EEP101_lecture21biotech - EEP 101­CONTAINMENT OF RISKS EEP...

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Unformatted text preview: EEP 101­CONTAINMENT OF RISKS EEP 101­CONTAINMENT OF RISKS &THE EVOLUTION OF BIOTECHNOLOGY David Zilberman State of ag biotechnology State The cup is half full=High adoption rates The in major crops in U.s. Argentina,China in Half empty practical ban in Europe &Japan Restrictions slowed adoption and product development development Under-development of technology in minor Under-development crops& developing countries crops& Concern about risk major reason for resistance resistance Presumed Points of Failure Presumed 1. Productivity: Biotechnology aims to solve problems of Biotechnology the North; will not make a difference in the South. the 1. Access: Biotechnology is controlled by corporations; Biotechnology will not be accessible on feasible terms to poor peasants. peasants. 1. Risks: Damage to environment and human health, Damage contamination of native genetic materials, and loss of crop biodiversity crop Impacts of ag bio tech on productivity productivity Ag biotech was developed in the north, with Ag application to crop and varieties of developed countries developed It mostly served to reduce pesticides use It and improve profitability. and Is the first generation of biotech appropriate Is to developing countries to -will it increase yields? How will it affect crop biodiversity? Ag biotech and development development We will address these issues here Theory: Impacts of ag biotechnology vary biotechnology The impacts of ag biotechnology on yield depends on The where it is applied How it is applied What was used before The management of the crop before and with biotech The depend on depend socio economic situations and socio institutional arrangement associate with biotechnology institutional Two important factor The extent of use of chemicals The varieties that are being modified Productivity: Yield-Increasing Potential Productivity: Yield = potential output x (1 - damage) Yield damage = f (pest, pest control) (pest, Combination of high pest pressure and minimal Combination existing use of pest control potential for yieldincreasing effect Attractive features of pest-control agricultural Attractive biotechnologies biotechnologies Simplicity of use Reduction in use of chemicals or labor Expansion of weather conditions where crop grow Adoption of GMO may entail a switch from local Adoption variety to generic variety variety This switch may reduce yields Technology, variety changes and yield effect yield ∆Y = Y potential Generic (1 - DamgBiotech ) - Y potential Local vaariety (1 - Damgno biotecg ) Yield gain =Reduction of pest damage of Yield generic variety generic - Difference in net yield between traditional and Difference generic generic Example 1 Example Potential yield local variety =4 ton/ hectare Potential Yield generic variety 3 tons/ hectare Damage 50% Bt reduce damage by 100% Yield effect of modified local variety 4 - 4*(1 - .5) = 2 Yield effect of generic variety 3 -2 =1 Productivity: Evidence for Bt Cotton Gains Productivity: Bt cotton in: United States: yield effect 0 – 15% China: yield effect 10% China: South Africa: yield effect 20%-40% India: yield effect 60 – 80 % In every country have reduction in chemical usage Field trials in 2001-2 has yield effect of 80% Field Some Indian Stories Some with generic variety and 87% with local GMV with Pesticides use decline by 70% No wonder yield loss can be 60% In 2002-3 when actual cotton was planted yield In effect was between -10%-30% effect Law pest pressure Law In some locations a wrong variety was introduced The yield gain in 2003-4 was higher-higher pet The damage damage Robin hood and GMV Robin In Gujjarat a local breeder introduced illegally In Bt cotton with spectacular result Bt A unholy alliance of environmentalists and unholy companies wanted the cotton to be burned companies Farmer demonstrated and the cotton saved and Farmer Bt legalized Bt It is meaningless tp speak about yield effect It Bt as insurance Bt since pest damage is a random variable and yield effect varies yield A switch to generic GMV may reduce yield in switch a good year but increase it substantially in a bad one bad Bt increases mean yield but reduces variance Bt and especially down side risk-where pesticides are costly and yield losses still may result in bankruptcy result Example 2 Example Potential yield: 6 local variety 4 generic variety Damage 25% with 50% probability 50% with 50% probability Bt eliminates pest damage Adoption of generic Bt Reduces yield from 4.5 to 4 with 50% probability Increases yield from 3.0 to 4 with 50% probability Adoption of local Bt Increases yield from 4.5 to 6 with 50% probability Increases yield from 3.0 to 6 with 50% probability Biotech risk and farm size Biotech The gain in terms of risk bearing cost is main The reason for adoption even in US reason Small farmers that have little access to Small insurance and formal credit market may be beneficial of lower risk beneficial Seed technology has minimal economics of Seed scale, reduce need to invest in pest control equipment and reduce monitoring time- thus may be appealing to small farmer if affordable and Modification is done with a good variety Modification Predicted yield effects of pest controlling Biotech Availabili Regi on Pest pressure ty of chemical alternativ es Developed countries Lowmed L.Am (c ommer cial) China medium medium medium medium high high low -med lowmed\ L.Am(noncommerc ial) South Asi a Africa high low low high &S o. east high low -med low -med medium low -med low med high high high high low Adoption of chemicals Yield effe ct GM crops of Environment: Relative to Modern Breeding Biotech Can Enhance Crop Biodiversity Biotech Main premise: Agbiotech allows minor modification of Main existing varieties and under appropriate institutional setup can be adopted while preserving crop biodiversity can Conventional breeding involves often massive genetic changes, Conventional and adjustments to accommodate biodiversity are costly and Well functioning IPR system can lead to crop biodiversity Well preservation preservation Field data support this claim Ag biotech and crop bio diversity Table 1. Number of available varieties for different GM technologies in selected countries (2001/2002) technologies Country USA Technology RR soybean Bt corn Bt cotton Argentina RR soybean Bt corn Bt cotton China India Mexico South Africa Bt cotton Bt cotton Bt cotton Bt cotton Area under technology (ha) 22 million 7 million 2 million 10 million 0.7 million 22,000 1.5 million 40,000 28,000 20,000 Number of local varieties/hybrids >1,100 >700 19 45 15 0 22 3 0 1 a Number of imported varieties/hybrids 0 0 0 11 6 2 5 0 2 2 Environment: Biodiversity scenarios in the field Biodiversity Strong IPRs, strong breeding sector, and low Strong transaction costs. (US) Private technology owner transaction (US) will license the innovation to different seed companies, who incorporate it into many or all crop varieties, so that crop biodiversity is preserved. Strong IPRs, strong breeding sector, but high Strong transaction costs. (EU) If an agreement cannot transaction (EU) be reached, companies will bypass breeding sector, directly introduce GM crop varieties that are not locally adapted. Environment: Biodiversity scenarios in the field Biodiversity Weak IPRs and a strong breeding sector. (China) Many different GM varieties are available Farmers and consumers are beneficiaries. SR social optimum. social Weak IPRs and a weak breeding sector. (Africa) Weak (Africa If foreign GM crop varieties are even introduced, If are done directly without adaptation. A loss of local crop biodiversity. local Biotech Could Enhance Crop Biodiversity Enhance Conventional breeding led to wholesale replacement of Conventional land races with elite line monocultures land Biotechnology could provide precise improvements to Biotechnology traditional land races traditional Could lead to reintroduction of new “technologically Could competitive” land races - ”Jurasic garden” competitive” Access and development development Intellectual Property Rights (IPR) Registrations Access: Biotechnologies in the South Access: Most IP is generated by research in the Most North North Transfer of public sector’s rights to the Transfer private sector provides incentives for development and commercialization development Companies have little incentive to invest in Companies applications specific to the South applications Access: Biotechnologies in the South Access: Companies are willing to give technologies for use Companies in South; good PR in Companies worry about liability, transaction costs Universities with rights to technology will also be Universities open to transferring to South applications open Needed institutional mediation: IP clearinghouse Access: Objectives of clearinghouse for IPR IPR Reduce search costs to identifying set of Reduce technologies accessible technologies Reduce transaction cost for the Reduce commercialization of innovations commercialization Increase transparency about ownership of IPR Provide mechanisms to manage negotiation of Provide access to IPR access Improve technology transfer mechanisms and Improve practices (mostly in public sector institution) practices Access: Model of a clearinghouse for IPR IP providers: Member organizations Non-member organizations Assignment, license, or option for full or limited fields of use Direct licensing transactions “Re-packaging” Pooled sub-licensing Single patent sub-licensing IP users: Non-member IP users Member organization IP users Non-member IP users Why Under investment in ag biotech biotech Regulatory constraints, IPR concerns reduce Regulatory investment investment Size of markets lead to under investment in Size minor crops minor Lack of investment is because of prices of ag Lack products Development of ag technology is cyclical Development depend on market condition depend Crisis leads to change Crisis Developing countries & minor crop crop Most ag biotech is developed for major crops in Most the north the Private companies in developed countries hold Private IPR for many GMO innovations There is a risk that Africa will miss the gene There revolution as it missed the green revolution. revolution Specialty crops may not attract investment in Specialty agricultural biotech & under-utilize it agricultural Continued investment in public research Continued investment in public research Risk of under investing in public research and Risk development development Public sector research complement private Public sector . Through technology transfer there is continuity. continuity. Public sector research contributes to Public competitiveness competitiveness Public sector R&D is essential in developing Public countries and minor crops countries Private & Public research Private Public sector research emphasize Public generalized basic innovations generalized Private sector research is product focus There is complementarily between sectors Technology transfer is crucial link Private sector under R&D and that affects Private minor crops Diversification of research paradigm paradigm There is a risk of overemphasizing biotech Need public research in alternative Need solutions that is not embodied in products solutions Need regulatory research- with Need international cooperation and exchange of knowledge. Access: Reducing Regulatory Constraints Access: Registration should be efficient. Excessive requirements Registration may be used as a source of political economic rent seeking. seeking. Borders are arbitrary. Countries can take advantage of Borders regulatory clearances granted elsewhere and concentrate on addressing unique local problems and risks. on Countries should develop regional alliances for regulation Countries and establish mechanisms for easy transfer of regulatory information. information. Regulatory design-tougher is not better is Regulation has a role risk control and screening Post regulation monitoring can correct Post mistakes-irreversibility happens -but not always mistakes-irreversibility Tough regulation may lead to Concentration Delay of introduction of technologies Reduced research and investment and retardation Reduced of technology Need to optimize regulation Need Impacts of regulation strategies Impacts For plant that reproduce sexually- once a GMV For variety is developed(an event) the gene is inserted to others through back crossing inserted Tough regulation of each variety lead to reduce Tough choice and switching away from local varietieschoice a small number of varieties will be used and small much of the potential of innovation lost much Regulations of events increase choice -cost of Regulations modifying specific varieties smaller modifying Regulation and pace of change change Varieties may change rather fast with Varieties conventional breeding conventional Slow regulatory process may result in Slow insertion of GMVs in older varieties and loss of benefits obtained through conventional breedingconventional Slow regulatory process slow innovation as Slow it is reducing returns to and thus investment in innovation investment Acceptance Acceptance Europeans attitude to Gmo Europeans Lack of trust in government-Bse F &mouth Insufficient food safety regulation Insufficient Strength of environmental movement Biotech is American technology Barrier to trade Scientists and society do not want to fall Scientists behind Acceptance Acceptance Progress of ag biotech depends on broad Progress acceptance acceptance Consumers have right to discriminate Consumers according to the way products are produced. according This discrimination should not be used to This form trade barriers form A global Academy of science needed for global dispute resolution Regulatory constrained needed for Regulatory acceptance. Concerns may be valid. Labeling Labeling Reasonable labeling is a reasonable regulatory requirement requirement Product tracing will reduce cost of safety maintenance. maintenance. Labeling will benefit industry in the long Labeling run.Enable product differntiation run.Enable Should be done privately subject to government Should monitoring monitoring Risks Risks Risk Containment Approach for Policymaking Risk Containment Approach for Policymaking Risk = Probability of a bad event occurring during a period of time. risk management to design policies to 1)maximize risk reduction within a given constraint on social costs. Or 2)maximize social welfare subject to risk constraints Risk containment can be practiced locally&globally Precaution in technology development Precaution is not avoiding risks. It means containing risks in an adaptive process of continuous learning.. There are gaping holes in scientific knowledge, but it is the best we have. Progress requires gradual expansion of capacity containing risks as we venture to new territories. Even risk averse individuals take risk take There are many risk management There strategies including: strategies Diversification Insurance experimentation Not taking risks id risky Multiplicity Of Risks Multiplicity Individual risks can not evaluated in isolation. Individual There are trade-offs in risk taking There Some of the risks associated with food Some policies include: policies Food shortages Environmental degradation Market concentration Poverty Political instability The Relations between risks and time and Risks may be correlated. High likelihood Risks of Food shortages is linked with high poverty probability. poverty Governance design should have a long Governance term perspective . Dynamic processes contribute to Dynamic generation or reduction of risks. Population growth may increase food Population shortage risk Food grew faster than population throughout Food most of the 20th century most Food productivity growth is sluggish-but Food population is expected increase and food demand to double. demand Food availability can meet the challenge by: Increased productivity increase intensification Expansion of agricultural land and resource base Malthusian scenario&agricultural Malthusian scenario&agricultural technology Intensification and the environment environment Alternative practices were introduced to Alternative reduce damages (IPM, Low Tillage, precision farming) with varying results Intensive use of chemicals(pesticides and Intensive fertilizers), multiple cropping and intensive plowing leads to plowing risks to human and animal health Contamination of bodies of water, Soil erosion Current ag biotech practices were invented to replace chemicals chemicals Expectation of strict pesticides Expectation regulations motivated introduction of pest control ag-biotech Its adoption is fast because of Its convenience as well as profitability. Underreporting of GMO use in India Brazil, and China. Environment: Sound Basis for Risk Analysis Environment: Is the Precautionary Principle a sound basis for risk Is analysis? analysis? There are always trade-offs between risks and benefits, There and between risks and risks. and In Africa, does risk of “genetic contamination” exceed risk of In starvation? starvation? Agricultural biotechnology should be evaluated in Agricultural comparison to pesticides and other real alternatives. comparison In tropics, increased productivity would reduce pressure for In deforestation. deforestation. Gmo’s are not perfect Gmo’s have problems-resistance buildup, Gmo’s damage to secondary pests, genetic contamination. contamination. Refugia, monitoring of impacts, restriction of Refugia, use in some locations can address these problems partially-but alternatives have problems and risks that have to be considered. problems Agricultural biotech is in its infancy- built up of Agricultural human capital and accumulation of -will lead to eliminations of many bug and lead to better technologies technologies Current ag biotech & risks Current Realized risks of agricultural biotechnology Realized thus far is small(in spite Monarch Butterfly) Experimentation with agricultural biotech is Experimentation vast(100million acres + annually), Each year Each year without a major incidence adds confidence to the use of the technology. yet monitoring is needed to continue. yet Loss of ag bio-diversity is reduced when a Loss diversity of GMO varieties is introduced. diversity New ag bio-technologies New Development of current GMO provided Development tools for more attractive future GMOimproving nutritional contents and health. improving It may use plants as labs for chemicals and medicines.That may necessitate growing genetically modified plants that are not edible in order to protect our sources of food Bio tech and environment Bio GMO leads to gains in terms of pesticides GMO use reduction and reduce acreage as yields increase increase Gene flow is a potential problem- need to Gene be monitored be The risk depends on the gene inserted-Bt The and vitamin C producing genes may be rather benign - but genes can produce toxins-regulations should vary toxins-regulations The Price of Excessive Regulatory Caution The Price of Excessive Regulatory Caution The regulatory process of ag chemicals and biotechnology designed to respond to concerns of environmentalists, but also benefited agribusiness Led to concentration Reduced solutions available for small crops & reduce diversity &specialization of farming. Reducing environmental risks increases concentration risks Farm land expansion& the environment environment Without increase in yield per acre population Without and demand growth will lead to expansion of agricultural resource utilization-deforestation, depletion of water resources,air and water pollution pollution Productivity increasing innovations crucial for Productivity protection of natural resources protection U.S agricultural acreage has decreased U.S throughout the century due to innovation& intensification. intensification. Conclusions Conclusions Agbiotechnology has significant potential for developing Agbiotechnology countries; the challenge is to realize that potential: countries; Productivity: yield effect of biotechnology tends to be larger in yield developing countries developing Access: iinstitutions can reduce IP and regulatory costs for nstitutions developing countries developing Risks: crop biodiversity can be preserved and could even be crop restored with biotechnology Ag biotech is more than Gmo’s. Ag It will evolve- alternative molecular approaches It will be developed-but will knowledge will not be accumulated without experience experience Development may be dependent on public and Development private sector funding private Ag bio tech is only part of the solution solution Ag biotech must be pursued as part of a Ag portfolio of technology and knowledge tools aiming to enhance productivity and environmental sustainability of agriculture. Europeans attitude to Gmo Europeans Lack of trust in government-Bse F &mouth Insufficient food safety regulation Insufficient Strength of environmental movement Biotech is American technology Barrier to trade Scientists and society do not want to fall Scientists behind Acceptance Acceptance Progress of ag biotech depends on broad Progress acceptance acceptance Consumers have right to discriminate Consumers according to the way products are produced. according This discrimination should not be used to This form trade barriers form A global Academy of science needed for global dispute resolution Regulatory constrained needed for Regulatory acceptance. Concerns may be valid. Labeling Labeling Reasonable labeling is a reasonable regulatory requirement requirement Product tracing will reduce cost of safety maintenance. maintenance. Labeling will benefit industry in the long Labeling run.Enable product differntiation run.Enable Should be done privately subject to government Should monitoring monitoring Consider Consider 250 million Americans are the “guinea pigs” for 250 agricultural biotechnology. Northern countries also took the risk with cars and with modern chemicals. Africa missed the Green Revolution; will it also miss Africa the Gene Revolution? the Epilog Differences in attitudes US vs EU- is it consumers attitudes? threatens attitudes? U.S. relative advantage in Biotech U.S. European dominance in chemical pest control markets markets Innovative capacity: Forward citations to US agbiotech patents Forward By nationality of lead inventor and grant date of cited patent 1800 1600 1400 1200 1000 800 600 400 200 0 1984 1985 1986 1987 1988 North American European 1989 1990 1991 1992 1993 1994 1995 Japanese 1996 1997 1998 1999 2000 Innovative capacity: Forward citations to US agrochemical patents Forward By nationality of lead inventor and grant date of cited patent 1800 1600 1400 1200 1000 800 600 400 200 0 1980 1981 1982 1983 1984 1985 1986 1987 1988 North American European Japanese 1996 1997 1998 1999 2000 1989 1990 1991 1992 1993 1994 1995 Market incentives: Global crop protection market, sales US $ millions millions $35,000 $30,000 1 yr. % change 2000 to 2001 ­10.2 % Others Japanese corporations US corporations ­1.2 % agchem agchem agbio/ seed $25,000 +12.9 % $20,000 $15,000 agbio/ seed $10,000 $5,000 European corporations ­1.0 % agchem $0 1991 2001 Data Sources: Wood Mackenzie Agrochemicals, in Chemistry & Industry, November 1993 and Phillips McDougall, AgriFutura Newsletter, March 2002 Innovative capacity: comparing citation based indices of comparing patent quality patent Behavioral evidence: Behavioral Double standards for the Double “precautionary principle”? “precautionary Double standards applied to intra-EU trade Double relations and external EU trade relations (Majone, 2003) (Majone, As applied to chemicals vs. biotechnologies? As Possible metrics? Sources? Behavioral evidence: Behavioral Conspicuous industry absence from Conspicuous policy process? policy “When GM products came to the market in When Europe, we were faced with contradictory statements or even silence both from regulators and from industry. This contributed substantially to the lack of confidence now present.” to ­ Dirk­Arie Toet Nestec Ltd., 2001 Conclusions Regulate not ban technologies Effective &trusted regulation essential Effective for innovation for Reform IPR introduce clearing house. Compensate for biogiversity Continue support for public research ...
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This note was uploaded on 03/18/2010 for the course ECON C125 taught by Professor Zelberman during the Spring '09 term at University of California, Berkeley.

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