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FAO/UNEP/UN-Energy Bioenergy Decision Support Tool -
MODULE 3: Implementation and Operation
The manner in which bioenergy production is organised and the
question of who owns which resources and what they can do with
them (property rights) depends on a number of factors, such as:
• The choice of feedstocks and conversion option;
• Choice of sectors and applications and scale of operations/
• Whether the bioenergy strategy emphasises domestic and/or
export options;
• Laws on land ownership, land tenure, and land use, including
foreign ownership/investment;
Institutions governing the formation and operation of private
and public entities;
• Political/bargaining power of various stakeholder groups;
• Social and cultural norms for use of natural resources;
Consequently, the options for ownership arise from a complex
mix of factors. Where export options are involved, inevitably
large-scale operations of some type will be needed, and the scale
of bioenergy production has immediate implications for the roles
of growers and farmers in feedstock production. Professionally
managed large-scale options will may carry lower economic
risks and but may yield fewer benefts for the community; some
benefts can be maintained if production is organised in favour of
The ownership scheme is inevitably linked to the characteristics
of the conversion technology and end products. Some bioenergy
options lend themselves to large-scale production and some
degree of unifed ownership (e.g. bio-ethanol from sugarcane)
while others can be economical across different scales (e.g.
biogas, woody biomass applications). The end-use market can
impact such economies as well; ethanol production for cook
stoves (rather than transport) combined with a micro-distillery
can be economical (Practical Action, 2009) under appropriate
institutional conditions.
In evaluating the potential effects of ownership schemes (as
shown in Table 1) the scale of production and the structure of
ownership become key variables; one can distinguish three types
(and two sub-types) of ownership relations between suppliers and
purchasers of biomass:
• Scheme 1: One company or operating entity receives and
processes the biomass that has been grown on large-scale
plantations that are also owned by the company or operating
entity (vertical integration of the agricultural/forestry and
industrial sides of bioenergy production).
• Scheme 2: A partnership is established between a company
or entity that processes biomass feedstock into bioenergy
and smallholders or outgrowers; normally this constitutes
some type of contract farming in which land is purchased (or
inherited) or leased. This scheme should be distinguished by
two types, based on large-scale vs. small-scale production or
company size.
• Scheme 3: The community-based growers or small farmers
are organised into a decentralized scheme whereby biomass
feedstock is used in smaller-scale production, often coupled
to local small-scale conversion options such as generators
for off-grid power production.
Specifc questions for impacts are found in the corresponding
<Mod8: Evaluating Impacts>.
For dedicated bioenergy crops (as opposed to wastes or
residues) four broad categories of ownership schemes can be
distinguished in a stylised form for illustrative purposes, depending
on the scale of operations (large or small) and the control of the
land used for bioenergy production, namely:
• Concession scheme: A company produces feedstock on its
own land or leased land.
• Contract farming: A company (large or small) buys feedstock
from smallholders.
Table 1 illustrates this typology and Table 3 presents the main
roles of the different stakeholders involved in these schemes.
Large scale schemes (A and B) are usually aimed at national
or export markets, whereas C and D type schemes are often
associated with small-scale decentralized initiatives, aimed at
providing energy access to people in rural areas.
Contract farming refers to “a system where a central processing
or exporting unit purchases the harvests of independent farmers
and the terms of the purchase are arranged in advance through
contracts” (Baumann, 2000). The terms of the contract vary and
usually specify how much produce the contractor will buy and
what price they will pay for it. In addition to buying the product
from farmers, the contractor frequently provides them with credit,
inputs and technical advice.
Small-scale schemes (Types C and D) can often have signifcant
potential to promote rural development, especially when using
locally-produced feedstock, through:
• Wider and more on-demand availability of energy, with all
its related services for local development (for households,
communities and production purposes).
• Job creation, both directly and indirectly, and especially for
biofuel projects based on agriculture. However, this is usually
limited in the case of small-scale schemes. In the case of
large-scale schemes, it depends on the degree of mechani-
zation of production and processing.
• An alternative in terms of agricultural production, thus
contributing to income diversifcation.
• As a result of the above, increased local revenue generation.
Some of these schemes are not mutually exclusive. In fact, in the
case of sugarcane and some other crops, it is common in many
African countries that a company operates a large estate but
also has agreements with smallholders accounting for perhaps
20% of total production (Nucleus estate model). The company
provides technical support and equipment, and the farmers
agree to provide a certain quantity and quality of feedstock. The
agreements with smallholders could be based on leased land or
it could be based on ownership rights whereby the smallholder
has either purchased or has inherited the plot of land. The reliance
on smallholders saves administration costs for the company,
improves the fexibility of feedstock supply through diversifcation
and also maintains good public relations with the community
through socio-economic benefts and infrastructure (Johnson et
al, 2007).