OECD and FAO Are Assumption Experts

In Current News, Ethanol by Chuck

OECD FAO Agricultural Outlook 2007The Organization for Economic Co-operation (OECD) and FAO have released their “OECD-FAO Agricultural Outlook – 2007-2016” report. It’s worth a look if you like pages and pages of assumptions. It’s already being quoted and used by the people who want to bash the development of biofuels, most especially ethanol. There’s also a background paper from their 20th meeting of the Round Table on Sustainable Development, held at the OECD on September 11-12 titled, “Biofuels – is the cure worse than the disease?” (pdf). I’m wondering who attended that concluded the following, “The conclusion must be that the potential of the current technologies of choice — ethanol and biodiesel — to deliver a major contribution to the energy demands of the transport sector without compromising food prices and the environment is very limited.”

Here’s an example of their admitting to lots of assumptions (which should be seriously questioned) in the Outlook report:

This Outlook does not analyse the developments in the biofuels sector, but treats biofuel production through implicit and exogenous assumptions in a number of countries. In particular these include the US, the EU, Canada and China, while ethanol production in Brazil is an explicit part of the sugar baseline.

The US is assumed to substantially increase its ethanol production, which predominantly is based on domestic maize. Ethanol output and corresponding maize use is assumed to grow by almost 50% in2007, and while growth rates are assumed to decline thereafter, US ethanol production is still assumed to double between 2006 and 2016 (Figure1.2). This expansion would exceed the requirements stated in the Renewable Fuel Standard (RFS) by far. In consequence, maize use for fuel production, which has doubled from2003, would increase from some 55Mt or one-fifth of maize production in 2006 to 110Mt or 32% at the end of the projection period.

Bio-diesel production, in contrast, is assumed to remain relatively limited in the US, due to lower profitability caused by high feedstock costs. Soya oil use for bio-diesel production is expected to reach 2Mt in2007 and to further increase to 2.3Mt in2011, with no growth assumed for the remaining projection years.

I had a college professor who always told us that to assume is to make an “ass” of “u” and “me.” I guess you might figure out what I think of these reports.