The second Green Revolution 2 comments

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The original Green Revolution was the increase in food production stemming from the improved strains of wheat, rice, maize and other cereals in the 1960s created by technologists, which increased the crop yield in underdeveloped countries across the world and prevented large scale famine. Biotech created the first Green Revolution; it looks like the search for energy will fuel the second.

It is ironic that the age of agriculture was supplanted by the Industrial Revolution, but now we have gone full circle and gone back to agriculture to further sustain our advanced industrial society. I have talked before on alternatives to oil and gas --- nuclear power and natural gas --- but these are only viable substitutes from the point of power generation. The other main use of oil is as transportation fuel, and this is where the hottest topic of the day emerges --- biofuels.

There are two main forms of biofuels --- biodiesel and bio-ethanol. The former is obtained by mixing natural oils (eg. palm oil, jatropha oil) into normal gasoline, while the latter involves deriving ethanol from crops like corn, soybean, sugar-cane. Both types are apparently able to operate in existing car engines. Most major countries have started to go into development of biofuels big-time, with the US and China having big government drives and feisty targets to have a proportion of their vehicles run on ethanol in a matter of several years, while some countries, in particular Brazil, already predominantly run on ethanol-powered vehicles.

My point is not so much on the downstream impact of these biofuels but rather, on the upstream. Given the sudden jump in demand for certain crops which can be harnessed for biofuels, there is true potential for them to become cash crops, or "energy" crops. Yet these have hitherto been food crops, and to divert them for energy will be to deprive the masses of food. Many, including energy experts themselves, have hence found a compelling moral argument against biofuels.

Cellusoic ethanol, which basically can utilise many kinds of natural fibre as feedstock, is still under research, yet most people and governments are unwilling to give up the biofuel alternative. The answer, then, must be a drastic increase in supply of these crops so that their food function will not be compromised. The high prices of agricultural products like palm oil, corn, downstream industrial ethanol etc will send the signal to the private sector eg. Archer Daniels Midland, to undertake investment. On the governmental sector, suddenly agriculture might become part of a strategic industry --- energy.

There is an additional incentive for new emerging powers like China and India to grow their agricultural sector. These two countries are predominantly rural (probably 70-80%) with urban development confined to a few metropolises, and hence have to develop a strong rural agenda to reduce social inequality and alleviate social tensions. Sustainable development is the main agenda of the Chinese government for the next few years, and that includes both the environmental and the social aspects. Energy cash crops might just provide one of the main channels for these countries to direct their rural development plans and to undertake massive modernisation. Indeed, it may not be far-fetched to project in the future that their rural economy might just become a competitive strength, if biofuels enter the mainstream alternative fuel market.

The US has recently announced a massive push for ethanol fuel substitutes (including research on cellusoic ethanol) while China has some ongoing programs for soybean zones in the Northeast (Celestial) and is expected to issue licences for bioethanol production (something that China Sun has been perpetually linked to). In India, the government is less involved but Reliance Group, the private sector behemoth, is embarking on a "second green revolution" (hence my title) in biofuels, through R&D as well as bringing the biomass energy generation concept to the rural areas: it is one of Reliance's three main drives for the future. Nearer to us, Malaysia is already refocusing the use of palm oil to the production of biodiesel to cater for the huge demands from European countries, and has encouraged the building of biodiesel plants. From 2007, all diesel sold in Malaysia must contain 5% palm oil.

It is not difficult to observe that the excitement seems as euphoric as a stock market at its peak, and things might just fall over a cliff suddenly (especially if oil prices suddenly dip). However, the clear trend is that agricultural productivity will become a key buzzword, in view of the new demand drivers for (certain) agricultural crops plus the current limited supply capacity (leading to the abovestated moral argument of food crop-energy crop substitution). Key beneficiaries? Agricultural machinery and tools manufacturers, agricultural technology providers, logistics services providers (logistics is part of productivity). It may sound a cliche, but the big beneficiaries of the 19th century gold rush in California were the pick and shovel providers.

References:
(1) Newsweek article 17 July 06: Bigger, Faster, Better
(2) Ethanol market.com
(3) Wikipedia article: Palm oil