible extensions with model

An Introduction to Spatial Multi-Market Models
• Introduction to spatial multi-market models
• Contrasts with non-spatial models
• Modeling considerations in GAMS
• Review of GAMS program
• Policy Simulations

Course wrap-up: next steps

Day 5
[ for project team members working on India MM model ]
We will be discussing issues that are specific to the India country study, and model development, such as:
• Estimation and calibration of model parameters
• Household data, and how to link with model
• Key technological parameters that need to be defined
• Specific characteristics of the Indian fuel/energy market that should be modeled

Reading List

• Goletti, F. and Rich, K. 1998. “Analysis of Policy Options for Income Growth and Poverty Alleviation,” Report prepared for the USAID project on “Structure and Conduct of Major Agricultural Input and Output Markets and Response to Reforms by Rural Households in Madagascar,” Washington, D.C.: IFPRI.

• Goletti, F. and Rich, K. 1998. “Policy Simulation for Agricultural Diversification.” Report prepared for the UNDP project on “Strengthening Capacity Building for Rural Development in Viet Nam”, Washington, D.C.: IFPRI.

• Minot, N. and Goletti, F. 1998. Export Liberalization and Household Welfare: The Case of Rice in Viet Nam,” American Journal of Agricultural Economics, 80(4):738-749.

• OECD, 2006. “Agricultural Market Impacts of Future Growth in the Production of Biofuels” AGR/CA/APM(2005)24/FINAL, February 1, 2006.

• Rich, K.M. and Winter-Nelson, A. 2007. An Integrated Epidemiological-Economic Analysis of Foot and Mouth Disease: Applications to the Southern Cone of South America.” American Journal of Agricultural Economics 89 (3): 682-697.

• Roningen, V.O. 1997. “Multi-Market, Multi-Region Partial Equilibrium Modeling” In Applied Methods for Trade Policy Analysis: A Handbook, J.F. Francois and K.A. Reinert, eds. (Cambridge: Cambridge University Press), pp. 231-257.

• Rosegrant, M. Zhu, T. Msangi, S., and Sulser T. 2008. “Global Scenarios for Biofuels: Impacts and Implications,” Review of Agricultural Economics 30(3): 495–505.

• Sadoulet, E., and deJanvry, A. 1995. Quantitative Development Policy Analysis (Baltimore: Johns Hopkins University Press), chapter 11.

Modeling Forum 2008

Biofuels Meeting at Stanford University
October 2008

The 1st annual modeling forum was comprised of both our internal project discussions (Monday October 20), as well as an additional day for outside participants to discuss challenges of methodology and data in their own work, and how it intersects with our project activities (Tuesday October 21).

Objectives
  • Revisit the project timeline, near-term milestones and needed outputs in the remaining months of 2008
  • Review the progress made in global modeling work and discuss technology study/li>
  • Discuss data requirements of country-level case studies and available modeling tools/li>
  • Introduce country team members and EMBRAPA collaborators/li>
  • Discuss important linkages between agronomical and policy modeling work and progress/li>
  • Discuss calendar of activities for next several months leading up into 2009 – leading towards the IAAE conference in Beijing and Brazil visit/li>
  • Discuss other global modeling efforts of biofuels of relevance to this project, compare methodologies, and discuss opportunities for synergies and linkages./li>
Meeting Agenda

Day 1: Monday October 20th, 2008

Welcome & Workshop Opening
Scott Rozelle & Siwa Msangi

Review of Progress

Progress on Global GTAP Modeling
Yang Jun & Siwa Msangi

Progress on Linkages with IMPACT
Siwa Msangi

Country Studies

Overview of Biofuels in Senegal
Sadibou Fall

Introduction to Senegal Country Model
Joseph Cabral

Overview of Biofuels in Mozambique & Introduction to Country Model
Channing Arndt, Rafael Uaiene

Experience of Linking GTAP and country models
Jikun Huang

Discussion over:
a) Key types of linkages to include between models
b) Additional data needs
c) Linkages to micro- and household levels

Progress on Agronomic Modeling
Adam Liska

Activities within the GCEP project
David Lobell

Wrap-Up & Looking Forward

Wrap-up with agreement on timeline of activities
Scott Rozelle & Siwa Msangi

Meeting Notes: 10.20.08

Day Two: Tuesday, October 21st, 2008

Welcome and Agenda-setting for the day
Scott Rozelle

Global Biofuels Modeling Approach and Results
Yang Jun & Siwa Msangi

Evaluating the Poverty Impacts of Biofuels in Mozambique
Channing Arndt (University of Copenhagen)

Modeling Sustainable Biomass Resource Potential
Andre Faaij (Copernicus Institute)

OECD-FAO Biofuels Modeling Framework
Holger Matthey (FAO)

CARD Biofuels Modeling Framework
Simla Tokgoz (CARD-IowaU)

Biofuels Modeling in FAPRI Framework
Pat Westhoff (FAPRI)

Discussion on methodology and linkages/synergies

Insights on Biofuels and Food Security from SoFA 2008
Keith Weibe (FAO)

Roundtable discussion on Environmental/Land Use Dimensions
1. Energy and Land Use
Govinda Timilsina (World Bank)
2. Land Use in LEI-TAP
Martin Banse (LEI-Wageningen)
3. Land Use and GHG in IMAGE
Bas Eickhout (MNP)

Building Synergies and Mutual Strengthening
Scott Rozelle

Timeline/Activities for Biofuels & the Poor, Follow-up Plans
Siwa Msangi

Meeting Notes: 10.21.08

IAEE Symposium 2009

Organized Symposium, 2009 IAAE Meeting, Beijing, China
Biofuels and the Poor:
Global Impact Pathways of Biofuels on the World Food Economy

The recent rapid global expansion in the demand and supply of biofuels is shaping the world food economy in new and fundamental ways, linking food prices to energy prices and potentially re-writing the rules of rural development. Such growth in biofuels is alternately viewed as a beacon of hope or a message of despair for the world’s billion poor people – with little existing data to support either position.

Objectives

This organized symposium addressed a number of the effects of biofuels expansion on world food markets, with an emphasis on the global poor. Papers in our session made both substantive and methodological contributions. Substantively, papers in our session sought to:

  • Describe the pathways of impact between expanding biofuels production and its effects on global commodity markets, poverty, and food security, and to
  • Assess the feasibility of investing in biofuels systems in poor countries, shedding light on when and where such investments might help or hinder efforts at poverty alleviation. These papers measure the effects on households in different parts of the developing world. Different impacts were examined on different types of households.

Methodologically, these papers span the spectrum of what is available in the literature. We show the differences in our models from including (or not including) the following assumptions: using a partial equilibrium framework vs. general equilibrium trade model; allowing for the expansion of land; allowing for the use of DDG; allowing for rising oil prices; and modeling the flexibility of using ethanol in the transportation fleet in the second decade of the 21st century.

Key Questions

Indeed, in summary, using a number of different models and a number of different approaches, there were two avenues of questions to guide the proposed work.

  • How will shifts in world prices caused by changes in some of the world’s largest biofuel-producing countries affect the rest of the world? Are producers and consumers in poor countries helped or hurt by increased biofuels production in countries such as the US, EU, Brazil, India, and China?
  • What are the costs and benefits to poverty-stricken farmers and consumers in poor countries from locally produced biofuels? Where might investments in biofuels production in poor countries help alleviate poverty, and where might such investments worsen it?
Institutions and Investigators

The symposium included representatives from five teams of economists around the world—CCAP in Beijing (Jikun Huang, Yang Jun and Qiu Huanguang); the Netherlands (Martin Banse); IFPRI (Mark Rosegrant, Siwa Msangi and Wei Zhang); two teams from Purdue (Tom Hertel); and Stanford University (Scott Rozelle and Elaine Yu).

Papers and Abstracts

Biofuels and the Poor
Global Impact Pathways of Biofuels on the World Food Economy

By Jikun Huang, Jun Yang, Siwa Msangi, & Scott Rozelle

Analyzing the Global Poverty Impacts of Biofuel Mandates
By Thomas W. Hertel (Purdue University)

The Emergence of Biofuels and Poverty Linkages: Implications for China’s Agriculture
By Huanguang Qiu, Jikun Huang, and Jun Yang

Will EU biofuel policies affect global agricultural markets?
Martin Banse, Hans van Meijl, Andrzej Tabeau and Geert Woltjer
LEI – Wageningen UR, The Hague

The Impact of Biofuel Growth on Agriculture:
Why is the Range of Estimates so Wide?

Wei Zhang, Siwa Msangi, & Elaine Yu

Modeling Workshop 2009

Modeling Workshop II on Biofuels and Food Security
IFPRI Headquarters, Washington DC, USA
October 28-30, 2009

The 2nd annual modeling forum was comprised of both internal project discussions of current progress, as well as engaging outside participants to discuss challenges of methodology and data in their own work, and how it intersects with our project activities.

Objectives
  • Revisit the project timeline, near-term milestones and needed outputs in the remaining months of 2009/first half of 2010 – leading towards the final year of the project.
  • Review the progress made in global and country-level modeling work
  • Discuss the policy implications of our results so far, and further improvements need to data and modeling for country-level case studies
  • Describe progress on agronomic part of the study and discuss important linkages between agronomical and policy modeling work
  • Discuss other efforts to examine the linkages between biofuels and poverty/food security at the country-level of relevance to this project, compare methodologies, and discuss opportunities for synergy.
  • Discuss calendar of activities for next several months leading up into 2009 – leading towards the IAAE conference in Beijing and Brazil visit
Meeting Agenda

Day 1 – Wednesday October 28th, 2009

Welcome & Workshop Opening
Scott Rozelle & Siwa Msangi

Overview of modeling efforts and key areas of interest
Siwa Msangi

Progress on Global GTAP Modeling – price, poverty, land impacts
Yang Jun

Important Issues to Consider

Biofuels and Technology Issues
Carl Pray

Group Discussion
Wrap-Up & Looking Forward
Scott Rozelle & Siwa Msangi

Meeting Notes: 10.28.09

Day 2 – Thursday October 29th, 2009

Welcome and Agenda-setting for the day
Scott Rozelle

Country Studies

Evaluating the gendered impacts of biofuels in Mozambique
Rui Benfica (World Bank)

Current biofuels policy and commercial interest in Mozambique
Channing Arndt (University of Copenhagen)

Initial model results for impact of biofuels in Senegal & Discussion
Fatou Cisse (CRES, Senegal)

Overview of biofuels policy and potential in India & Discussion
S.S. Raju & P. Shinoj (NCAP, India)

Modeling framework for looking at biofuels in India & Discussion
Karl Rich (American Univ Cairo/ILRI) & P. Kumar (NCAP/IARI, India)

Overview of biofuels in China / Analysis with CAPSim/ChinAgro models /Discussion
Huanguang Qiu(CCAP/CAS, Beijing)

Other Country-level biofuels studies

Insights from FAO “Bioenergy and Food Security” (BEFS) project
Irini Maltsolglou (FAO)

Ethanol Production in India: Viability, Constraints and Hidden Costs
Kiyoshi Mino (U of Illinois, Urbana-Champaign)

Overview of Biofuels in Brazil: Technology and Policy
Geraldo Souza & Flavio Avila (EMBRAPA)

Discussion over:

  • Key points of convergence/divergence across studies
  • Common data and modeling needs/challenges
  • Linkage to micro- and household-level (poverty, gender)
  • Opportunities to work together and share knowledge

Wrap-up and Looking Forward
Scott Rozelle & Siwa Msangi

Meeting Notes: 10.29.09

Day – Friday October 30th, 2009

Estimating yield potential ceilings of major food and biofuel crops
and implications for modeling global food security

Kenneth Cassman (U of Nebraska-Lincoln)

Overview of project website and recent updates
Elaine Yu (Stanford)

Thinking about outreach activities for 2009/2010: refining our outreach and communication strategy
Scott Rozelle (Stanford) & Siwa Msangi (IFPRI)

Review of milestones
Siwa Msangi(IFPRI)

Wrap-up with agreement on timeline of activities
Scott Rozelle (Stanford)

Meeting Notes: 10.30.09