United Nations Environment Programme/ Regional Office for Europe

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COUNTRY PROJECT Presentation Jamaica Integrated
Assessment of Trade-Related Policies in the
Agriculture Sector and Biological
Diversity Geneva, 1-3 July 2008


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Objective of the assessment

• Overall objectives
• To field-test the UNEP IA manual
• To develop policy options for the future of
  Jamaicas 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
• Jamaicas 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.

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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.

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The state-owned Sugar Company of Jamaica loses
more than 1 billion a year and now has
accumulated losses of around 18 billion.
Current position

• 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

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Diagnosis

• Jamaicas sugar industry has costs of production
  that are among the highest within ACP
  countriesfactors 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

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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.

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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.

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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.)
Changes in national prices of agricultural
products
Choice of crops, extent intensity of farming
Income of farmers
Status of PAs other areas of biodiversity
importance
Rural employment
Agricultural production
Non-farming livelihoods
Poverty well-being
Area fragmentation of land in natural state
modified as agro-ecosystems
Ecosystem services Biodiversity
economic
social
environmental
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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.

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Data sources

• Key data sources
• Macroeconomic and social/poverty data from the
  Planning Institute of Jamaica, World Bank,
  Inter-American 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

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Results

• There were some unexpected findings....

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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
  bio-accumulate.
• 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 wash-water 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

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Possible future scenarios
Plan succeeds
14-16k ha (of 46k ha) of sugar cane switched to
ethanol, output doubled to 300,000 tons, add 13k
ha.

• US policies on tariff barriers and CBI continued
  post-2009
• Oil price remains high

-ve for environment
Current diversification and ethanol plan
ve or -ve for environment

• US policies on tariff barriers and CBI
  discontinued post-2009
• Oil price falls

• Other farming
• Housing
• Tourism

Plan fails
Land comes out of cane
Industry contracts, becomes competitive
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Summary of scenarios

• 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.

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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.

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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.

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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.

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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.

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The future trading relationship
The EU has committed to removing all export
subsidies from 2013, but there have been some
important changes in the post-EPA 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.
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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 Jamaicas 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
  Jamaicas 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.

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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.

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Feedback many studies, little action

• 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 wont 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.

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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
  (US38-57m). Greater potential gains in
  efficiency in mid-1980s took 3.5 barrels of
  oil to generate US100 of GDP, in real terms it
  now takes about 5 barrels of oil return to 80s
  level generates US600-900m 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.

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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.

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Main challenges

• Sensitive and difficult political environment.
• Key data hard to get, large gaps in available
  information (surprising, given number of previous
  studies).

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Main achievements to date

• Undertaking the study in a sensitive and
  difficult political environment.
• Accessing hard-to-get data.

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Thank you !