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Newsletter 8th February 2008

- The lesson of South Africa - From chemistry to biology - The case for crop protection

The lesson of South Africa

South Africa is suffering an energy crisis. Eskom, the state-owned power generator, simply cannot supply the country's needs, and it looks as though it will be several years before the problem is resolved. South Africa is the continent's economic powerhouse. The country is rich in minerals and is the leading global supplier of many precious metals and diamonds. The almost miraculously smooth and peaceful transition from apartheid to a functional multiracial democracy has once again allowed foreign direct investment, at the same time as demand for the country's exports has been driven by the rapid development of China and the generally healthy global economy. Yes, there are big problems, including high unemployment, one of the highest crime rates in the world, and huge numbers of HIV-AIDS sufferers. But the potential is there and the South African economy seems set on a path of continued strong growth.

All this is now compromised by the energy crisis. The country is trying to reduce overall energy demand by 10-15%, at a time when 6% annual economic growth is targeted. Ambitious targets to halve unemployment and poverty by 2014 are also put at risk. In late January, the mining industry – which accounts for 7% of the economy and 30% of exports – was to a large extent closed down as vital safety systems would have been unable to operate. Mines are now operating once more, but with a degree of power rationing.

Eskom forecast this problem ten years ago, and the country is now reaping the rewards of the government's failure to take appropriate action. The assumption seemed to be that energy efficiency measures and use of renewable energy sources would suffice to stave off what now appears to have been inevitable. Economic growth in South Africa is largely driven by industry, particularly mining, and this is inevitably a large consumer of energy. This growth also translates into greater prosperity for citizens, and household use therefore increases (particularly as more people are connected to the grid for the first time). Even with efficiency measures, this drives up energy demand. Despite the crucial importance of the mining industry, it only consumers 12% of total power output, while the domestic and other industrial sectors each account for 35%.

The situation in South Africa is very different from that of the EU. European economies are highly developed and quite mature, and much of the heavy industrial base has been lost to lower cost competitors. Nevertheless, they continue to grow and, other things being equal, demand for energy increases. Energy use is no longer linearly related to GDP, but efficiency measures only partially offset greater demand. Politicians should therefore learn the lesson from South Africa. Voters can be persuaded that greater energy efficiency is desirable (which it is) and rising prices will reinforce the message, but no-one will thank a government which does not make security of supply its first priority when making energy policy.

From chemistry to biology

It is common to give names to particular eras of history to encapsulate their key distinguishing characteristic. So, we have the Stone Age, the Steam Age, the Industrial Revolution, etc. By many reckonings, the twentieth century can be thought of as the Age of Chemistry. Large-scale chemical processes were commercialised, which in turn enabled far-reaching changes to the way people lived their lives. The Haber process, for example, enabled atmospheric nitrogen to be fixed and fertilisers to be produced. Without these, the Earth could not support its current population. Other developments have given us a vast range of materials ranging from vitamins and pharmaceuticals to plastics, all of which form an integral part of our daily  lives.

Chemical processes have been developed and refined over decades – centuries, in some cases – and are often highly efficient. However, increasingly they are being challenged and replaced by biological processes, and future generations may see the 21st century as the beginning of the Age of Biology. Already, many vitamins, pharmaceuticals and other fine chemicals are made by fermentation, and our increasing ability to modify micro-organisms opens up the possibility of more and more chemical processes being replaced by efficient and competitive biological ones.

Biological processes are generally run at much lower temperatures than chemical ones, and can be far more specific in what they produce. Low energy costs and high yields are clear advantages, and in many cases by-product streams can themselves be raw materials for further value-added processing.

The advantages seem obvious, and an increasing proportion of fine chemicals are now derived from biological processes. However, the bulk industry is still dominated by chemical processes to produce key raw materials such as ethylene and acrylic acid. A university of Utrecht study looked at the potential of existing industrial biotechnology processes to make them. Their focus was the potential to reduce carbon dioxide emissions, for which they concluded that massive savings were possible. Given the attention currently given to this issue, this may be the catalyst for further development.

However, new processes are competing against chemical processes which have been made highly efficient and run on plant which represents an enormous capital investment. Transforming the bulk chemical industry is not going to happen overnight, but the future seems clear. High oil prices and further advances in industrial biotechnology will begin to make biomass and biological processes an increasingly competitive option.

The case for crop protection

EU legislators are putting increasing pressure on the crop protection industry, and it is likely that European farmers will be faced with a significant reduction in the number of compounds available to them in coming years. As resistance to some of the remaining compounds develops, growers will see yield reductions and quality problems which could see the loss of some crops from certain regions. At a time of rising food prices and a need for farmers in Europe and the rest of the world to maximise production to feed both a growing population and satisfy growing industrial demand for biomass, hampering the agricultural sector in this way seems at best misguided.

There are few who will stand up to defend pesticides, which are not very fashionable despite their undoubted benefits. It has therefore fallen to two of the major suppliers – Bayer CropScience and Syngenta – to commission a report from the Italian research institute Nomisma. The report is called 'European Agriculture of the Future: The role of Plant Production Products', and finds that the consequences of proposed EU regulations would include large yield reductions, significantly higher prices and much increased food imports. Inevitably, this has been condemned by environmental activists, but it would be wise for MEPs and Commission officials to take a step back and think what they are doing before they go blindly forward on a path which will benefit no-one.