Sharing the risks, costs of biomass crops

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Posted on September 5, 2013
Sharing the risks/costs of biomass crops

This image shows Miscanthus. Credit: University of Illinois

Farmers who grow corn and soybeans can take advantage of government price support programs and crop insurance, but similar programs are not available for those who grow biomass crops such as Miscanthus. A University of Illinois study recommends a framework for contracts between growers and biorefineries to help spell out expectations for sustainability practices and designate who will assume the risks and costs associated with these new perennial energy crops.

“The current biomass market operates more along the lines of a take-it-or-leave-it contract, but in order to encourage enhanced participation and promote a more sustainable, stable biomass supply, a new kind of contract needs to be created,” said Jody Endres, a U of I professor of energy and environmental law.

Endres said that a good contract gives everyone more certainty.

“Incomplete contracts are the hazard,” she said. “We need to develop contracts that nail down all of the details and are transparent about who’s taking on the risk and who’s paying for it. If we get these considerations into the contracts, those who finance this new biomass crop industry will have more certainty to invest.”

The study identifies considerations that should be included in the framework for a biomass contract, including a control for moral hazard, risk incentive tradeoff, existing agricultural practices, and risk and management tools to make the industry more sustainable financially and environmentally.

Endres said that if biorefineries receive money in the form of carbon credits for reducing pollution, incentives for farmers should be included in contracts because they are the ones who are bearing the risks associated with sustainability practices.

 

Read more at: Phys.org



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