Feature

The Next Big Thing: H20

Water is the new gold, and a few savvy countries and companies are already banking on it.

As food prices skyrocketed over the last two years, countries and state-sponsored companies were quietly snapping up land around the world. Few noticed when South Korea began investing in farms in Madagascar, or when China, Japan, Libya, Egypt, and Persian Gulf countries acquired farmland in Laos, Cambodia, Burma, Mozambique, Uganda, Ethiopia, Brazil, Pakistan, Central Asia, and Russia. From what little has emerged publicly, the total land purchased since early 2007 adds up to at least twice the cereal cropland of Germany.

The purchases weren't about land, but water. For with the land comes the right to withdraw the water linked to it, in most countries essentially a freebie that increasingly could be the most valuable part of the deal. Estimated on the basis of one crop per year, the land purchased represents 55 to 65 cubic kilometers of embedded freshwater, an amount equal to roughly 1½ times the water held by the Hoover Dam. And, because this water has no price, the investors can take it over virtually free. It's not quite a scenario from a James Bond movie, but the rush to lock up scarce water resources in agricultural belts is nonetheless disturbing. It suggests another food crisis might not be too far away.

In a sense, the great water grab is only prudent: Some 70 percent of all freshwater withdrawn for human use goes into agriculture, but underground aquifers are falling -- in some regions by several meters per year -- and rivers are running dry due to overuse. The worst problems are in some of the world's most important agricultural areas: eastern Spain, the U.S. Great Plains, the Middle East and North Africa, and parts of Pakistan, northwest India, and northeast China. As the former head of the International Water Management Institute warned, "We could be facing annual losses equivalent to the entire grain crops of India and the U.S. combined" if current trends hold.

We'd better figure out water policies that work, and fast. In some parts of the world, such as Oman, water is not free. Farmers must pay for the infrastructure or contribute work, and because water rights are tradable, water does have a price. Oman's system has been sustainable for 4,500 years. Obviously, pricing and tradability have their limits: We also need to guarantee enough water for drinking and basic hygiene for those unable to pay, and set aside quotas for nature.

Market mechanisms at both the local level (tradable water rights) and the international level (multilateral free trade in agriculture) will have to be part of the solution. But we need to get moving before the steady drip of events becomes a torrent.

Feature

The Next Big Thing: Better Biofuels

The next generation of energy is on its way.

The financial crisis is taking up most of the media oxygen these days, but the aftershocks of two other acute crises, in energy and food prices, are still reverberating. The combined result is that energy and agriculture are becoming inseparable issues.

It sounds counterintuitive, because lower oil prices are making fuels from farm and forest land less competitive. This is true, but only in the short run. The crisis has boosted awareness that dependency on a limited set of resources, including financial products, must be avoided by all means. The best response is diversification -- and biofuels will be a major beneficiary of this incipient trend.

Today's biofuels involve either ethanol or diesel, with the former accounting for roughly 90 percent of the market. Brazil, the United States, and China are the greatest producers. More than half of the world's bioethanol is generated from sugar cane; the rest, controversially, comes mainly from corn. Biodiesel is mostly derived from rapeseed and sunflower. Jatropha and other "wild" crops are barely in their infancy. On the whole, biofuel crops as a tool to lift small farmers out of poverty remain an unfulfilled dream.

The real promise for biofuels lies not in food or feed crops, but in nonfood organic material such as grass, wood, organic waste (this may include the inedible part of crops, such as stalks), and algae. The potential supply is large: About half of all biomass on Earth consists of lignocellulose, a structural material of plants that can be processed into fuel. And the legal mandate will be there: By 2016, U.S. bioethanol producers will be required to switch to lignocellulosic feed stocks.

For now, coarse mechanical and chemical methods are necessary to separate the constituents of lignocellulose, and energy efficiency is still low. But soon enough, more sophisticated use of bacteria, fungi, and yeasts will make the processing far easier and cleaner. Aquatic biomass (such as algae) will provide another option, as will rapidly growing grass and tree species and organic refuse from households and factories.

Will the biofuels of tomorrow replace oil, as some advocates suggest? It's doubtful. Produced and used responsibly, fuel from plants will at best be a small, though growing, piece of a broader renewable energy portfolio that includes wind and solar power. But even if electric cars are in widespread use and massive increases in fuel efficiency are taking place, the need for liquid fuels will still rise in the next decade in many areas. In some countries, adding biofuels to the mix will make a real difference in saving foreign exchange and boosting the agricultural sector. Biofuels have the added advantage of allowing the continued use of fossil fuel infrastructure, which, like it or not, is one Big Thing that will be with us for some time to come.