Marc DeNaeyer, Managing Partner of TROFI in The Netherlands, has often contributed valuable information to both the Pundit and sister publication, PRODUCE BUSINESS, including pieces such as these:
Pundit’s Mailbag — Pesticides And Cancer
Why Don’t American Retailers Just Standardize On EurepGAP?
Pesticides Keep Pestering Us
Pundit Mailbag — Global Warming’s Shameful Marketing Attempts
E.U Expansion And Residue Reduction
Global Warming Won’t Go Quitely
Today we owe Marc a hat tip as this summer he pointed out to us an interesting development in Europe:
FRANCE — PAN-EUROPEAN SCHOOL FRUIT AND VEGETABLES SCHEME
French Agriculture and Fisheries Minister, Michel Barnier, has welcomed the EU Commission proposal on the pan-European school fruit and vegetables program, launched on July 8 by the European Commissioner for Agriculture and Rural Development, Mariann Fisher Boel.
The scheme, which will receive 90 million Euros of European funding per year, will target school children aged 6-10 years and will start in September 2009.
In France, young people consume 4 times less fruit and vegetables than their grand-parents, and French only eat 350g fruit and vegetables per day, less than the 400g WHO recommendation.
The EU French Presidency is eager to reach an adoption of the text by the end of the year. At the national level, Michel Barnier has launched last May the program “un fruit pour la récré” (“a fruit for recreation time”) which aims at distributing free fruit and vegetables to school children in priority education zones (ZEP) starting September 2008. In July, a complementary free fruit distribution program was launched in France for children attending leisure and holiday centres.
It didn’t surprise us to read that the French don’t eat their recommended allotment of fruits and vegetables — neither do Americans — but we were intrigued by the notion that young people in France are eating so many fewer fruits and vegetables than their grandparents.
Of course in our interview with Lorelei DiSogra of United Fresh, we talked a great deal about the US program to distribute fresh produce in schools. Marc suggested we could follow up with Lawrence Swan of Fyffes and Philippe Binard of Freshfel, the European Fresh Produce Association, based in Brussels, to learn more.
We seized on his suggestion and asked Pundit Investigator and Special Projects Editor Mira Slott to speak to both gentlemen:
Dr. Laurence Swan
Managing Director for R&D
Q: The Pan-European School Fruit Scheme sounds ambitious and far-reaching. The European Commission reported proposing 90 million Euros annually for the purchase and distribution of free fresh fruit and vegetables to schools, and this money would be matched by national funds in those member states that choose to make use of the program. Besides providing free fruit and vegetables, the scheme would require participating member-states to set up national strategies including educational and awareness-raising initiatives, such as Food Dudes, which you were instrumental in championing.
To that end, could you clarify the discrepancy in proposed funding numbers being reported? The European Commission, Agriculture and Rural Development website and various news releases say the EU’s contribution will be 90 million Euros per year, yet a report out of Bangor University, pioneer of the Food Dudes program, says the EU has proposed a 156 million Euro scheme.
A: The amount originally asked for was 100 million Euros, and the European Commission came back with 90 million Euros; that’s what is currently in the papers to get ratified. There was talk in DG Agri ( The European Commission’s Directorate-General for Agriculture and Rural Development) of how money would be split. A substantial lobby says the money coming from the EU should be allotted for the free fruit and distribution to schools.
If that is the case, DG Agri estimates it would cost 156 million Euros. Would they go with 156 million Euros or 90 million Euros, where everything else that goes into the scheme, from the education packs to running the program, be picked up by the national governments? We chose to talk 90 million Euros because that was completely certain.
The discrepancy in numbers relates to Brussels taking on the total cost of the fruit-and-vegetable distribution of each project that’s been sanctioned. There are certain feelings amongst officials that a clear distinction of responsibility for Brussels — to pay for all the fruit and distribution is where it begins and ends — would make administration easier. DG Agri’s number is 156 million Euros. This is still very, very tentative in internal discussions. The 90-million Euros is widely discussed, but there is some strong opinion lending credence to the possibility of DG Agri taking on the total free fruit and distribution cost. This would draw a clear cut distinction.
Q: Changing children’s eating habits is a complex process. How integral to success is integrating educational and behavior-based intervention programs in conjunction with making fresh produce readily available to young children? I imagine there are many financial and bureaucratic hurdles to overcome as well. Could you discuss some of the challenges and opportunities that lie ahead in implementing this European Union-wide proposal in various school systems and political and logistical infrastructures in different countries?
A: There are always interconnections between the free produce schemes and the accompanying programs. The types of programs and how they are executed influence success in altering children’s behaviors and eating habits both short term and long term.
Q: Could you update us on the Food Dudes program?
A: Food Dudes is now running in Ireland by the Department of Agriculture. It has finished its first year, I believe very successfully. In September 2008 Food Dudes started its second year, reaching 85,000 students each year. The idea is that over a period of four or five years the Food Dudes program will be implemented in every primary school in the country for children 4 to 11 years old.
Q: Did you learn anything new following the original pilot programs and initial research validating the program, or areas that need improvement?
A: The succession of research justifying the need for the program began with the trial at the two primary schools in Dundalk, then through the Ireland Department of Agriculture two schools in Dublin, and then keeping it alive with an infusion of money from Brussels’ European Commission, Agriculture and Rural Development — two years of that reached 34,000 students, something on that order.
The program was analyzed extensively at the end of both years. It was a highly independent study by a team of researchers at UCC Dublin questioning and testing the veracity of the food program data in Ireland. The research was directed by Dr. Patrick Wall, who now holds a prominent position at the European Food Safety Authority (EFSA).
Originally, when we did Food Dudes in Dundalk and Dublin, we were doing really detailed consumption studies down to the last milligram. We had to keep the core of the apple for evidence. You can imagine that was really costly.
The whole idea is that in those four or five years, all primary school will receive the Food Dudes indoctrination of 16 days. This will cost 53 Euros per student — depending on the exchange rate that probably translates to $65 or $75 U.S. dollars. That would be equivalent to the fruit and vegetable snack programs advocated by Lorelei DiSogra in the states. [Pundit interview here].
That covers the cost of fruit and distribution, the rewards, their costs and distribution, the videos each class sees where junk punks are defeated by children eating the fruits and vegetables, the administration costs and home packs. Administration cost is not to be easily dismissed. All schools need to be visited and convince the principal of the program is worth doing, and his staff must be spoken with to get them on board, and then make it all happen on day one. Administration amounts to about a third of the cost.
Q: On a national level, how are logistics of product distribution handled? Does the produce industry play a role?
A: At the government level, it went out to tender. A company in the distribution trade was awarded that tender, which made the most sense because it had lots of vehicles on the road to get around to these schools. Where the fruit trade is pure and in a good position to do this kind of business, when you look to expand the program nationwide, you need a company with little vans and lorries going to shops that can also distribute product to schools. It’s not economical for a 40-pound truck to deliver a half pack of tomatoes to a primary school. The economics and logistics of distribution are being watched closely by many in Brussels and elsewhere.
Q: Where does the Pan-European school produce proposal stand at this point in terms of getting passed and implemented? Does this drive expansion of programs like Food Dudes?
A: As was mentioned by Lorelei in the Pundit piece, the process has been underway for quite some time, and it takes fortitude to see it through. A long time ago, under the auspices of Freshfel, I was asked to write a business plan by DG Agri and DG Sanco in Brussels to spark their imagination. This was maybe three or four years ago. It filtered around places trying to find a home.
There was a school milk scheme and on the basis of that, we said we wanted 100 million Euros to have a serious fruit and vegetable scheme in Europe. It met with opposition with people saying, ‘we don’t have money.’ We know of $150 billion a year in health-related problems. My argument: Can you afford not to have a scheme? The logic is irrefutable. More and more people came to the cause. It took knocking on doors and promulgating this to get decision-makers coming on board. The EU Commission for Agriculture and Rural Development decided to run with it. It’s being debated on the best way to do it.
On May 30, 2007, a white paper was produced on nutrition, overweight and obesity. The European Agricultural Commission argued the need for change. It stated that a school fruit scheme would be a step in the right direction. From that the Joint Services Commission stepped into gear and had consultations with various key drivers in these areas and they produced a report under DG-Sanco [Directorate General for Health and Consumer Affairs] to launch a European Union discussion platform — The EU Platform for Action on Health, Diet and Physical Activity.
DG-Sanco, the public health department of the European Health Department, started back in 2005, but Freshfel was not elected on it until 2006. It was one of the strange things — if any platform called for bringing in players with health knowledge, you would think you’d need the organization of fruits and vegetables. Since then we’ve been welcomed with open arms and made tremendous progress with them.
Although I work for Fyffes, Freshfel has a small lobby group for the fresh fruit and vegetable industry, which also includes retailers, wholesalers and some shippers, similar to the PMA. Freshfel is divided into various sections, and one deals with promotions. I was the chairman of that working group at the time and continue in that role today.
The Council of the European Union invited the European Commission of Agriculture to make a proposal for a fruit scheme. After all this discussion, this is where the $90 million number came about. By the end of the year, it will all be sorted out , how the money will be spread, the rules of the game will be finalized by end of 2008 and then the work to make it happen will take place for the academic year starting September 2009.
Q: It sounds like there are still major issues to be ironed out.
A: When you meet someone in authority every day there is a gap in knowledge, and when you find they haven’t even heard of you, it can be discouraging. Patience is the word. Obviously between now and probably next spring in Freshfel, we will be giving all the support we can to this initiative. There is a huge amount to be discussed. It is one thing to provide fruits and vegetables to schools but you do need the psychological emphasis to change eating habits. So we will be supporting them in their discussions. For instance, there is some talk central funds from Brussels would fund the fruits and vegetables to schools, but it would have to go hand in hand with each individual government. And we are going to support the educational program aspects.
One of the charms and strengths of Europe is it is so diverse with different systems of schooling. Every program has to be flexible to take that into account. What we discovered in relation to Food Dudes in Britain and Ireland, British children have a canteen culture, where they go to school and are fed there during the day. In Ireland, we have a lunch box culture, where parents pack the daily meals. You must include parents with both honestly because you won’t get the flow-through.
Q: Beyond school meal system variances, how do different countries and cultures impact the Food Dudes program? Do the story line or characters need to be changed?
A: One joy of the Food Dudes program is that it works in different systems and cultures. I’d doubt you’d have to create different characters; you have multi-ethnic children, but the story line works — it’s like a western with wide appeal.
Q: Don’t countries and school systems already have their own programs in place. How easy is it to transform engrained programs?
A: In any of these schemes that are getting quite a lot of publicity, you tend to find already existing schemes in these countries and everyone believes their scheme is best. It’s frustrating when you see fundamental flaws in a program. It becomes very difficult.
Q: What about the disparities in economic structure. Is the funding being proposed really sufficient to cover such a broad spectrum of countries across Europe?
A: There is a great range in Europe as you have in the states in terms of disposable income and various states with better infrastructure than others. Some of our newer members in the EU would find it difficult to fund a program like this. And therefore, in discussions going on, it will likely to be asked by national governments if they can contribute less.
If you take $90 million, it won’t cover all the children of Europe. Someone has to make a difficult call. We could do two or three more countries well and then move on to others. If forced to spread the money thinly to all, you wouldn’t be able to do a good job in any of them.
Again you could have a situation where fruits and vegetables are paid for by Brussels or national governments. Or you interface with national governments, or you want industry to pay for all or a percentage of it.
Q: The produce industry operates on such low margins and has become increasingly burdened with food safety costs, among others, that you may be hard pressed to garner large funds there, despite general goodwill toward such worthy programs.
A: Our experience with Food Dudes is that to get industry to pay is impossible and the whole thing can fall down if the program is based on industry contributions. I can tell you in Ireland with the scheme we ran that Fyffes was core and central to the success of the scheme — in that Fyffes kept Food Dudes going when money wasn’t coming in.
Some people were in positions where they said they’d contribute but failed to contribute. If we sat by and said we’ll wait till we get all the money in, we’d still be sitting. There were some that contributed, but many times we paid the bills to keep the program going.
Q: Who are the key players driving the Pan-European initiative forward now?
A: To continue with the process, by this autumn, there will be participants chosen based on their ability to participate, and then we’ll be on a Pan European scheme. DG Agri is absolutely fundamental and it’s really wonderful they’ve grasped this program and are running with it. It’s also worth mentioning; the heads of DG Education and DG Sanco are giving this initiative their full backing and are very interested in it. I’ve seen personally where you get different divisions and they’re all very busy and don’t necessarily get in sync.
Looking to get fruit in school and change perceptions of eating requires definite roles for education and agriculture, and it is difficult to see what area is most important. In most cases, I’ve come across Agriculture is center. But you need health and education there with strong support to get where you want. You can’t do this without all areas participating.
One of the things we’re promoting at Freshfel as the reasons for this scheme is that this is something central government in Europe is doing for the health of children. Is there any single thing more important? There is a tendency in any large conglomeration, state or country for the general population to feel remote from central government. One or more steps removed from reality from what they’re doing on the ground. This brings Brussels relevance to all homes of Europe; this is a major phenomenon if politicians see this as a good thing. Once you lay the facts before them they believe it’s really worth following.
The European Commission published a document, a six-page leaflet. It lists the European Union countries and various schemes in existence. You can see the leaflet here.
We need more people to step up to the plate. You see people like Lorelei DiSogra who are so passionate. We’ve been in this for decades. We need the younger generation to get involved. There are many ways to address these problems. Kids are overweight for so many reasons. I notice that Lorelei says she has a bottle of Champagne in her refrigerator for when her goals are met… I have a bottle of Champagne as well. Hopefully, we can all celebrate together.
Q: How did this program evolve, and how did you become involved? What was the impetus for development of the European-wide scheme to provide free fruit and vegetables to school children?
A: As a matter of fact, looking at consumption trends across Europe, on one hand consumption was at best stagnating, and there was an obvious need to explore any efforts that could be done to stimulate consumption, particularly in the youngest, the worst eaters but the consumers of tomorrow. It is important to address consumption during these impressionable early childhood years. Trying to get the youngest used to eating fresh product, tastes they don’t know or unfamiliar varieties could change their diet and eating habits long term.
Second, looking at public health, note in Europe like in America the level of overweight and obesity among the youngest has been growing, already reaching close to epidemic levels.
The third element was a greater consciousness among public authorities that some action could be taken at the level of those that set agriculture policy.
Q: This was a new way of thinking?
A: Policy was moving toward the part of the equation that links to the demand side, rather than addressing the issue solely from the supply side. This was a shift in mentality to recognize that policy dealing with agriculture could also have health impacts on citizens. In general terms, acceptance at the European Commission level and for the Directorate-General for Agriculture and Rural Development to believe their action could also contribute to the health of European citizens.
Q: What role or influence does Freshfel play in shaping the program?
A: Against this background, we as an organization have tried to accompanying this process. We believe it is about time to have this action implemented. We have noted in the past action at regional and local levels appearing successful in their measured impact. Unfortunately, these programs are small scale in terms of geographic coverage or budget, not allowing for long-term projects.
Q: Could you provide some examples of these programs? We have highlighted the Food Dudes program, which integrates a psychological component at its core.
A: The most spectacular one in the UK has been securing on a daily basis a piece of fruit for young children in the 4-to-6 or 6-to-8 range, delivering one piece of fruit to each child five days a week for three or four years. And also the Food Dudes in Ireland has been extended nationwide. These are examples. Should they be continued or discontinued; a lot of questions about the validity of these programs are raised all at the same time.
Q: Changing children’s eating habits in the face of outside forces is no easy task, especially long-term. The Food Dudes went to great lengths to both monitor and evaluate progress of its behavior-based methods in order to document and validate progress. Does the UK’s daily fruit scheme integrate educational or other complimentary strategies, and has it been tracking the results?
A: Most of the programs, if good programs, link to evaluation. In the UK they have done that. In some other countries, they’ve also linked the program to some kind of evaluation at the end so they know whether it is worth investing the money.
Q: Is there a way to get copies of these evaluations? Quantifying how children’s eating habits are changed in the short term and especially in the long term seems quite challenging, especially with the numerous variables involved.
A: If you go to the European Commission website, the EU school fruit program is connected to DG Agri, on the front page right side, you can link to the program and you will find reports of meetings and organized consultations in Brussels. You can learn a lot about the different programs. If you look at the UK program, it will show the monitoring. You can also find information on the UK program on the NHS site. [Editors Note: You can read the Impact Assessment of School Fruit Scheme here].
At a more regional level, there are smaller scale programs, in Belgium the Flemish part of the country offered a program, and there are others developed in the Netherlands, Spain and France as of this school term.
Q: Is there any interest in merging successful strategies across countries?
A: It makes sense as part of the European umbrella to insure consistency and facilitate exchange of best practices and provide greater awareness. A European umbrella makes it easier to show the government in a country where such a program is not seen as a priority how it could become a project worth implementing with European support. We have been supportive from the beginning, lobbying to the Commission. On the first week of July 2008 they launched a proposal and while not yet adopted, at least it’s underway.
Q: What needs to be done to get this European Union-wide scheme adopted? Are there major sticking points or is this just a matter of fine-tuning?
A: For the moment it’s just a proposal. The objective is to see if what the European Commission is proposing is acceptable. The proposed system of co-financing would have the European Commission provide 50 percent and in some countries 75 percent of the budget to supply and distribute the product. This funding should be covering the value of the product plus the cost of distribution. The member states should cover the remaining part by taking either the 50 percent or the poorest countries only pay 25 percent.
On top of that, in order to have a program eligible, it is important member states claiming to get the money will introduce some accompanying measures to increase consumption. The concept that it will just be fruit made available is not what the Commission is willing to do. The program will need a promotion measure, or educational plan, or psychological element like the Food Dudes. Some kind of communication is important to reinforce just making the fruit available.
There is still an element of discussion before finalization of the proposal. There are no details on top of that obligation of monitoring to make sure the program is effective. There should be some kind of evaluation before intervention starts, and at the end to see whether the measure has had any impact.
On top of that, once the proposal is adopted, before the legal text, there is a need to make implementation rules, try to explain technically how that will work in practice. What kinds of fruits and vegetables are in the scheme; should some be out because they are carrying some sugar or salt; maybe further definition on scope. Then I suppose additional rules on good functioning of the program, maybe the Commission will just give flexibility in the scheme. If you look at how schools work, some canteen, some not, some have food service companies deliver, some where schools don’t operate in the afternoon, some where vending machine distributing is not allowed. There are so many formats. A call for a national strategy must adjust to local realities.
Q: I imagine certain countries would face more challenges and cost impediments than others in implementing the program based on infrastructure, logistics, bureaucratic issues, etc.
A: If you take the complex U.K. school system, that has been working very well. In the UK, it is easier logistically dealing with perishable product. It already has in place a program for distribution of milk, although milk has longer shelf life than fresh produce.
Delivering one piece of fruit per week, in some schools the quantity distributed may be two or three boxes of fruit, if there are 200 children in the age of consideration that means a small delivery. In the UK program, that would be multiplied by five working days. At the political level, whether there should not be more budget available, more fruit available every day, those elements are still open.
Q: I’m hearing various financial estimates tossed around regarding the total cost of the program. Is there debate regarding the budget, whether it is sufficient or should be expanded?
A: The idea for the budget went like this: The European Union’s total budget for the national scheme within the European Union framework was 156 million Euros, out of which 90 million Euros would be European Union money. Members eligible for EU funding would make a national contribution to cover the balance.
Two kinds of discussions have been taking place: whether we should skip the national contribution and boost the EU’s contribution to 156 million Euros to simplify the scheme. This way members states not considering the program as a priority will still do it.
The Parliament would consider 156 million Euros is not enough, and the program needs 300 million Euros or 350 million Euros to make it successful from the beginning. There is lobbying going on.
Q: What is your view?
A: Our estimation is that for smaller children to receive one piece of fruit every day covering 30 weeks, you would need close to 900 million Euros, so the figure 300 is not a big surprise.
If we compare the cost of obesity in Europe, what is 300 million Euros? This is where agriculture policy could have a big benefit. It is always difficult to make the link from savings in one pocket to savings in another pocket. If we don’t act today, the problem will get worse, especially if younger children don’t get used to the flavors of fruits and vegetables and begin eating more produce.
A lot of studies show that you get used to a taste when you’re young. That’s why it is important to educate as soon as possible. If you start even at three- or four-years old, this period is a little easier to influence behavior and they will continue it later. Once children are becoming teenagers, it is much more difficult.
Q: Is the EU looking to target certain countries where the need is greater, either from a health standpoint or cost standpoint?
A: The program is open to all member states. For those already implementing programs, they should not substitute current EU money, but use it to grow the program. It might be surprising when you examine the health data. The worst in Europe is mainly in the UK where obesity has become an important problem, and in southern European countries, normally famous for the Mediterranean diets rich in fruits and vegetables, where the problem seems to be insidious. There is not an effort by the European Union to decide; it is up to the sector in each of the countries to authorize to do the program based on local discussions.
Q: What steps will Freshfel take now to help push this program forward and build produce consumption across Europe?
A: We acted at the early stage of policy-making — what was an idea turned into a concrete proposal. Freshfel has been active at various levels to address overall stagnation fruits and vegetables in most countries.
The role we have now is double; on one hand to make sure there is a platform to exchange best practices, and facilitate the networking of best practice at national levels. Learn what works and what doesn’t work and contribute in this exchange of ideas.
It is important to have good networking with experts in the sector, those who grow and distribute produce, those in education, environment, and health need to communicate with each other. There must be a good link between all the different elements, but so far there hasn’t been so much networking. Then we’ll have a role to play in distribution and logistics strategies.
We have to make sure we find the best way for delivering the product, and get those who are involved in good programs to exchange views on the most effective ways to get this done. Then provide input with the EU on implementation rules. On a technical level, there are a number of things that need to be discussed and integrated into the implementation legislation. Our role is far from over.
Q: You’ve pointed out that once the programs are underway, it will be critical to evaluate progress in order to secure continued funding.
A: So many people have been supporting the idea that this is an important program to change behavior. Whatever decision is reached on the budget, if it is not used in full or implemented properly, efforts will not be realized. It is worth insuring the program is secured and carried on to the maximum of its possibility, and is operating with the largest chance of success for the coming years. After two or three years, an evaluation of the policy may result in the program being discontinued.
Such a program could have a snowball affect, changing eating habits and consumption at home. This has been demonstrated with Food Dudes, where parent involvement is an important element. Not only are kids sharing what they’ve learned in school with the family, they are asking for fruits and vegetables, and insisting parents buy produce during the grocery shopping trip.
Q: Is there an effort to involve supermarkets and food service operators in these schemes?
A number of programs in supermarkets market to children, offering smaller sized product designed for them, some promoting healthy lunch boxes that include a banana or apple. Maybe there could be a program developed by supermarkets that ties in directly with the school’s approach. In the UK, for example, Morrisons is already starting to link the school campaign with action in the store to encourage children to take produce. I’ve seen this interaction done well in France as well.
Also outside retail business, with the food service sector there is much potential to build off the free fruit and vegetable program, perhaps delivering healthy meals at schools, and maybe adapt serving sizes. Actions are needed to provide the school kitchen with the right equipment for preparation of healthy meals. It’s not only about making sure product is physically available, but that all the different campaigns are implemented to spread awareness and education. In other research, we found some children in urban environments didn’t know where milk came from. It’s important to bring children closer to nature and teach them about the production process, educating the youngest on why it is good to eat strawberries or Clementines.
Q: In a broader sense, does Freshfel work on unified marketing and promotion efforts?
A: When you look at Europe as is today, there is still a lot of fragmentation in the market. It requires different approaches to talk to a German consumer or a Spanish consumer. We try to have the possibility for local discussion of EU policy and help pass on views to policy makers in Brussels and facilitate communication long term. We recognized that it could be beneficial to have a single logo and image to promote a common goal and we’ve been in the process of developing one in the last year. At the same time the success of these programs will hinge on the way they are implemented, monitored and evaluated at the local level.
We can say now that among those who make policy, there is a transatlantic consensus that revolves around three key points:
That merely running agriculture policy to increase production is insufficient. We can no longer be indifferent to what people eat.
That the cost to society of obesity is such that investment in programs to promote healthy living, both diet and exercise is financially prudent.
That children are the logical place to start if we are to change eating habits.
Of course, this doesn’t stop political battles over budget, and we are hamstrung by the fact that we have to demonstrate a secondary effect — not only do we have to show that children eat more fruits and vegetables as a result of these programs but we also have to demonstrate that this results in increased health. Not an easy thing to do — especially over long periods of time.
Still one has to start somewhere and with the USDA Fresh Fruit and Vegetable Snack Program in the States and now this pan-European program, we are going to start right here.
It will be a journey, all we can say is that when Dr. Swan and Dr. DiSogra open those bottles of champagne, we want an invitation to be there to chronicle the historic moment and, just maybe, imbibe a bit of the bubbly ourselves.
Many thanks to Marc DeNaeyer of TROFI, Lawrence Swan of Fyffes and Philippe Binard of Freshfel Europe for sharing this important European story with our readers.
The world has become so complex that it is hard to figure out what is good and what is bad.
With the news being that Oil Falls Near $70 a Barrel, 16-Month Low, Alarming OPEC — meaning that oil is down over 50% from its $145.29 high in July — one would think we have cause for celebration.
After all it was just back in June that James P. Hoffa of the International Brotherhood of Teamsters told us that Obscene Gas Prices Hurt Consumers, and we were told it was urgent to get oil prices down with the Center for American Progress pushing Eight Reasons to Release Oil from the Strategic Petroleum Reserve.
Certainly lower oil prices mean some people who make a lot of trouble will have less money to make trouble with and may even have trouble keeping control of their own people. The Miami Herald ran a piece entitled, Falling Oil Prices a Bad Omen for Chàvez:
…Venezuela relies on oil for 94 percent of its foreign income, and oil prices have plummeted from their record $146 a barrel in July to about $75 a barrel on Wednesday.
If the world recession is here to stay for awhile, as most economists predict, rich countries will buy less oil.
The Goldman Sachs bank projected this week that crude prices will be at $70 a barrel at the end of the year, and may drop further to $50 a barrel in the case of a deeper-than-expected world recession. Others estimate oil prices will be at $65 a barrel.
With these prices, Chàvez will have trouble maintaining his domestic social programs, which could lead to growing social tensions. And his grandiose economic aid promises abroad will be very hard to meet.
PFC Energy, a Washington D.C.-based consulting firm, says Venezuela would need oil prices at $97 a barrel to balance its external accounts in 2009 — way beyond current oil prices.
Rose Anne Franco, one of the authors of the PFC report, told me that this estimate does not include foreign aid promises that Chàvez makes almost daily around the world, but that have not yet been included in Venezuela’s budget. That would push the threshold even higher.
Threats Watch,a non-profit organization that monitors and disseminates information about national security threats, writes of Iran’s Fear of Low Prices:
…there seems to be real fiscal concerns at hand for the Islamic Republic. Mohsin Khan, Director of Middle East and Central Asia at the International Monetary Fund, argues,
Iran’s break-even price is $90 a barrel, and that is a big issue in Iran right now. If prices dip below $90 a barrel,…then they would have to tighten their public expenditure policy, and probably cut subsidies, which would be an issue for the government there — the public would not be content.
For other oil producing nations, Khan believes break-even threshold is much lower. “The UAE will have a fiscal balance at an oil price of $23, if it goes below they would run a deficit. For Qatar, the break-even price is $24 a barrel.” Saudi Arabia’s standard of $49 a barrel is the highest amongst the Gulf Cooperation Council countries on account of its high spending “on a lot of projects right now, and oil money is used to fund these projects.”
Iran’s struggling economy might not be able to sustain a prolonged period of low oil prices. The economy is the primary issue in the upcoming presidential elections and the political factions are fractured over how to fix it. Seeing the strain that subsidies have put on his inflated budget, President Ahmadinejad is considering abolishing many of them — a move that could cause inflation to spike if not done slowly and cautiously (the official inflation number is already at 26%).
If there is a positive to take from the credit crisis fallout, this just might be it.
So there are many good things that come from lower oil prices, but there are three big problems:
First is that the reason oil prices are going down is that lower levels of economic activity are reducing demand for oil. Lower levels of economic activity mean fewer employed and less prosperity.
Second, that great sucking sound you hear is sustainability going out the window. As the economy got softer, retailers started redefining sustainability to only focus on those initiatives that clearly generated a positive financial return — as opposed to those efforts pursued for environmental or social reasons. With oil prices down 50%, a lot of this so-called “low hanging fruit” is now hanging higher. So meaningful sustainability initiatives have become much rarer. Many are now just “greenwashing”.
Third, the other sound you hear is that of brakes screeching all over the world as alternative energy projects no longer make sense and consumer sacrifices for conservation — say smaller cars — become less appealing. Whether for reasons related to environmentalism, nationalism or other motivations, many believe we need to move to a post-oil world. If this is true, then declines in oil prices will likely postpone that move.
As the economists would say, with an assumption of ceteris paribus or “all things being equal,” it is obviously better to pay less for something we buy than to pay more. The problem is that advocates of renewable energy, non-carbon-emitting energy sources, energy conservation and promoters of energy independence are not simply saying that one day we may run out of oil; they are making claims that there are externalities to our use of oil that the market price doesn’t capture because these costs have been socialized.
In other words, if we have to maintain a large Navy to sustain a big flow of oil, there is a cost to the use of imported oil that is not included in the price of oil. If our use of oil is going to cause sea levels to rise so we have to build expensive dikes and relocate populations, that is a cost of using oil not included in the price of oil.
Once oil is discovered, the cost of producing the oil is only somewhere between $4 and $9 per barrel. This means that oil production does not stop simply because oil prices fall.
This makes investors hesitant to spend money on windmills, solar power, tar sands, shale, nuclear, hydrogen cars and other technologies. All these investments will take many years to pay off but because oil is so inexpensive to produce there is no assurance that oil prices will remain high enough to allow these investments to achieve a reasonable return.
Indeed, as those in produce well know, even small changes in the supply or demand for a commodity can cause large swings in price. The current crash in oil prices — an over-50% drop — can be understood in relationship to US gasoline consumption. Over the four weeks ending October 10, consumption was down 5.2% from the previous year. Though that one statistic is not the whole story, it illustrates how quickly prices can decline.
This makes investments in alternative energy sources even more problematic. If electric cars or hydrogen fuel-cell vehicles capture, say 5% of the market, a very real consequence may be a collapse in oil prices making the fuel cell or electric vehicles uneconomical. Same thing with efforts to use the tar sands or windmills. If any of these ventures are successful enough to be significant, they can easily lead to a decline in oil prices making the alternatives uneconomic.
Perhaps the most significant public policy question before us today is this: Are the externalities involved in the use of petroleum (or carbon-emitting fuels) such that we ought to establish a minimum price (or a tax regime to achieve the same goal) so that investments can be made more confidently in conservation and alternative energy? This type of initiative would not guarantee a profit — if the windmills don’t work, if the technology is bad or the company is incompetently run, one could still lose money. One would not, however, have a market risk below a set price.
It is not exactly free enterprise, but if one sticks to eliminating externalities, even a robust free marketer could go along, and, besides, in the current environment, defending ideological purity is difficult. We suppose we could make the case that we need alternative energy more than we need Bear Stearns.
One of the reasons the world is in such terrible shape is that we have lost the capacity as a civilization to make distinctions. We owe a hat tip to Lorri Koster, Co-Chairman, Board of Directors, Vice President, Marketing at Mann Packing, for passing on this incredible piece from The Wall Street Journal:
SWITZERLAND’S GREEN POWER REVOLUTION:
ETHICISTS PONDER PLANTS’ RIGHTS
Who Is to Say Flora Don’t Have Feelings? Figuring Out What Wheat Would Want
ZURICH — For years, Swiss scientists have blithely created genetically modified rice, corn and apples. But did they ever stop to consider just how humiliating such experiments may be to plants?
That’s a question they must now ask. Last spring, this small Alpine nation began mandating that geneticists conduct their research without trampling on a plant’s dignity. …
Dr. Keller recently sought government permission to do a field trial of genetically modified wheat that has been bred to resist a fungus. He first had to debate the finer points of plant dignity with university ethicists. Then, in a written application to the government, he tried to explain why the planned trial wouldn’t “disturb the vital functions or lifestyle” of the plants. He eventually got the green light.
The rule, based on a constitutional amendment, came into being after the Swiss Parliament asked a panel of philosophers, lawyers, geneticists and theologians to establish the meaning of flora’s dignity.
“We couldn’t start laughing and tell the government we’re not going to do anything about it,” says Markus Schefer, a member of the ethics panel and a professor of law at the University of Basel. “The constitution requires it.”
In April, the team published a 22-page treatise on “the moral consideration of plants for their own sake.” It stated that vegetation has an inherent value and that it is immoral to arbitrarily harm plants by, say, “decapitation of wildflowers at the roadside without rational reason.”…
Many scientists interpret the dignity rule as applying mainly to field trials like Dr. Keller’s, but some worry it may one day apply to lab studies as well. Another gripe: While Switzerland’s stern laws defend lab animals and now plants from genetic tweaking, similar protections haven’t been granted to snails and drosophila flies, which are commonly used in genetic experiments.
It also begs an obvious, if unrelated question: For a carrot, is there a more mortifying fate than being peeled, chopped and dropped into boiling water?
“Where does it stop?” asks Yves Poirier, a molecular biologist at the laboratory of plant biotechnology at the University of Lausanne. “Should we now defend the dignity of microbes and viruses?”
Seeking clarity, Dr. Poirier recently invited the head of the Swiss ethics panel to his university. In their public discussion, Dr. Poirier said the new rules are flawed because decades of traditional plant breeding had led to widely available sterile fruit, such as seedless grapes. Things took a surreal turn when it was disclosed that some panel members believe plants have feelings, Dr. Poirier says. …
Several years ago, when Christof Sautter, a botanist at Switzerland’s Federal Institute of Technology, failed to get permission to do a local field trial on transgenic wheat, he moved the experiment to the U.S. He’s too embarrassed to mention the new dignity rule to his American colleagues. “They’ll think Swiss people are crazy,” he says….
In another unusual move, the people of Ecuador last month voted for a new constitution that is the first to recognize ecosystem rights enforceable in a court of law. Thus, the nation’s rivers, forests and air are no longer mere property, but right-bearing entities with “the right to exist, persist and…regenerate.”
Dr. Keller in Zurich has more mundane concerns. …
One morning recently, he stood by a field near Zurich where the three-year trial with transgenic wheat is under way. His observations suggest that the transgenic wheat does well in the wild. Yet Dr. Keller’s troubles aren’t over.
In June, about 35 members of a group opposed to the genetic modification of crops, invaded the test field. Clad in white overalls and masks, they scythed and trampled the plants, causing plenty of damage.
“They just cut them,” says Dr. Keller, gesturing to wheat stumps left in the field. “Where’s the dignity in that?”
It is easy to make fun of the lunacy here. Yet it is not half as crazy as it is a logical outgrowth of decisions made long ago.
When western civilization became uncomfortable with religion… when it became unwilling to see the world through a traditional Judeo/Christian lens… when it no longer believed that there was such a thing as a soul… it was left to look for alternative explanations.
Initially the argument was that value comes from possessing intellectual abilities that make one a rational being — a person. It was just a small step from this to a belief that profoundly mentally retarded people, for example, have no rights as a person. Peter Singer, a bioethics professor at Princeton, has made the case that killing an infant is nowhere near as serious a moral issue as killing an adult. Singer argues that infants simply lack all theessential characteristics to be deemed "persons" — “rationality, autonomy, and self-consciousness” — and as such “simply killing an infant is never equivalent to killing a person.”
Even this claim, though, is a thin reed to lean on. After all, on what basis do we exalt cognitive abilities? Why are these traits more important or valued than physical strength? This is the soil in which the animal rights movement grows. When initially passed, our many laws preventing cruelty to animals were not focused on concerns about animal well-being, they were focused on the notion that it is dehumanizing to be cruel to animals, and if we inure ourselves with such cruelty, surely we will be cruel to men next.
The animal rights movement changed this around. Animals now have rights of their own and human beings have no right to transgress them.
Yet, once again, this is not a distinction likely to hold. Why should it matter that one is an animal as opposed to a vegetable? Why is sentience a morally significant factor? Aren’t we just valuing it because we possess it?
So as night follows day we find people thinking as this Swiss law reflects. Not so much because sensible people actually believe that plants have rights, but because these same sophisticated people would feel ridiculous saying that God ordained something else, they would think themselves brutish if they said that humans get to rule because humans can… in effect they have lost the ability to defend their own civilization.
The irony is that these exquisitely sensitive and morally aware people will one day be crushed by barbarians who will care not a whit for these values. There is something profoundly troubling about a culture that so values tolerance that it allows itself to be destroyed by the intolerant.
You can read the report, The Dignity of Living Beings with Regard to Plants: Moral Consideration of Plants for Their Own Sake right here.