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27 November 2006

Three-day meeting also to review energy issues of Africa, least developed countries

The recent dramatic changes in world energy markets -- especially sharply higher prices for oil -- will be the subject of UNCTAD´s 2006 meeting on dynamic and new sectors of world trade.

The 29 November-1 December conference will feature experts from government, industry, academia, and non-governmental organizations. The three topics to be covered are "adjusting to the changing energy economy"; "the biofuels option"; and "special focus on energy issues in Africa and least-developed countries (LDCs)". The meeting will take place at the Palais des Nations.

Adjusting to a changing energy economy (29 November)

Oil prices have increased sharply, as has concern about the security of energy supplies. The implications for economic growth and development are potentially serious, although the new situation also offers opportunities for some developing countries because it may enable them to tap into new markets and reduce poverty.

Adjustments could prove to be difficult. Oil exporters face a difficult twin challenge to keep higher profits from unbalancing their economies and wisely use these additional earnings for diversification and higher value added activities, while a much more serious impact could be felt by oil-importing countries -- rising import bills could trigger knock-on effects that touch every sector of economic activity. Experts will discuss policy measures that may soften these blows over the short and long term, along with options for more balanced energy mixes, including more extensive use of alternative and renewable sources of energy. The increase in oil prices has improved the commercial viability of such alternative sources.

The biofuels option (30 November)

One response to the changing world energy situation has been greater use of biofuels, whether through the conversion into ethanol of traditional crops such as sugar cane or maize or through the industrial production of cellulosic ethanol. World production of ethanol from sugar cane, maize and sugar beet increased from less than 20 billion liters in 2000 to over 40 billion liters in 2005. This represents around 3% of global gasoline use. Production is forecast to almost double again by 2010. Some analysts estimate it is feasible for biofuels to make up 20% of fuels consumed worldwide by 2020.

A number of countries are gradually imposing fuel blending targets and providing subsidies and incentives to support nascent bio-fuel industries. These developments could spur a sustained worldwide demand for and supply of biofuels in coming years. This in turn may trigger a profound change in the world agricultural economy by providing an opportunity for developing countries to diversify agricultural production, raise rural incomes and improve quality of life. Biofuels may also slow down the process of global warming.

Burgeoning biofuel demand is also raising concerns, however. Previously uncultivated land with high environmental value may end up being used for energy crop production, reducing biodiversity, and there are risks that the cultivation of energy crops may have overall environmental costs that outweigh the environmental advantages of biofuels. Competing uses may mean there isn´t sufficient land for all purposes. Availability of water may constrain energy crops, and if an expanding global biofuels market drives up commodity prices, the ability of poor consumers in developing countries to buy food may be imperiled. The ability of small and local farmers to participate profitably in energy crop production may be limited. And it may be difficult for developing countries to gain access to technology, especially complex technology, related to bio-energy.

UNCTAD´s work on biofuels provides trade, economic and legal analysis to enable developing countries to capture the opportunities and avoid the risks emerging from biofuels production and use.

Special focus on energy issues in Africa and least developed countries (LDCs) (1 December)

Africa is endowed with natural energy resources, largely underexploited, that could contribute to sustainable economic growth as energy markets evolve. It is gaining importance as an oil-producing region. From 1990 to 2005, oil production rose from 6.5 to 9.3 million barrels per day -- from 9.9 % to 11.2% of world production. The sustained high prices of recent years have highlighted African´s potential as a supplier of oil, and the continent has become the focus of attention of some major oil-importing countries, most notably China. The challenge for African exporters is to capture the positive effects of high prices -- to use them for stable, sustainable, broad-based economic development. High oil prices are not an unqualified bonanza: the so-called "resource curse" -- the relative under-performance of resource rich countries -- is a major issue in Africa.

Meanwhile, energy sufficiency and security are becoming vital issues for development in Africa and in LDCs. For example, without dramatic new investments in energy resources, including alternative sources of energy, by 2030 there will be 650 million Africans living without electricity, compared with 509 million today.

UNCTAD aims to assist developing countries in setting strategies that enable the energy sector to serve as a driving force for effective development. Key policy objectives include channeling oil revenues to finance capital investments in infrastructure and basic services, while avoiding real exchange rate appreciation, and taking into account the absorption capacity of the relevant economies. UNCTAD considers the development of the energy sector as a critical component of capacity-building and poverty alleviation efforts in Africa and in LDCs.

This week´s meeting dedicated to the energy sector is UNCTAD´s third annual review of new and dynamic sectors of world trade.

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