implications of biosafety regulatory costs and time delays ...€¦ · •endures an average time...
TRANSCRIPT
Program for Biosafety Systems ndash httppbsifpriinfo
Implications of Biosafety Regulatory Costs and Time Delays on RampD
Joseacute Falck Zepeda Senior Research Fellow
International Food Policy Research Institute - Program for Biosafety Systems (IFPRI - PBS)
Three basic issues related to investments and regulatory costs and benefits
1 Recuperating an amount of investment return over time
2 Recuperating an investment with increases in cost of regulatory compliance or delays on the onset of benefits
3 Regulatory and knowledge costbenefit tradeoffs
Issue 1 Recuperating a fixed amount of return over time
Model 1 A simplified ldquotypicalrdquo biotechnology developer
bull Invests US$ 136 million in a new GM crop
bull Endures an average time for regulatory approval of 48 months (Phillips McDougall 2011)
bull Financial implications of a 20 rate of return
ndash Require a total NPV of US$ 272 million
ndash Each year of delay represents an NPV of US$ 227 million
Source Smyth McDonald and Falck-Zepeda 2013
Marginal loss of net cash flow from delays in regulatory approval process (IRR = 20)
00
100
200
300
400
500
1 2 3 4 5 6 7 8 9 10 11 12 13
Marginal Loss ()
Years
Source Smyth McDonald and Falck-Zepeda 2013
Threshold
If IRR is 50 then
threshold closer to
4 years
Issues and Implications
bull Regulatory delays have a negative impact on returns to investments
bull With a 20 rate of return expect year 6 of regulatory delay to be the trigger point for suspending investment in new RampD projects
bull Current regulatory approvals taking 48 months implies that the upper boundary has likely been reached
Source Smyth McDonald and Falck-Zepeda 2013
Issue 2 Recuperating an investment with increases in cost of compliance or
delays in the onset of benefits
Case study 1 Model investor case study (continued)
bull Investor conducts investment of 136 million US$ with a desired period of recovery of 10 years
bull Investor requires a 20 rate of return on investment in real terms ndash NPV of the investment is 272 million dollars
ndash Require a stream of nominal payments of 389 million per year
bull Allow same number of payments and value of each payment but increase time to onset of the benefits
NPV with increasing time to onset of benefits
(120000000)
(100000000)
(80000000)
(60000000)
(40000000)
(20000000)
-
20000000
40000000
0 1 2 3 4 5 6 7 8 9
NP
V (
US$
)
Year after onset of benefits
NPV
Keeping same number of payments + rate or return (20)
Impact of risk and uncertainty on the stream of benefits over time
bull What happens to the riskiness of investments as the onset of benefits is pushed over time
bull Repeat NPV calculation for the ldquomodelrdquo investor using RISK to conduct simulation through repeated iterations
Risk impacts and the stream of benefits
-120
-100
-80
-60
-40
-20
0
20
40
1 2 3 4 5 6 7 8
Valu
es
in M
illio
ns
Years after the onset of benefits
5 - 95 +- 1 Std Dev Mean
Impact of risk and uncertainty in the stream of benefits
bull Dispersion around net benefits increases over time =gt Investment returns become riskier
bull Note that we have the ability to characterize recovery path and its parametershellip
bull What happens if investor cannot make a determination of the NPV
ndash Likelihood that an investment will not be made increases due to uncertainty
Case study 2 Net benefits from the adoption of GE crops in the Philippines
Bt eggplant
MVR tomato Bt rice PRSV resistant papaya
Net Benefits baseline (NPV in US$)
20466196 16748347 220373603 90765793
Effect of increasing
cost or time of
compliance
Source Bayer Norton and Falck Zepeda (2008)
Contrasting baseline net benefit levels from GE crop adoption with higher costs in the Philippines
Notes 1) Source Bayer Norton and Falck Zepeda (2008) 2) Baseline values for each technology expressed in millions US$ using a
discount rate for the estimation of Net Present Value = 5 3) Change in Net benefits defined as the total benefits estimated using the
economic surplus minus total regulatory costs
Contrasting benefit levels from GE crop adoption with larger regulatory lags in the Philippines
Notes 1) Source Bayer Norton and Falck Zepeda (2008) 2) Baseline values for each technology expressed in millions US$ using a
discount rate for the estimation of Net Present Value = 5 3) Change in Net benefits defined as the total benefits estimated using the
economic surplus minus total regulatory costs
Issues and implications
bull Regulatory costs are not likely to have a significant impact on the returns to investment
bull Exception are organizations that have budgetfinancial constraints
ndash National research organizations in developing countries
ndash International research systems developing public good products
ndash Small private firms in developing countries
bull Regulatory delays have a significant negative impact on net returns
ndash Impact on the number and type of technologies
ndash More ldquohigher returnrdquo products and less public good products
Issue 3 Regulatory and knowledge costbenefit tradeoffs
Cost and benefit tradeoffs
bull Learning process - gains in knowledge through increased experimentation andor inclusion of socioeconomic in decision making are possible
bull Delays may have a positive impact if it helps avoid potential negative impacts
bull Face the issue of irreversibility ndash Costs and benefits that may not be ever reversed
ndash One foundation of the precautionary principleapproach and regulatory protocols such as the Cartagena Protocol on Biosafety
Case study 3 The case of fungal resistant bananas in Uganda
bull Ex ante study ndash used the real options approach
bull Conclusions ndash If approval delayed forego
potential annual (social) benefits of +- US$200 million
ndash Maximum total development costs cannot exceed US$108 million
ndash Even considering irreversibility adoption still benefits Uganda
Citation Kikulwe E J Wesseler and J Falck-Zepeda 2008 Introducing a Genetically Modified
Banana in Uganda Social Benefits Costs and Consumer Perceptions IFPRI Discussion Paper
767 Environment and Production Technology Division International Food Policy Research
Institute Washington D C USA
Copyright Kikulwe copy 2009
Potential implications for decision making (1)
bull Gain more andor better information about technology impacts for decision making - may support valuable technologies
bull Need to balance gains in information additional costs amp effort and impacts on innovation
bull Potential for introducing uncertainty that can lead to an unworkable system
Potential implications for decision making (2)
bull Additional requirements will increase the cost of regulatory compliance
bull Potentially regulatory delays will likely cause a
ndash reduction in the number of technologies especially those released by the public sector and cropstraits of a public good nature
ndash some public sector institutions may not be able to deploy technologies due to fixed costs necessary to enter market
Time to change and develop functional biosafety and decision making systems
ldquoTo continue making things as we have done until now is not an option we must develop a shared vision between agriculture and environment agendas and move towards a paradigm shiftrdquo ldquoWe must face the challenges with technology not ideologyhellipincluding developing proper governance and regulatory processes that workrdquo From a declaration of scientists at the 2012 Central American Conference on Agriculture and Environment (CIAA)
SOCIO-ECONOMIC CONSIDERATIONS IN BIOTECHNOLOGY REGULATION Edited by bull Karinne Ludlow Monash University Australia bull Stuart J Smyth University of Saskatchewan Canada and bull Joseacute Falck-Zepeda International Food Policy Research Institute
USA Discusses 15 methodological areas ranging from impacts on producers and society and environment to trade indigenous knowledge and ethicalequity Includes also discussions on background and issues related to decision making Springer Editors Spring 2014
Joseacute Benjamin Falck-Zepeda PhD
Senior Research Fellow Leader Policy Team Program for Biosafety Systems
IFPRI 2033 K Street NW
Washington DC 20006-1002 USA
jfalck-zepedacgiarorg
Brief biopubs httpwwwifpriorgstaffprofilejose-falck-zepeda Blog httpsocioeconomicbiosafetywordpresscom
Follow me on Twitter josefalck
Food safety issue
RISK scientific RISK socially constructed RISK modern RISK political
High cholesterol foods High Moderate Moderate Low - moderate
Foods high in sugar High Moderate Moderate - high Moderate
High sodium foods Moderate Low Moderate Low
Dead mouse in beverage bottle
Low ndash high High High Low
Dead frog in package of frozen vegetables
Low ndash moderate
High High Low
E-coli in hamburgers High Low Moderate Low
Salmonella High Low Moderate Low
Mycotoxins High Moderate High - moderate Low
Filth and extraneous materials (insect fragments stones twigs rodent manure)
High High High Low
GM foods Low High High High
Three basic issues related to investments and regulatory costs and benefits
1 Recuperating an amount of investment return over time
2 Recuperating an investment with increases in cost of regulatory compliance or delays on the onset of benefits
3 Regulatory and knowledge costbenefit tradeoffs
Issue 1 Recuperating a fixed amount of return over time
Model 1 A simplified ldquotypicalrdquo biotechnology developer
bull Invests US$ 136 million in a new GM crop
bull Endures an average time for regulatory approval of 48 months (Phillips McDougall 2011)
bull Financial implications of a 20 rate of return
ndash Require a total NPV of US$ 272 million
ndash Each year of delay represents an NPV of US$ 227 million
Source Smyth McDonald and Falck-Zepeda 2013
Marginal loss of net cash flow from delays in regulatory approval process (IRR = 20)
00
100
200
300
400
500
1 2 3 4 5 6 7 8 9 10 11 12 13
Marginal Loss ()
Years
Source Smyth McDonald and Falck-Zepeda 2013
Threshold
If IRR is 50 then
threshold closer to
4 years
Issues and Implications
bull Regulatory delays have a negative impact on returns to investments
bull With a 20 rate of return expect year 6 of regulatory delay to be the trigger point for suspending investment in new RampD projects
bull Current regulatory approvals taking 48 months implies that the upper boundary has likely been reached
Source Smyth McDonald and Falck-Zepeda 2013
Issue 2 Recuperating an investment with increases in cost of compliance or
delays in the onset of benefits
Case study 1 Model investor case study (continued)
bull Investor conducts investment of 136 million US$ with a desired period of recovery of 10 years
bull Investor requires a 20 rate of return on investment in real terms ndash NPV of the investment is 272 million dollars
ndash Require a stream of nominal payments of 389 million per year
bull Allow same number of payments and value of each payment but increase time to onset of the benefits
NPV with increasing time to onset of benefits
(120000000)
(100000000)
(80000000)
(60000000)
(40000000)
(20000000)
-
20000000
40000000
0 1 2 3 4 5 6 7 8 9
NP
V (
US$
)
Year after onset of benefits
NPV
Keeping same number of payments + rate or return (20)
Impact of risk and uncertainty on the stream of benefits over time
bull What happens to the riskiness of investments as the onset of benefits is pushed over time
bull Repeat NPV calculation for the ldquomodelrdquo investor using RISK to conduct simulation through repeated iterations
Risk impacts and the stream of benefits
-120
-100
-80
-60
-40
-20
0
20
40
1 2 3 4 5 6 7 8
Valu
es
in M
illio
ns
Years after the onset of benefits
5 - 95 +- 1 Std Dev Mean
Impact of risk and uncertainty in the stream of benefits
bull Dispersion around net benefits increases over time =gt Investment returns become riskier
bull Note that we have the ability to characterize recovery path and its parametershellip
bull What happens if investor cannot make a determination of the NPV
ndash Likelihood that an investment will not be made increases due to uncertainty
Case study 2 Net benefits from the adoption of GE crops in the Philippines
Bt eggplant
MVR tomato Bt rice PRSV resistant papaya
Net Benefits baseline (NPV in US$)
20466196 16748347 220373603 90765793
Effect of increasing
cost or time of
compliance
Source Bayer Norton and Falck Zepeda (2008)
Contrasting baseline net benefit levels from GE crop adoption with higher costs in the Philippines
Notes 1) Source Bayer Norton and Falck Zepeda (2008) 2) Baseline values for each technology expressed in millions US$ using a
discount rate for the estimation of Net Present Value = 5 3) Change in Net benefits defined as the total benefits estimated using the
economic surplus minus total regulatory costs
Contrasting benefit levels from GE crop adoption with larger regulatory lags in the Philippines
Notes 1) Source Bayer Norton and Falck Zepeda (2008) 2) Baseline values for each technology expressed in millions US$ using a
discount rate for the estimation of Net Present Value = 5 3) Change in Net benefits defined as the total benefits estimated using the
economic surplus minus total regulatory costs
Issues and implications
bull Regulatory costs are not likely to have a significant impact on the returns to investment
bull Exception are organizations that have budgetfinancial constraints
ndash National research organizations in developing countries
ndash International research systems developing public good products
ndash Small private firms in developing countries
bull Regulatory delays have a significant negative impact on net returns
ndash Impact on the number and type of technologies
ndash More ldquohigher returnrdquo products and less public good products
Issue 3 Regulatory and knowledge costbenefit tradeoffs
Cost and benefit tradeoffs
bull Learning process - gains in knowledge through increased experimentation andor inclusion of socioeconomic in decision making are possible
bull Delays may have a positive impact if it helps avoid potential negative impacts
bull Face the issue of irreversibility ndash Costs and benefits that may not be ever reversed
ndash One foundation of the precautionary principleapproach and regulatory protocols such as the Cartagena Protocol on Biosafety
Case study 3 The case of fungal resistant bananas in Uganda
bull Ex ante study ndash used the real options approach
bull Conclusions ndash If approval delayed forego
potential annual (social) benefits of +- US$200 million
ndash Maximum total development costs cannot exceed US$108 million
ndash Even considering irreversibility adoption still benefits Uganda
Citation Kikulwe E J Wesseler and J Falck-Zepeda 2008 Introducing a Genetically Modified
Banana in Uganda Social Benefits Costs and Consumer Perceptions IFPRI Discussion Paper
767 Environment and Production Technology Division International Food Policy Research
Institute Washington D C USA
Copyright Kikulwe copy 2009
Potential implications for decision making (1)
bull Gain more andor better information about technology impacts for decision making - may support valuable technologies
bull Need to balance gains in information additional costs amp effort and impacts on innovation
bull Potential for introducing uncertainty that can lead to an unworkable system
Potential implications for decision making (2)
bull Additional requirements will increase the cost of regulatory compliance
bull Potentially regulatory delays will likely cause a
ndash reduction in the number of technologies especially those released by the public sector and cropstraits of a public good nature
ndash some public sector institutions may not be able to deploy technologies due to fixed costs necessary to enter market
Time to change and develop functional biosafety and decision making systems
ldquoTo continue making things as we have done until now is not an option we must develop a shared vision between agriculture and environment agendas and move towards a paradigm shiftrdquo ldquoWe must face the challenges with technology not ideologyhellipincluding developing proper governance and regulatory processes that workrdquo From a declaration of scientists at the 2012 Central American Conference on Agriculture and Environment (CIAA)
SOCIO-ECONOMIC CONSIDERATIONS IN BIOTECHNOLOGY REGULATION Edited by bull Karinne Ludlow Monash University Australia bull Stuart J Smyth University of Saskatchewan Canada and bull Joseacute Falck-Zepeda International Food Policy Research Institute
USA Discusses 15 methodological areas ranging from impacts on producers and society and environment to trade indigenous knowledge and ethicalequity Includes also discussions on background and issues related to decision making Springer Editors Spring 2014
Joseacute Benjamin Falck-Zepeda PhD
Senior Research Fellow Leader Policy Team Program for Biosafety Systems
IFPRI 2033 K Street NW
Washington DC 20006-1002 USA
jfalck-zepedacgiarorg
Brief biopubs httpwwwifpriorgstaffprofilejose-falck-zepeda Blog httpsocioeconomicbiosafetywordpresscom
Follow me on Twitter josefalck
Food safety issue
RISK scientific RISK socially constructed RISK modern RISK political
High cholesterol foods High Moderate Moderate Low - moderate
Foods high in sugar High Moderate Moderate - high Moderate
High sodium foods Moderate Low Moderate Low
Dead mouse in beverage bottle
Low ndash high High High Low
Dead frog in package of frozen vegetables
Low ndash moderate
High High Low
E-coli in hamburgers High Low Moderate Low
Salmonella High Low Moderate Low
Mycotoxins High Moderate High - moderate Low
Filth and extraneous materials (insect fragments stones twigs rodent manure)
High High High Low
GM foods Low High High High
Issue 1 Recuperating a fixed amount of return over time
Model 1 A simplified ldquotypicalrdquo biotechnology developer
bull Invests US$ 136 million in a new GM crop
bull Endures an average time for regulatory approval of 48 months (Phillips McDougall 2011)
bull Financial implications of a 20 rate of return
ndash Require a total NPV of US$ 272 million
ndash Each year of delay represents an NPV of US$ 227 million
Source Smyth McDonald and Falck-Zepeda 2013
Marginal loss of net cash flow from delays in regulatory approval process (IRR = 20)
00
100
200
300
400
500
1 2 3 4 5 6 7 8 9 10 11 12 13
Marginal Loss ()
Years
Source Smyth McDonald and Falck-Zepeda 2013
Threshold
If IRR is 50 then
threshold closer to
4 years
Issues and Implications
bull Regulatory delays have a negative impact on returns to investments
bull With a 20 rate of return expect year 6 of regulatory delay to be the trigger point for suspending investment in new RampD projects
bull Current regulatory approvals taking 48 months implies that the upper boundary has likely been reached
Source Smyth McDonald and Falck-Zepeda 2013
Issue 2 Recuperating an investment with increases in cost of compliance or
delays in the onset of benefits
Case study 1 Model investor case study (continued)
bull Investor conducts investment of 136 million US$ with a desired period of recovery of 10 years
bull Investor requires a 20 rate of return on investment in real terms ndash NPV of the investment is 272 million dollars
ndash Require a stream of nominal payments of 389 million per year
bull Allow same number of payments and value of each payment but increase time to onset of the benefits
NPV with increasing time to onset of benefits
(120000000)
(100000000)
(80000000)
(60000000)
(40000000)
(20000000)
-
20000000
40000000
0 1 2 3 4 5 6 7 8 9
NP
V (
US$
)
Year after onset of benefits
NPV
Keeping same number of payments + rate or return (20)
Impact of risk and uncertainty on the stream of benefits over time
bull What happens to the riskiness of investments as the onset of benefits is pushed over time
bull Repeat NPV calculation for the ldquomodelrdquo investor using RISK to conduct simulation through repeated iterations
Risk impacts and the stream of benefits
-120
-100
-80
-60
-40
-20
0
20
40
1 2 3 4 5 6 7 8
Valu
es
in M
illio
ns
Years after the onset of benefits
5 - 95 +- 1 Std Dev Mean
Impact of risk and uncertainty in the stream of benefits
bull Dispersion around net benefits increases over time =gt Investment returns become riskier
bull Note that we have the ability to characterize recovery path and its parametershellip
bull What happens if investor cannot make a determination of the NPV
ndash Likelihood that an investment will not be made increases due to uncertainty
Case study 2 Net benefits from the adoption of GE crops in the Philippines
Bt eggplant
MVR tomato Bt rice PRSV resistant papaya
Net Benefits baseline (NPV in US$)
20466196 16748347 220373603 90765793
Effect of increasing
cost or time of
compliance
Source Bayer Norton and Falck Zepeda (2008)
Contrasting baseline net benefit levels from GE crop adoption with higher costs in the Philippines
Notes 1) Source Bayer Norton and Falck Zepeda (2008) 2) Baseline values for each technology expressed in millions US$ using a
discount rate for the estimation of Net Present Value = 5 3) Change in Net benefits defined as the total benefits estimated using the
economic surplus minus total regulatory costs
Contrasting benefit levels from GE crop adoption with larger regulatory lags in the Philippines
Notes 1) Source Bayer Norton and Falck Zepeda (2008) 2) Baseline values for each technology expressed in millions US$ using a
discount rate for the estimation of Net Present Value = 5 3) Change in Net benefits defined as the total benefits estimated using the
economic surplus minus total regulatory costs
Issues and implications
bull Regulatory costs are not likely to have a significant impact on the returns to investment
bull Exception are organizations that have budgetfinancial constraints
ndash National research organizations in developing countries
ndash International research systems developing public good products
ndash Small private firms in developing countries
bull Regulatory delays have a significant negative impact on net returns
ndash Impact on the number and type of technologies
ndash More ldquohigher returnrdquo products and less public good products
Issue 3 Regulatory and knowledge costbenefit tradeoffs
Cost and benefit tradeoffs
bull Learning process - gains in knowledge through increased experimentation andor inclusion of socioeconomic in decision making are possible
bull Delays may have a positive impact if it helps avoid potential negative impacts
bull Face the issue of irreversibility ndash Costs and benefits that may not be ever reversed
ndash One foundation of the precautionary principleapproach and regulatory protocols such as the Cartagena Protocol on Biosafety
Case study 3 The case of fungal resistant bananas in Uganda
bull Ex ante study ndash used the real options approach
bull Conclusions ndash If approval delayed forego
potential annual (social) benefits of +- US$200 million
ndash Maximum total development costs cannot exceed US$108 million
ndash Even considering irreversibility adoption still benefits Uganda
Citation Kikulwe E J Wesseler and J Falck-Zepeda 2008 Introducing a Genetically Modified
Banana in Uganda Social Benefits Costs and Consumer Perceptions IFPRI Discussion Paper
767 Environment and Production Technology Division International Food Policy Research
Institute Washington D C USA
Copyright Kikulwe copy 2009
Potential implications for decision making (1)
bull Gain more andor better information about technology impacts for decision making - may support valuable technologies
bull Need to balance gains in information additional costs amp effort and impacts on innovation
bull Potential for introducing uncertainty that can lead to an unworkable system
Potential implications for decision making (2)
bull Additional requirements will increase the cost of regulatory compliance
bull Potentially regulatory delays will likely cause a
ndash reduction in the number of technologies especially those released by the public sector and cropstraits of a public good nature
ndash some public sector institutions may not be able to deploy technologies due to fixed costs necessary to enter market
Time to change and develop functional biosafety and decision making systems
ldquoTo continue making things as we have done until now is not an option we must develop a shared vision between agriculture and environment agendas and move towards a paradigm shiftrdquo ldquoWe must face the challenges with technology not ideologyhellipincluding developing proper governance and regulatory processes that workrdquo From a declaration of scientists at the 2012 Central American Conference on Agriculture and Environment (CIAA)
SOCIO-ECONOMIC CONSIDERATIONS IN BIOTECHNOLOGY REGULATION Edited by bull Karinne Ludlow Monash University Australia bull Stuart J Smyth University of Saskatchewan Canada and bull Joseacute Falck-Zepeda International Food Policy Research Institute
USA Discusses 15 methodological areas ranging from impacts on producers and society and environment to trade indigenous knowledge and ethicalequity Includes also discussions on background and issues related to decision making Springer Editors Spring 2014
Joseacute Benjamin Falck-Zepeda PhD
Senior Research Fellow Leader Policy Team Program for Biosafety Systems
IFPRI 2033 K Street NW
Washington DC 20006-1002 USA
jfalck-zepedacgiarorg
Brief biopubs httpwwwifpriorgstaffprofilejose-falck-zepeda Blog httpsocioeconomicbiosafetywordpresscom
Follow me on Twitter josefalck
Food safety issue
RISK scientific RISK socially constructed RISK modern RISK political
High cholesterol foods High Moderate Moderate Low - moderate
Foods high in sugar High Moderate Moderate - high Moderate
High sodium foods Moderate Low Moderate Low
Dead mouse in beverage bottle
Low ndash high High High Low
Dead frog in package of frozen vegetables
Low ndash moderate
High High Low
E-coli in hamburgers High Low Moderate Low
Salmonella High Low Moderate Low
Mycotoxins High Moderate High - moderate Low
Filth and extraneous materials (insect fragments stones twigs rodent manure)
High High High Low
GM foods Low High High High
Model 1 A simplified ldquotypicalrdquo biotechnology developer
bull Invests US$ 136 million in a new GM crop
bull Endures an average time for regulatory approval of 48 months (Phillips McDougall 2011)
bull Financial implications of a 20 rate of return
ndash Require a total NPV of US$ 272 million
ndash Each year of delay represents an NPV of US$ 227 million
Source Smyth McDonald and Falck-Zepeda 2013
Marginal loss of net cash flow from delays in regulatory approval process (IRR = 20)
00
100
200
300
400
500
1 2 3 4 5 6 7 8 9 10 11 12 13
Marginal Loss ()
Years
Source Smyth McDonald and Falck-Zepeda 2013
Threshold
If IRR is 50 then
threshold closer to
4 years
Issues and Implications
bull Regulatory delays have a negative impact on returns to investments
bull With a 20 rate of return expect year 6 of regulatory delay to be the trigger point for suspending investment in new RampD projects
bull Current regulatory approvals taking 48 months implies that the upper boundary has likely been reached
Source Smyth McDonald and Falck-Zepeda 2013
Issue 2 Recuperating an investment with increases in cost of compliance or
delays in the onset of benefits
Case study 1 Model investor case study (continued)
bull Investor conducts investment of 136 million US$ with a desired period of recovery of 10 years
bull Investor requires a 20 rate of return on investment in real terms ndash NPV of the investment is 272 million dollars
ndash Require a stream of nominal payments of 389 million per year
bull Allow same number of payments and value of each payment but increase time to onset of the benefits
NPV with increasing time to onset of benefits
(120000000)
(100000000)
(80000000)
(60000000)
(40000000)
(20000000)
-
20000000
40000000
0 1 2 3 4 5 6 7 8 9
NP
V (
US$
)
Year after onset of benefits
NPV
Keeping same number of payments + rate or return (20)
Impact of risk and uncertainty on the stream of benefits over time
bull What happens to the riskiness of investments as the onset of benefits is pushed over time
bull Repeat NPV calculation for the ldquomodelrdquo investor using RISK to conduct simulation through repeated iterations
Risk impacts and the stream of benefits
-120
-100
-80
-60
-40
-20
0
20
40
1 2 3 4 5 6 7 8
Valu
es
in M
illio
ns
Years after the onset of benefits
5 - 95 +- 1 Std Dev Mean
Impact of risk and uncertainty in the stream of benefits
bull Dispersion around net benefits increases over time =gt Investment returns become riskier
bull Note that we have the ability to characterize recovery path and its parametershellip
bull What happens if investor cannot make a determination of the NPV
ndash Likelihood that an investment will not be made increases due to uncertainty
Case study 2 Net benefits from the adoption of GE crops in the Philippines
Bt eggplant
MVR tomato Bt rice PRSV resistant papaya
Net Benefits baseline (NPV in US$)
20466196 16748347 220373603 90765793
Effect of increasing
cost or time of
compliance
Source Bayer Norton and Falck Zepeda (2008)
Contrasting baseline net benefit levels from GE crop adoption with higher costs in the Philippines
Notes 1) Source Bayer Norton and Falck Zepeda (2008) 2) Baseline values for each technology expressed in millions US$ using a
discount rate for the estimation of Net Present Value = 5 3) Change in Net benefits defined as the total benefits estimated using the
economic surplus minus total regulatory costs
Contrasting benefit levels from GE crop adoption with larger regulatory lags in the Philippines
Notes 1) Source Bayer Norton and Falck Zepeda (2008) 2) Baseline values for each technology expressed in millions US$ using a
discount rate for the estimation of Net Present Value = 5 3) Change in Net benefits defined as the total benefits estimated using the
economic surplus minus total regulatory costs
Issues and implications
bull Regulatory costs are not likely to have a significant impact on the returns to investment
bull Exception are organizations that have budgetfinancial constraints
ndash National research organizations in developing countries
ndash International research systems developing public good products
ndash Small private firms in developing countries
bull Regulatory delays have a significant negative impact on net returns
ndash Impact on the number and type of technologies
ndash More ldquohigher returnrdquo products and less public good products
Issue 3 Regulatory and knowledge costbenefit tradeoffs
Cost and benefit tradeoffs
bull Learning process - gains in knowledge through increased experimentation andor inclusion of socioeconomic in decision making are possible
bull Delays may have a positive impact if it helps avoid potential negative impacts
bull Face the issue of irreversibility ndash Costs and benefits that may not be ever reversed
ndash One foundation of the precautionary principleapproach and regulatory protocols such as the Cartagena Protocol on Biosafety
Case study 3 The case of fungal resistant bananas in Uganda
bull Ex ante study ndash used the real options approach
bull Conclusions ndash If approval delayed forego
potential annual (social) benefits of +- US$200 million
ndash Maximum total development costs cannot exceed US$108 million
ndash Even considering irreversibility adoption still benefits Uganda
Citation Kikulwe E J Wesseler and J Falck-Zepeda 2008 Introducing a Genetically Modified
Banana in Uganda Social Benefits Costs and Consumer Perceptions IFPRI Discussion Paper
767 Environment and Production Technology Division International Food Policy Research
Institute Washington D C USA
Copyright Kikulwe copy 2009
Potential implications for decision making (1)
bull Gain more andor better information about technology impacts for decision making - may support valuable technologies
bull Need to balance gains in information additional costs amp effort and impacts on innovation
bull Potential for introducing uncertainty that can lead to an unworkable system
Potential implications for decision making (2)
bull Additional requirements will increase the cost of regulatory compliance
bull Potentially regulatory delays will likely cause a
ndash reduction in the number of technologies especially those released by the public sector and cropstraits of a public good nature
ndash some public sector institutions may not be able to deploy technologies due to fixed costs necessary to enter market
Time to change and develop functional biosafety and decision making systems
ldquoTo continue making things as we have done until now is not an option we must develop a shared vision between agriculture and environment agendas and move towards a paradigm shiftrdquo ldquoWe must face the challenges with technology not ideologyhellipincluding developing proper governance and regulatory processes that workrdquo From a declaration of scientists at the 2012 Central American Conference on Agriculture and Environment (CIAA)
SOCIO-ECONOMIC CONSIDERATIONS IN BIOTECHNOLOGY REGULATION Edited by bull Karinne Ludlow Monash University Australia bull Stuart J Smyth University of Saskatchewan Canada and bull Joseacute Falck-Zepeda International Food Policy Research Institute
USA Discusses 15 methodological areas ranging from impacts on producers and society and environment to trade indigenous knowledge and ethicalequity Includes also discussions on background and issues related to decision making Springer Editors Spring 2014
Joseacute Benjamin Falck-Zepeda PhD
Senior Research Fellow Leader Policy Team Program for Biosafety Systems
IFPRI 2033 K Street NW
Washington DC 20006-1002 USA
jfalck-zepedacgiarorg
Brief biopubs httpwwwifpriorgstaffprofilejose-falck-zepeda Blog httpsocioeconomicbiosafetywordpresscom
Follow me on Twitter josefalck
Food safety issue
RISK scientific RISK socially constructed RISK modern RISK political
High cholesterol foods High Moderate Moderate Low - moderate
Foods high in sugar High Moderate Moderate - high Moderate
High sodium foods Moderate Low Moderate Low
Dead mouse in beverage bottle
Low ndash high High High Low
Dead frog in package of frozen vegetables
Low ndash moderate
High High Low
E-coli in hamburgers High Low Moderate Low
Salmonella High Low Moderate Low
Mycotoxins High Moderate High - moderate Low
Filth and extraneous materials (insect fragments stones twigs rodent manure)
High High High Low
GM foods Low High High High
Marginal loss of net cash flow from delays in regulatory approval process (IRR = 20)
00
100
200
300
400
500
1 2 3 4 5 6 7 8 9 10 11 12 13
Marginal Loss ()
Years
Source Smyth McDonald and Falck-Zepeda 2013
Threshold
If IRR is 50 then
threshold closer to
4 years
Issues and Implications
bull Regulatory delays have a negative impact on returns to investments
bull With a 20 rate of return expect year 6 of regulatory delay to be the trigger point for suspending investment in new RampD projects
bull Current regulatory approvals taking 48 months implies that the upper boundary has likely been reached
Source Smyth McDonald and Falck-Zepeda 2013
Issue 2 Recuperating an investment with increases in cost of compliance or
delays in the onset of benefits
Case study 1 Model investor case study (continued)
bull Investor conducts investment of 136 million US$ with a desired period of recovery of 10 years
bull Investor requires a 20 rate of return on investment in real terms ndash NPV of the investment is 272 million dollars
ndash Require a stream of nominal payments of 389 million per year
bull Allow same number of payments and value of each payment but increase time to onset of the benefits
NPV with increasing time to onset of benefits
(120000000)
(100000000)
(80000000)
(60000000)
(40000000)
(20000000)
-
20000000
40000000
0 1 2 3 4 5 6 7 8 9
NP
V (
US$
)
Year after onset of benefits
NPV
Keeping same number of payments + rate or return (20)
Impact of risk and uncertainty on the stream of benefits over time
bull What happens to the riskiness of investments as the onset of benefits is pushed over time
bull Repeat NPV calculation for the ldquomodelrdquo investor using RISK to conduct simulation through repeated iterations
Risk impacts and the stream of benefits
-120
-100
-80
-60
-40
-20
0
20
40
1 2 3 4 5 6 7 8
Valu
es
in M
illio
ns
Years after the onset of benefits
5 - 95 +- 1 Std Dev Mean
Impact of risk and uncertainty in the stream of benefits
bull Dispersion around net benefits increases over time =gt Investment returns become riskier
bull Note that we have the ability to characterize recovery path and its parametershellip
bull What happens if investor cannot make a determination of the NPV
ndash Likelihood that an investment will not be made increases due to uncertainty
Case study 2 Net benefits from the adoption of GE crops in the Philippines
Bt eggplant
MVR tomato Bt rice PRSV resistant papaya
Net Benefits baseline (NPV in US$)
20466196 16748347 220373603 90765793
Effect of increasing
cost or time of
compliance
Source Bayer Norton and Falck Zepeda (2008)
Contrasting baseline net benefit levels from GE crop adoption with higher costs in the Philippines
Notes 1) Source Bayer Norton and Falck Zepeda (2008) 2) Baseline values for each technology expressed in millions US$ using a
discount rate for the estimation of Net Present Value = 5 3) Change in Net benefits defined as the total benefits estimated using the
economic surplus minus total regulatory costs
Contrasting benefit levels from GE crop adoption with larger regulatory lags in the Philippines
Notes 1) Source Bayer Norton and Falck Zepeda (2008) 2) Baseline values for each technology expressed in millions US$ using a
discount rate for the estimation of Net Present Value = 5 3) Change in Net benefits defined as the total benefits estimated using the
economic surplus minus total regulatory costs
Issues and implications
bull Regulatory costs are not likely to have a significant impact on the returns to investment
bull Exception are organizations that have budgetfinancial constraints
ndash National research organizations in developing countries
ndash International research systems developing public good products
ndash Small private firms in developing countries
bull Regulatory delays have a significant negative impact on net returns
ndash Impact on the number and type of technologies
ndash More ldquohigher returnrdquo products and less public good products
Issue 3 Regulatory and knowledge costbenefit tradeoffs
Cost and benefit tradeoffs
bull Learning process - gains in knowledge through increased experimentation andor inclusion of socioeconomic in decision making are possible
bull Delays may have a positive impact if it helps avoid potential negative impacts
bull Face the issue of irreversibility ndash Costs and benefits that may not be ever reversed
ndash One foundation of the precautionary principleapproach and regulatory protocols such as the Cartagena Protocol on Biosafety
Case study 3 The case of fungal resistant bananas in Uganda
bull Ex ante study ndash used the real options approach
bull Conclusions ndash If approval delayed forego
potential annual (social) benefits of +- US$200 million
ndash Maximum total development costs cannot exceed US$108 million
ndash Even considering irreversibility adoption still benefits Uganda
Citation Kikulwe E J Wesseler and J Falck-Zepeda 2008 Introducing a Genetically Modified
Banana in Uganda Social Benefits Costs and Consumer Perceptions IFPRI Discussion Paper
767 Environment and Production Technology Division International Food Policy Research
Institute Washington D C USA
Copyright Kikulwe copy 2009
Potential implications for decision making (1)
bull Gain more andor better information about technology impacts for decision making - may support valuable technologies
bull Need to balance gains in information additional costs amp effort and impacts on innovation
bull Potential for introducing uncertainty that can lead to an unworkable system
Potential implications for decision making (2)
bull Additional requirements will increase the cost of regulatory compliance
bull Potentially regulatory delays will likely cause a
ndash reduction in the number of technologies especially those released by the public sector and cropstraits of a public good nature
ndash some public sector institutions may not be able to deploy technologies due to fixed costs necessary to enter market
Time to change and develop functional biosafety and decision making systems
ldquoTo continue making things as we have done until now is not an option we must develop a shared vision between agriculture and environment agendas and move towards a paradigm shiftrdquo ldquoWe must face the challenges with technology not ideologyhellipincluding developing proper governance and regulatory processes that workrdquo From a declaration of scientists at the 2012 Central American Conference on Agriculture and Environment (CIAA)
SOCIO-ECONOMIC CONSIDERATIONS IN BIOTECHNOLOGY REGULATION Edited by bull Karinne Ludlow Monash University Australia bull Stuart J Smyth University of Saskatchewan Canada and bull Joseacute Falck-Zepeda International Food Policy Research Institute
USA Discusses 15 methodological areas ranging from impacts on producers and society and environment to trade indigenous knowledge and ethicalequity Includes also discussions on background and issues related to decision making Springer Editors Spring 2014
Joseacute Benjamin Falck-Zepeda PhD
Senior Research Fellow Leader Policy Team Program for Biosafety Systems
IFPRI 2033 K Street NW
Washington DC 20006-1002 USA
jfalck-zepedacgiarorg
Brief biopubs httpwwwifpriorgstaffprofilejose-falck-zepeda Blog httpsocioeconomicbiosafetywordpresscom
Follow me on Twitter josefalck
Food safety issue
RISK scientific RISK socially constructed RISK modern RISK political
High cholesterol foods High Moderate Moderate Low - moderate
Foods high in sugar High Moderate Moderate - high Moderate
High sodium foods Moderate Low Moderate Low
Dead mouse in beverage bottle
Low ndash high High High Low
Dead frog in package of frozen vegetables
Low ndash moderate
High High Low
E-coli in hamburgers High Low Moderate Low
Salmonella High Low Moderate Low
Mycotoxins High Moderate High - moderate Low
Filth and extraneous materials (insect fragments stones twigs rodent manure)
High High High Low
GM foods Low High High High
Issues and Implications
bull Regulatory delays have a negative impact on returns to investments
bull With a 20 rate of return expect year 6 of regulatory delay to be the trigger point for suspending investment in new RampD projects
bull Current regulatory approvals taking 48 months implies that the upper boundary has likely been reached
Source Smyth McDonald and Falck-Zepeda 2013
Issue 2 Recuperating an investment with increases in cost of compliance or
delays in the onset of benefits
Case study 1 Model investor case study (continued)
bull Investor conducts investment of 136 million US$ with a desired period of recovery of 10 years
bull Investor requires a 20 rate of return on investment in real terms ndash NPV of the investment is 272 million dollars
ndash Require a stream of nominal payments of 389 million per year
bull Allow same number of payments and value of each payment but increase time to onset of the benefits
NPV with increasing time to onset of benefits
(120000000)
(100000000)
(80000000)
(60000000)
(40000000)
(20000000)
-
20000000
40000000
0 1 2 3 4 5 6 7 8 9
NP
V (
US$
)
Year after onset of benefits
NPV
Keeping same number of payments + rate or return (20)
Impact of risk and uncertainty on the stream of benefits over time
bull What happens to the riskiness of investments as the onset of benefits is pushed over time
bull Repeat NPV calculation for the ldquomodelrdquo investor using RISK to conduct simulation through repeated iterations
Risk impacts and the stream of benefits
-120
-100
-80
-60
-40
-20
0
20
40
1 2 3 4 5 6 7 8
Valu
es
in M
illio
ns
Years after the onset of benefits
5 - 95 +- 1 Std Dev Mean
Impact of risk and uncertainty in the stream of benefits
bull Dispersion around net benefits increases over time =gt Investment returns become riskier
bull Note that we have the ability to characterize recovery path and its parametershellip
bull What happens if investor cannot make a determination of the NPV
ndash Likelihood that an investment will not be made increases due to uncertainty
Case study 2 Net benefits from the adoption of GE crops in the Philippines
Bt eggplant
MVR tomato Bt rice PRSV resistant papaya
Net Benefits baseline (NPV in US$)
20466196 16748347 220373603 90765793
Effect of increasing
cost or time of
compliance
Source Bayer Norton and Falck Zepeda (2008)
Contrasting baseline net benefit levels from GE crop adoption with higher costs in the Philippines
Notes 1) Source Bayer Norton and Falck Zepeda (2008) 2) Baseline values for each technology expressed in millions US$ using a
discount rate for the estimation of Net Present Value = 5 3) Change in Net benefits defined as the total benefits estimated using the
economic surplus minus total regulatory costs
Contrasting benefit levels from GE crop adoption with larger regulatory lags in the Philippines
Notes 1) Source Bayer Norton and Falck Zepeda (2008) 2) Baseline values for each technology expressed in millions US$ using a
discount rate for the estimation of Net Present Value = 5 3) Change in Net benefits defined as the total benefits estimated using the
economic surplus minus total regulatory costs
Issues and implications
bull Regulatory costs are not likely to have a significant impact on the returns to investment
bull Exception are organizations that have budgetfinancial constraints
ndash National research organizations in developing countries
ndash International research systems developing public good products
ndash Small private firms in developing countries
bull Regulatory delays have a significant negative impact on net returns
ndash Impact on the number and type of technologies
ndash More ldquohigher returnrdquo products and less public good products
Issue 3 Regulatory and knowledge costbenefit tradeoffs
Cost and benefit tradeoffs
bull Learning process - gains in knowledge through increased experimentation andor inclusion of socioeconomic in decision making are possible
bull Delays may have a positive impact if it helps avoid potential negative impacts
bull Face the issue of irreversibility ndash Costs and benefits that may not be ever reversed
ndash One foundation of the precautionary principleapproach and regulatory protocols such as the Cartagena Protocol on Biosafety
Case study 3 The case of fungal resistant bananas in Uganda
bull Ex ante study ndash used the real options approach
bull Conclusions ndash If approval delayed forego
potential annual (social) benefits of +- US$200 million
ndash Maximum total development costs cannot exceed US$108 million
ndash Even considering irreversibility adoption still benefits Uganda
Citation Kikulwe E J Wesseler and J Falck-Zepeda 2008 Introducing a Genetically Modified
Banana in Uganda Social Benefits Costs and Consumer Perceptions IFPRI Discussion Paper
767 Environment and Production Technology Division International Food Policy Research
Institute Washington D C USA
Copyright Kikulwe copy 2009
Potential implications for decision making (1)
bull Gain more andor better information about technology impacts for decision making - may support valuable technologies
bull Need to balance gains in information additional costs amp effort and impacts on innovation
bull Potential for introducing uncertainty that can lead to an unworkable system
Potential implications for decision making (2)
bull Additional requirements will increase the cost of regulatory compliance
bull Potentially regulatory delays will likely cause a
ndash reduction in the number of technologies especially those released by the public sector and cropstraits of a public good nature
ndash some public sector institutions may not be able to deploy technologies due to fixed costs necessary to enter market
Time to change and develop functional biosafety and decision making systems
ldquoTo continue making things as we have done until now is not an option we must develop a shared vision between agriculture and environment agendas and move towards a paradigm shiftrdquo ldquoWe must face the challenges with technology not ideologyhellipincluding developing proper governance and regulatory processes that workrdquo From a declaration of scientists at the 2012 Central American Conference on Agriculture and Environment (CIAA)
SOCIO-ECONOMIC CONSIDERATIONS IN BIOTECHNOLOGY REGULATION Edited by bull Karinne Ludlow Monash University Australia bull Stuart J Smyth University of Saskatchewan Canada and bull Joseacute Falck-Zepeda International Food Policy Research Institute
USA Discusses 15 methodological areas ranging from impacts on producers and society and environment to trade indigenous knowledge and ethicalequity Includes also discussions on background and issues related to decision making Springer Editors Spring 2014
Joseacute Benjamin Falck-Zepeda PhD
Senior Research Fellow Leader Policy Team Program for Biosafety Systems
IFPRI 2033 K Street NW
Washington DC 20006-1002 USA
jfalck-zepedacgiarorg
Brief biopubs httpwwwifpriorgstaffprofilejose-falck-zepeda Blog httpsocioeconomicbiosafetywordpresscom
Follow me on Twitter josefalck
Food safety issue
RISK scientific RISK socially constructed RISK modern RISK political
High cholesterol foods High Moderate Moderate Low - moderate
Foods high in sugar High Moderate Moderate - high Moderate
High sodium foods Moderate Low Moderate Low
Dead mouse in beverage bottle
Low ndash high High High Low
Dead frog in package of frozen vegetables
Low ndash moderate
High High Low
E-coli in hamburgers High Low Moderate Low
Salmonella High Low Moderate Low
Mycotoxins High Moderate High - moderate Low
Filth and extraneous materials (insect fragments stones twigs rodent manure)
High High High Low
GM foods Low High High High
Issue 2 Recuperating an investment with increases in cost of compliance or
delays in the onset of benefits
Case study 1 Model investor case study (continued)
bull Investor conducts investment of 136 million US$ with a desired period of recovery of 10 years
bull Investor requires a 20 rate of return on investment in real terms ndash NPV of the investment is 272 million dollars
ndash Require a stream of nominal payments of 389 million per year
bull Allow same number of payments and value of each payment but increase time to onset of the benefits
NPV with increasing time to onset of benefits
(120000000)
(100000000)
(80000000)
(60000000)
(40000000)
(20000000)
-
20000000
40000000
0 1 2 3 4 5 6 7 8 9
NP
V (
US$
)
Year after onset of benefits
NPV
Keeping same number of payments + rate or return (20)
Impact of risk and uncertainty on the stream of benefits over time
bull What happens to the riskiness of investments as the onset of benefits is pushed over time
bull Repeat NPV calculation for the ldquomodelrdquo investor using RISK to conduct simulation through repeated iterations
Risk impacts and the stream of benefits
-120
-100
-80
-60
-40
-20
0
20
40
1 2 3 4 5 6 7 8
Valu
es
in M
illio
ns
Years after the onset of benefits
5 - 95 +- 1 Std Dev Mean
Impact of risk and uncertainty in the stream of benefits
bull Dispersion around net benefits increases over time =gt Investment returns become riskier
bull Note that we have the ability to characterize recovery path and its parametershellip
bull What happens if investor cannot make a determination of the NPV
ndash Likelihood that an investment will not be made increases due to uncertainty
Case study 2 Net benefits from the adoption of GE crops in the Philippines
Bt eggplant
MVR tomato Bt rice PRSV resistant papaya
Net Benefits baseline (NPV in US$)
20466196 16748347 220373603 90765793
Effect of increasing
cost or time of
compliance
Source Bayer Norton and Falck Zepeda (2008)
Contrasting baseline net benefit levels from GE crop adoption with higher costs in the Philippines
Notes 1) Source Bayer Norton and Falck Zepeda (2008) 2) Baseline values for each technology expressed in millions US$ using a
discount rate for the estimation of Net Present Value = 5 3) Change in Net benefits defined as the total benefits estimated using the
economic surplus minus total regulatory costs
Contrasting benefit levels from GE crop adoption with larger regulatory lags in the Philippines
Notes 1) Source Bayer Norton and Falck Zepeda (2008) 2) Baseline values for each technology expressed in millions US$ using a
discount rate for the estimation of Net Present Value = 5 3) Change in Net benefits defined as the total benefits estimated using the
economic surplus minus total regulatory costs
Issues and implications
bull Regulatory costs are not likely to have a significant impact on the returns to investment
bull Exception are organizations that have budgetfinancial constraints
ndash National research organizations in developing countries
ndash International research systems developing public good products
ndash Small private firms in developing countries
bull Regulatory delays have a significant negative impact on net returns
ndash Impact on the number and type of technologies
ndash More ldquohigher returnrdquo products and less public good products
Issue 3 Regulatory and knowledge costbenefit tradeoffs
Cost and benefit tradeoffs
bull Learning process - gains in knowledge through increased experimentation andor inclusion of socioeconomic in decision making are possible
bull Delays may have a positive impact if it helps avoid potential negative impacts
bull Face the issue of irreversibility ndash Costs and benefits that may not be ever reversed
ndash One foundation of the precautionary principleapproach and regulatory protocols such as the Cartagena Protocol on Biosafety
Case study 3 The case of fungal resistant bananas in Uganda
bull Ex ante study ndash used the real options approach
bull Conclusions ndash If approval delayed forego
potential annual (social) benefits of +- US$200 million
ndash Maximum total development costs cannot exceed US$108 million
ndash Even considering irreversibility adoption still benefits Uganda
Citation Kikulwe E J Wesseler and J Falck-Zepeda 2008 Introducing a Genetically Modified
Banana in Uganda Social Benefits Costs and Consumer Perceptions IFPRI Discussion Paper
767 Environment and Production Technology Division International Food Policy Research
Institute Washington D C USA
Copyright Kikulwe copy 2009
Potential implications for decision making (1)
bull Gain more andor better information about technology impacts for decision making - may support valuable technologies
bull Need to balance gains in information additional costs amp effort and impacts on innovation
bull Potential for introducing uncertainty that can lead to an unworkable system
Potential implications for decision making (2)
bull Additional requirements will increase the cost of regulatory compliance
bull Potentially regulatory delays will likely cause a
ndash reduction in the number of technologies especially those released by the public sector and cropstraits of a public good nature
ndash some public sector institutions may not be able to deploy technologies due to fixed costs necessary to enter market
Time to change and develop functional biosafety and decision making systems
ldquoTo continue making things as we have done until now is not an option we must develop a shared vision between agriculture and environment agendas and move towards a paradigm shiftrdquo ldquoWe must face the challenges with technology not ideologyhellipincluding developing proper governance and regulatory processes that workrdquo From a declaration of scientists at the 2012 Central American Conference on Agriculture and Environment (CIAA)
SOCIO-ECONOMIC CONSIDERATIONS IN BIOTECHNOLOGY REGULATION Edited by bull Karinne Ludlow Monash University Australia bull Stuart J Smyth University of Saskatchewan Canada and bull Joseacute Falck-Zepeda International Food Policy Research Institute
USA Discusses 15 methodological areas ranging from impacts on producers and society and environment to trade indigenous knowledge and ethicalequity Includes also discussions on background and issues related to decision making Springer Editors Spring 2014
Joseacute Benjamin Falck-Zepeda PhD
Senior Research Fellow Leader Policy Team Program for Biosafety Systems
IFPRI 2033 K Street NW
Washington DC 20006-1002 USA
jfalck-zepedacgiarorg
Brief biopubs httpwwwifpriorgstaffprofilejose-falck-zepeda Blog httpsocioeconomicbiosafetywordpresscom
Follow me on Twitter josefalck
Food safety issue
RISK scientific RISK socially constructed RISK modern RISK political
High cholesterol foods High Moderate Moderate Low - moderate
Foods high in sugar High Moderate Moderate - high Moderate
High sodium foods Moderate Low Moderate Low
Dead mouse in beverage bottle
Low ndash high High High Low
Dead frog in package of frozen vegetables
Low ndash moderate
High High Low
E-coli in hamburgers High Low Moderate Low
Salmonella High Low Moderate Low
Mycotoxins High Moderate High - moderate Low
Filth and extraneous materials (insect fragments stones twigs rodent manure)
High High High Low
GM foods Low High High High
Case study 1 Model investor case study (continued)
bull Investor conducts investment of 136 million US$ with a desired period of recovery of 10 years
bull Investor requires a 20 rate of return on investment in real terms ndash NPV of the investment is 272 million dollars
ndash Require a stream of nominal payments of 389 million per year
bull Allow same number of payments and value of each payment but increase time to onset of the benefits
NPV with increasing time to onset of benefits
(120000000)
(100000000)
(80000000)
(60000000)
(40000000)
(20000000)
-
20000000
40000000
0 1 2 3 4 5 6 7 8 9
NP
V (
US$
)
Year after onset of benefits
NPV
Keeping same number of payments + rate or return (20)
Impact of risk and uncertainty on the stream of benefits over time
bull What happens to the riskiness of investments as the onset of benefits is pushed over time
bull Repeat NPV calculation for the ldquomodelrdquo investor using RISK to conduct simulation through repeated iterations
Risk impacts and the stream of benefits
-120
-100
-80
-60
-40
-20
0
20
40
1 2 3 4 5 6 7 8
Valu
es
in M
illio
ns
Years after the onset of benefits
5 - 95 +- 1 Std Dev Mean
Impact of risk and uncertainty in the stream of benefits
bull Dispersion around net benefits increases over time =gt Investment returns become riskier
bull Note that we have the ability to characterize recovery path and its parametershellip
bull What happens if investor cannot make a determination of the NPV
ndash Likelihood that an investment will not be made increases due to uncertainty
Case study 2 Net benefits from the adoption of GE crops in the Philippines
Bt eggplant
MVR tomato Bt rice PRSV resistant papaya
Net Benefits baseline (NPV in US$)
20466196 16748347 220373603 90765793
Effect of increasing
cost or time of
compliance
Source Bayer Norton and Falck Zepeda (2008)
Contrasting baseline net benefit levels from GE crop adoption with higher costs in the Philippines
Notes 1) Source Bayer Norton and Falck Zepeda (2008) 2) Baseline values for each technology expressed in millions US$ using a
discount rate for the estimation of Net Present Value = 5 3) Change in Net benefits defined as the total benefits estimated using the
economic surplus minus total regulatory costs
Contrasting benefit levels from GE crop adoption with larger regulatory lags in the Philippines
Notes 1) Source Bayer Norton and Falck Zepeda (2008) 2) Baseline values for each technology expressed in millions US$ using a
discount rate for the estimation of Net Present Value = 5 3) Change in Net benefits defined as the total benefits estimated using the
economic surplus minus total regulatory costs
Issues and implications
bull Regulatory costs are not likely to have a significant impact on the returns to investment
bull Exception are organizations that have budgetfinancial constraints
ndash National research organizations in developing countries
ndash International research systems developing public good products
ndash Small private firms in developing countries
bull Regulatory delays have a significant negative impact on net returns
ndash Impact on the number and type of technologies
ndash More ldquohigher returnrdquo products and less public good products
Issue 3 Regulatory and knowledge costbenefit tradeoffs
Cost and benefit tradeoffs
bull Learning process - gains in knowledge through increased experimentation andor inclusion of socioeconomic in decision making are possible
bull Delays may have a positive impact if it helps avoid potential negative impacts
bull Face the issue of irreversibility ndash Costs and benefits that may not be ever reversed
ndash One foundation of the precautionary principleapproach and regulatory protocols such as the Cartagena Protocol on Biosafety
Case study 3 The case of fungal resistant bananas in Uganda
bull Ex ante study ndash used the real options approach
bull Conclusions ndash If approval delayed forego
potential annual (social) benefits of +- US$200 million
ndash Maximum total development costs cannot exceed US$108 million
ndash Even considering irreversibility adoption still benefits Uganda
Citation Kikulwe E J Wesseler and J Falck-Zepeda 2008 Introducing a Genetically Modified
Banana in Uganda Social Benefits Costs and Consumer Perceptions IFPRI Discussion Paper
767 Environment and Production Technology Division International Food Policy Research
Institute Washington D C USA
Copyright Kikulwe copy 2009
Potential implications for decision making (1)
bull Gain more andor better information about technology impacts for decision making - may support valuable technologies
bull Need to balance gains in information additional costs amp effort and impacts on innovation
bull Potential for introducing uncertainty that can lead to an unworkable system
Potential implications for decision making (2)
bull Additional requirements will increase the cost of regulatory compliance
bull Potentially regulatory delays will likely cause a
ndash reduction in the number of technologies especially those released by the public sector and cropstraits of a public good nature
ndash some public sector institutions may not be able to deploy technologies due to fixed costs necessary to enter market
Time to change and develop functional biosafety and decision making systems
ldquoTo continue making things as we have done until now is not an option we must develop a shared vision between agriculture and environment agendas and move towards a paradigm shiftrdquo ldquoWe must face the challenges with technology not ideologyhellipincluding developing proper governance and regulatory processes that workrdquo From a declaration of scientists at the 2012 Central American Conference on Agriculture and Environment (CIAA)
SOCIO-ECONOMIC CONSIDERATIONS IN BIOTECHNOLOGY REGULATION Edited by bull Karinne Ludlow Monash University Australia bull Stuart J Smyth University of Saskatchewan Canada and bull Joseacute Falck-Zepeda International Food Policy Research Institute
USA Discusses 15 methodological areas ranging from impacts on producers and society and environment to trade indigenous knowledge and ethicalequity Includes also discussions on background and issues related to decision making Springer Editors Spring 2014
Joseacute Benjamin Falck-Zepeda PhD
Senior Research Fellow Leader Policy Team Program for Biosafety Systems
IFPRI 2033 K Street NW
Washington DC 20006-1002 USA
jfalck-zepedacgiarorg
Brief biopubs httpwwwifpriorgstaffprofilejose-falck-zepeda Blog httpsocioeconomicbiosafetywordpresscom
Follow me on Twitter josefalck
Food safety issue
RISK scientific RISK socially constructed RISK modern RISK political
High cholesterol foods High Moderate Moderate Low - moderate
Foods high in sugar High Moderate Moderate - high Moderate
High sodium foods Moderate Low Moderate Low
Dead mouse in beverage bottle
Low ndash high High High Low
Dead frog in package of frozen vegetables
Low ndash moderate
High High Low
E-coli in hamburgers High Low Moderate Low
Salmonella High Low Moderate Low
Mycotoxins High Moderate High - moderate Low
Filth and extraneous materials (insect fragments stones twigs rodent manure)
High High High Low
GM foods Low High High High
NPV with increasing time to onset of benefits
(120000000)
(100000000)
(80000000)
(60000000)
(40000000)
(20000000)
-
20000000
40000000
0 1 2 3 4 5 6 7 8 9
NP
V (
US$
)
Year after onset of benefits
NPV
Keeping same number of payments + rate or return (20)
Impact of risk and uncertainty on the stream of benefits over time
bull What happens to the riskiness of investments as the onset of benefits is pushed over time
bull Repeat NPV calculation for the ldquomodelrdquo investor using RISK to conduct simulation through repeated iterations
Risk impacts and the stream of benefits
-120
-100
-80
-60
-40
-20
0
20
40
1 2 3 4 5 6 7 8
Valu
es
in M
illio
ns
Years after the onset of benefits
5 - 95 +- 1 Std Dev Mean
Impact of risk and uncertainty in the stream of benefits
bull Dispersion around net benefits increases over time =gt Investment returns become riskier
bull Note that we have the ability to characterize recovery path and its parametershellip
bull What happens if investor cannot make a determination of the NPV
ndash Likelihood that an investment will not be made increases due to uncertainty
Case study 2 Net benefits from the adoption of GE crops in the Philippines
Bt eggplant
MVR tomato Bt rice PRSV resistant papaya
Net Benefits baseline (NPV in US$)
20466196 16748347 220373603 90765793
Effect of increasing
cost or time of
compliance
Source Bayer Norton and Falck Zepeda (2008)
Contrasting baseline net benefit levels from GE crop adoption with higher costs in the Philippines
Notes 1) Source Bayer Norton and Falck Zepeda (2008) 2) Baseline values for each technology expressed in millions US$ using a
discount rate for the estimation of Net Present Value = 5 3) Change in Net benefits defined as the total benefits estimated using the
economic surplus minus total regulatory costs
Contrasting benefit levels from GE crop adoption with larger regulatory lags in the Philippines
Notes 1) Source Bayer Norton and Falck Zepeda (2008) 2) Baseline values for each technology expressed in millions US$ using a
discount rate for the estimation of Net Present Value = 5 3) Change in Net benefits defined as the total benefits estimated using the
economic surplus minus total regulatory costs
Issues and implications
bull Regulatory costs are not likely to have a significant impact on the returns to investment
bull Exception are organizations that have budgetfinancial constraints
ndash National research organizations in developing countries
ndash International research systems developing public good products
ndash Small private firms in developing countries
bull Regulatory delays have a significant negative impact on net returns
ndash Impact on the number and type of technologies
ndash More ldquohigher returnrdquo products and less public good products
Issue 3 Regulatory and knowledge costbenefit tradeoffs
Cost and benefit tradeoffs
bull Learning process - gains in knowledge through increased experimentation andor inclusion of socioeconomic in decision making are possible
bull Delays may have a positive impact if it helps avoid potential negative impacts
bull Face the issue of irreversibility ndash Costs and benefits that may not be ever reversed
ndash One foundation of the precautionary principleapproach and regulatory protocols such as the Cartagena Protocol on Biosafety
Case study 3 The case of fungal resistant bananas in Uganda
bull Ex ante study ndash used the real options approach
bull Conclusions ndash If approval delayed forego
potential annual (social) benefits of +- US$200 million
ndash Maximum total development costs cannot exceed US$108 million
ndash Even considering irreversibility adoption still benefits Uganda
Citation Kikulwe E J Wesseler and J Falck-Zepeda 2008 Introducing a Genetically Modified
Banana in Uganda Social Benefits Costs and Consumer Perceptions IFPRI Discussion Paper
767 Environment and Production Technology Division International Food Policy Research
Institute Washington D C USA
Copyright Kikulwe copy 2009
Potential implications for decision making (1)
bull Gain more andor better information about technology impacts for decision making - may support valuable technologies
bull Need to balance gains in information additional costs amp effort and impacts on innovation
bull Potential for introducing uncertainty that can lead to an unworkable system
Potential implications for decision making (2)
bull Additional requirements will increase the cost of regulatory compliance
bull Potentially regulatory delays will likely cause a
ndash reduction in the number of technologies especially those released by the public sector and cropstraits of a public good nature
ndash some public sector institutions may not be able to deploy technologies due to fixed costs necessary to enter market
Time to change and develop functional biosafety and decision making systems
ldquoTo continue making things as we have done until now is not an option we must develop a shared vision between agriculture and environment agendas and move towards a paradigm shiftrdquo ldquoWe must face the challenges with technology not ideologyhellipincluding developing proper governance and regulatory processes that workrdquo From a declaration of scientists at the 2012 Central American Conference on Agriculture and Environment (CIAA)
SOCIO-ECONOMIC CONSIDERATIONS IN BIOTECHNOLOGY REGULATION Edited by bull Karinne Ludlow Monash University Australia bull Stuart J Smyth University of Saskatchewan Canada and bull Joseacute Falck-Zepeda International Food Policy Research Institute
USA Discusses 15 methodological areas ranging from impacts on producers and society and environment to trade indigenous knowledge and ethicalequity Includes also discussions on background and issues related to decision making Springer Editors Spring 2014
Joseacute Benjamin Falck-Zepeda PhD
Senior Research Fellow Leader Policy Team Program for Biosafety Systems
IFPRI 2033 K Street NW
Washington DC 20006-1002 USA
jfalck-zepedacgiarorg
Brief biopubs httpwwwifpriorgstaffprofilejose-falck-zepeda Blog httpsocioeconomicbiosafetywordpresscom
Follow me on Twitter josefalck
Food safety issue
RISK scientific RISK socially constructed RISK modern RISK political
High cholesterol foods High Moderate Moderate Low - moderate
Foods high in sugar High Moderate Moderate - high Moderate
High sodium foods Moderate Low Moderate Low
Dead mouse in beverage bottle
Low ndash high High High Low
Dead frog in package of frozen vegetables
Low ndash moderate
High High Low
E-coli in hamburgers High Low Moderate Low
Salmonella High Low Moderate Low
Mycotoxins High Moderate High - moderate Low
Filth and extraneous materials (insect fragments stones twigs rodent manure)
High High High Low
GM foods Low High High High
Impact of risk and uncertainty on the stream of benefits over time
bull What happens to the riskiness of investments as the onset of benefits is pushed over time
bull Repeat NPV calculation for the ldquomodelrdquo investor using RISK to conduct simulation through repeated iterations
Risk impacts and the stream of benefits
-120
-100
-80
-60
-40
-20
0
20
40
1 2 3 4 5 6 7 8
Valu
es
in M
illio
ns
Years after the onset of benefits
5 - 95 +- 1 Std Dev Mean
Impact of risk and uncertainty in the stream of benefits
bull Dispersion around net benefits increases over time =gt Investment returns become riskier
bull Note that we have the ability to characterize recovery path and its parametershellip
bull What happens if investor cannot make a determination of the NPV
ndash Likelihood that an investment will not be made increases due to uncertainty
Case study 2 Net benefits from the adoption of GE crops in the Philippines
Bt eggplant
MVR tomato Bt rice PRSV resistant papaya
Net Benefits baseline (NPV in US$)
20466196 16748347 220373603 90765793
Effect of increasing
cost or time of
compliance
Source Bayer Norton and Falck Zepeda (2008)
Contrasting baseline net benefit levels from GE crop adoption with higher costs in the Philippines
Notes 1) Source Bayer Norton and Falck Zepeda (2008) 2) Baseline values for each technology expressed in millions US$ using a
discount rate for the estimation of Net Present Value = 5 3) Change in Net benefits defined as the total benefits estimated using the
economic surplus minus total regulatory costs
Contrasting benefit levels from GE crop adoption with larger regulatory lags in the Philippines
Notes 1) Source Bayer Norton and Falck Zepeda (2008) 2) Baseline values for each technology expressed in millions US$ using a
discount rate for the estimation of Net Present Value = 5 3) Change in Net benefits defined as the total benefits estimated using the
economic surplus minus total regulatory costs
Issues and implications
bull Regulatory costs are not likely to have a significant impact on the returns to investment
bull Exception are organizations that have budgetfinancial constraints
ndash National research organizations in developing countries
ndash International research systems developing public good products
ndash Small private firms in developing countries
bull Regulatory delays have a significant negative impact on net returns
ndash Impact on the number and type of technologies
ndash More ldquohigher returnrdquo products and less public good products
Issue 3 Regulatory and knowledge costbenefit tradeoffs
Cost and benefit tradeoffs
bull Learning process - gains in knowledge through increased experimentation andor inclusion of socioeconomic in decision making are possible
bull Delays may have a positive impact if it helps avoid potential negative impacts
bull Face the issue of irreversibility ndash Costs and benefits that may not be ever reversed
ndash One foundation of the precautionary principleapproach and regulatory protocols such as the Cartagena Protocol on Biosafety
Case study 3 The case of fungal resistant bananas in Uganda
bull Ex ante study ndash used the real options approach
bull Conclusions ndash If approval delayed forego
potential annual (social) benefits of +- US$200 million
ndash Maximum total development costs cannot exceed US$108 million
ndash Even considering irreversibility adoption still benefits Uganda
Citation Kikulwe E J Wesseler and J Falck-Zepeda 2008 Introducing a Genetically Modified
Banana in Uganda Social Benefits Costs and Consumer Perceptions IFPRI Discussion Paper
767 Environment and Production Technology Division International Food Policy Research
Institute Washington D C USA
Copyright Kikulwe copy 2009
Potential implications for decision making (1)
bull Gain more andor better information about technology impacts for decision making - may support valuable technologies
bull Need to balance gains in information additional costs amp effort and impacts on innovation
bull Potential for introducing uncertainty that can lead to an unworkable system
Potential implications for decision making (2)
bull Additional requirements will increase the cost of regulatory compliance
bull Potentially regulatory delays will likely cause a
ndash reduction in the number of technologies especially those released by the public sector and cropstraits of a public good nature
ndash some public sector institutions may not be able to deploy technologies due to fixed costs necessary to enter market
Time to change and develop functional biosafety and decision making systems
ldquoTo continue making things as we have done until now is not an option we must develop a shared vision between agriculture and environment agendas and move towards a paradigm shiftrdquo ldquoWe must face the challenges with technology not ideologyhellipincluding developing proper governance and regulatory processes that workrdquo From a declaration of scientists at the 2012 Central American Conference on Agriculture and Environment (CIAA)
SOCIO-ECONOMIC CONSIDERATIONS IN BIOTECHNOLOGY REGULATION Edited by bull Karinne Ludlow Monash University Australia bull Stuart J Smyth University of Saskatchewan Canada and bull Joseacute Falck-Zepeda International Food Policy Research Institute
USA Discusses 15 methodological areas ranging from impacts on producers and society and environment to trade indigenous knowledge and ethicalequity Includes also discussions on background and issues related to decision making Springer Editors Spring 2014
Joseacute Benjamin Falck-Zepeda PhD
Senior Research Fellow Leader Policy Team Program for Biosafety Systems
IFPRI 2033 K Street NW
Washington DC 20006-1002 USA
jfalck-zepedacgiarorg
Brief biopubs httpwwwifpriorgstaffprofilejose-falck-zepeda Blog httpsocioeconomicbiosafetywordpresscom
Follow me on Twitter josefalck
Food safety issue
RISK scientific RISK socially constructed RISK modern RISK political
High cholesterol foods High Moderate Moderate Low - moderate
Foods high in sugar High Moderate Moderate - high Moderate
High sodium foods Moderate Low Moderate Low
Dead mouse in beverage bottle
Low ndash high High High Low
Dead frog in package of frozen vegetables
Low ndash moderate
High High Low
E-coli in hamburgers High Low Moderate Low
Salmonella High Low Moderate Low
Mycotoxins High Moderate High - moderate Low
Filth and extraneous materials (insect fragments stones twigs rodent manure)
High High High Low
GM foods Low High High High
Risk impacts and the stream of benefits
-120
-100
-80
-60
-40
-20
0
20
40
1 2 3 4 5 6 7 8
Valu
es
in M
illio
ns
Years after the onset of benefits
5 - 95 +- 1 Std Dev Mean
Impact of risk and uncertainty in the stream of benefits
bull Dispersion around net benefits increases over time =gt Investment returns become riskier
bull Note that we have the ability to characterize recovery path and its parametershellip
bull What happens if investor cannot make a determination of the NPV
ndash Likelihood that an investment will not be made increases due to uncertainty
Case study 2 Net benefits from the adoption of GE crops in the Philippines
Bt eggplant
MVR tomato Bt rice PRSV resistant papaya
Net Benefits baseline (NPV in US$)
20466196 16748347 220373603 90765793
Effect of increasing
cost or time of
compliance
Source Bayer Norton and Falck Zepeda (2008)
Contrasting baseline net benefit levels from GE crop adoption with higher costs in the Philippines
Notes 1) Source Bayer Norton and Falck Zepeda (2008) 2) Baseline values for each technology expressed in millions US$ using a
discount rate for the estimation of Net Present Value = 5 3) Change in Net benefits defined as the total benefits estimated using the
economic surplus minus total regulatory costs
Contrasting benefit levels from GE crop adoption with larger regulatory lags in the Philippines
Notes 1) Source Bayer Norton and Falck Zepeda (2008) 2) Baseline values for each technology expressed in millions US$ using a
discount rate for the estimation of Net Present Value = 5 3) Change in Net benefits defined as the total benefits estimated using the
economic surplus minus total regulatory costs
Issues and implications
bull Regulatory costs are not likely to have a significant impact on the returns to investment
bull Exception are organizations that have budgetfinancial constraints
ndash National research organizations in developing countries
ndash International research systems developing public good products
ndash Small private firms in developing countries
bull Regulatory delays have a significant negative impact on net returns
ndash Impact on the number and type of technologies
ndash More ldquohigher returnrdquo products and less public good products
Issue 3 Regulatory and knowledge costbenefit tradeoffs
Cost and benefit tradeoffs
bull Learning process - gains in knowledge through increased experimentation andor inclusion of socioeconomic in decision making are possible
bull Delays may have a positive impact if it helps avoid potential negative impacts
bull Face the issue of irreversibility ndash Costs and benefits that may not be ever reversed
ndash One foundation of the precautionary principleapproach and regulatory protocols such as the Cartagena Protocol on Biosafety
Case study 3 The case of fungal resistant bananas in Uganda
bull Ex ante study ndash used the real options approach
bull Conclusions ndash If approval delayed forego
potential annual (social) benefits of +- US$200 million
ndash Maximum total development costs cannot exceed US$108 million
ndash Even considering irreversibility adoption still benefits Uganda
Citation Kikulwe E J Wesseler and J Falck-Zepeda 2008 Introducing a Genetically Modified
Banana in Uganda Social Benefits Costs and Consumer Perceptions IFPRI Discussion Paper
767 Environment and Production Technology Division International Food Policy Research
Institute Washington D C USA
Copyright Kikulwe copy 2009
Potential implications for decision making (1)
bull Gain more andor better information about technology impacts for decision making - may support valuable technologies
bull Need to balance gains in information additional costs amp effort and impacts on innovation
bull Potential for introducing uncertainty that can lead to an unworkable system
Potential implications for decision making (2)
bull Additional requirements will increase the cost of regulatory compliance
bull Potentially regulatory delays will likely cause a
ndash reduction in the number of technologies especially those released by the public sector and cropstraits of a public good nature
ndash some public sector institutions may not be able to deploy technologies due to fixed costs necessary to enter market
Time to change and develop functional biosafety and decision making systems
ldquoTo continue making things as we have done until now is not an option we must develop a shared vision between agriculture and environment agendas and move towards a paradigm shiftrdquo ldquoWe must face the challenges with technology not ideologyhellipincluding developing proper governance and regulatory processes that workrdquo From a declaration of scientists at the 2012 Central American Conference on Agriculture and Environment (CIAA)
SOCIO-ECONOMIC CONSIDERATIONS IN BIOTECHNOLOGY REGULATION Edited by bull Karinne Ludlow Monash University Australia bull Stuart J Smyth University of Saskatchewan Canada and bull Joseacute Falck-Zepeda International Food Policy Research Institute
USA Discusses 15 methodological areas ranging from impacts on producers and society and environment to trade indigenous knowledge and ethicalequity Includes also discussions on background and issues related to decision making Springer Editors Spring 2014
Joseacute Benjamin Falck-Zepeda PhD
Senior Research Fellow Leader Policy Team Program for Biosafety Systems
IFPRI 2033 K Street NW
Washington DC 20006-1002 USA
jfalck-zepedacgiarorg
Brief biopubs httpwwwifpriorgstaffprofilejose-falck-zepeda Blog httpsocioeconomicbiosafetywordpresscom
Follow me on Twitter josefalck
Food safety issue
RISK scientific RISK socially constructed RISK modern RISK political
High cholesterol foods High Moderate Moderate Low - moderate
Foods high in sugar High Moderate Moderate - high Moderate
High sodium foods Moderate Low Moderate Low
Dead mouse in beverage bottle
Low ndash high High High Low
Dead frog in package of frozen vegetables
Low ndash moderate
High High Low
E-coli in hamburgers High Low Moderate Low
Salmonella High Low Moderate Low
Mycotoxins High Moderate High - moderate Low
Filth and extraneous materials (insect fragments stones twigs rodent manure)
High High High Low
GM foods Low High High High
Impact of risk and uncertainty in the stream of benefits
bull Dispersion around net benefits increases over time =gt Investment returns become riskier
bull Note that we have the ability to characterize recovery path and its parametershellip
bull What happens if investor cannot make a determination of the NPV
ndash Likelihood that an investment will not be made increases due to uncertainty
Case study 2 Net benefits from the adoption of GE crops in the Philippines
Bt eggplant
MVR tomato Bt rice PRSV resistant papaya
Net Benefits baseline (NPV in US$)
20466196 16748347 220373603 90765793
Effect of increasing
cost or time of
compliance
Source Bayer Norton and Falck Zepeda (2008)
Contrasting baseline net benefit levels from GE crop adoption with higher costs in the Philippines
Notes 1) Source Bayer Norton and Falck Zepeda (2008) 2) Baseline values for each technology expressed in millions US$ using a
discount rate for the estimation of Net Present Value = 5 3) Change in Net benefits defined as the total benefits estimated using the
economic surplus minus total regulatory costs
Contrasting benefit levels from GE crop adoption with larger regulatory lags in the Philippines
Notes 1) Source Bayer Norton and Falck Zepeda (2008) 2) Baseline values for each technology expressed in millions US$ using a
discount rate for the estimation of Net Present Value = 5 3) Change in Net benefits defined as the total benefits estimated using the
economic surplus minus total regulatory costs
Issues and implications
bull Regulatory costs are not likely to have a significant impact on the returns to investment
bull Exception are organizations that have budgetfinancial constraints
ndash National research organizations in developing countries
ndash International research systems developing public good products
ndash Small private firms in developing countries
bull Regulatory delays have a significant negative impact on net returns
ndash Impact on the number and type of technologies
ndash More ldquohigher returnrdquo products and less public good products
Issue 3 Regulatory and knowledge costbenefit tradeoffs
Cost and benefit tradeoffs
bull Learning process - gains in knowledge through increased experimentation andor inclusion of socioeconomic in decision making are possible
bull Delays may have a positive impact if it helps avoid potential negative impacts
bull Face the issue of irreversibility ndash Costs and benefits that may not be ever reversed
ndash One foundation of the precautionary principleapproach and regulatory protocols such as the Cartagena Protocol on Biosafety
Case study 3 The case of fungal resistant bananas in Uganda
bull Ex ante study ndash used the real options approach
bull Conclusions ndash If approval delayed forego
potential annual (social) benefits of +- US$200 million
ndash Maximum total development costs cannot exceed US$108 million
ndash Even considering irreversibility adoption still benefits Uganda
Citation Kikulwe E J Wesseler and J Falck-Zepeda 2008 Introducing a Genetically Modified
Banana in Uganda Social Benefits Costs and Consumer Perceptions IFPRI Discussion Paper
767 Environment and Production Technology Division International Food Policy Research
Institute Washington D C USA
Copyright Kikulwe copy 2009
Potential implications for decision making (1)
bull Gain more andor better information about technology impacts for decision making - may support valuable technologies
bull Need to balance gains in information additional costs amp effort and impacts on innovation
bull Potential for introducing uncertainty that can lead to an unworkable system
Potential implications for decision making (2)
bull Additional requirements will increase the cost of regulatory compliance
bull Potentially regulatory delays will likely cause a
ndash reduction in the number of technologies especially those released by the public sector and cropstraits of a public good nature
ndash some public sector institutions may not be able to deploy technologies due to fixed costs necessary to enter market
Time to change and develop functional biosafety and decision making systems
ldquoTo continue making things as we have done until now is not an option we must develop a shared vision between agriculture and environment agendas and move towards a paradigm shiftrdquo ldquoWe must face the challenges with technology not ideologyhellipincluding developing proper governance and regulatory processes that workrdquo From a declaration of scientists at the 2012 Central American Conference on Agriculture and Environment (CIAA)
SOCIO-ECONOMIC CONSIDERATIONS IN BIOTECHNOLOGY REGULATION Edited by bull Karinne Ludlow Monash University Australia bull Stuart J Smyth University of Saskatchewan Canada and bull Joseacute Falck-Zepeda International Food Policy Research Institute
USA Discusses 15 methodological areas ranging from impacts on producers and society and environment to trade indigenous knowledge and ethicalequity Includes also discussions on background and issues related to decision making Springer Editors Spring 2014
Joseacute Benjamin Falck-Zepeda PhD
Senior Research Fellow Leader Policy Team Program for Biosafety Systems
IFPRI 2033 K Street NW
Washington DC 20006-1002 USA
jfalck-zepedacgiarorg
Brief biopubs httpwwwifpriorgstaffprofilejose-falck-zepeda Blog httpsocioeconomicbiosafetywordpresscom
Follow me on Twitter josefalck
Food safety issue
RISK scientific RISK socially constructed RISK modern RISK political
High cholesterol foods High Moderate Moderate Low - moderate
Foods high in sugar High Moderate Moderate - high Moderate
High sodium foods Moderate Low Moderate Low
Dead mouse in beverage bottle
Low ndash high High High Low
Dead frog in package of frozen vegetables
Low ndash moderate
High High Low
E-coli in hamburgers High Low Moderate Low
Salmonella High Low Moderate Low
Mycotoxins High Moderate High - moderate Low
Filth and extraneous materials (insect fragments stones twigs rodent manure)
High High High Low
GM foods Low High High High
Case study 2 Net benefits from the adoption of GE crops in the Philippines
Bt eggplant
MVR tomato Bt rice PRSV resistant papaya
Net Benefits baseline (NPV in US$)
20466196 16748347 220373603 90765793
Effect of increasing
cost or time of
compliance
Source Bayer Norton and Falck Zepeda (2008)
Contrasting baseline net benefit levels from GE crop adoption with higher costs in the Philippines
Notes 1) Source Bayer Norton and Falck Zepeda (2008) 2) Baseline values for each technology expressed in millions US$ using a
discount rate for the estimation of Net Present Value = 5 3) Change in Net benefits defined as the total benefits estimated using the
economic surplus minus total regulatory costs
Contrasting benefit levels from GE crop adoption with larger regulatory lags in the Philippines
Notes 1) Source Bayer Norton and Falck Zepeda (2008) 2) Baseline values for each technology expressed in millions US$ using a
discount rate for the estimation of Net Present Value = 5 3) Change in Net benefits defined as the total benefits estimated using the
economic surplus minus total regulatory costs
Issues and implications
bull Regulatory costs are not likely to have a significant impact on the returns to investment
bull Exception are organizations that have budgetfinancial constraints
ndash National research organizations in developing countries
ndash International research systems developing public good products
ndash Small private firms in developing countries
bull Regulatory delays have a significant negative impact on net returns
ndash Impact on the number and type of technologies
ndash More ldquohigher returnrdquo products and less public good products
Issue 3 Regulatory and knowledge costbenefit tradeoffs
Cost and benefit tradeoffs
bull Learning process - gains in knowledge through increased experimentation andor inclusion of socioeconomic in decision making are possible
bull Delays may have a positive impact if it helps avoid potential negative impacts
bull Face the issue of irreversibility ndash Costs and benefits that may not be ever reversed
ndash One foundation of the precautionary principleapproach and regulatory protocols such as the Cartagena Protocol on Biosafety
Case study 3 The case of fungal resistant bananas in Uganda
bull Ex ante study ndash used the real options approach
bull Conclusions ndash If approval delayed forego
potential annual (social) benefits of +- US$200 million
ndash Maximum total development costs cannot exceed US$108 million
ndash Even considering irreversibility adoption still benefits Uganda
Citation Kikulwe E J Wesseler and J Falck-Zepeda 2008 Introducing a Genetically Modified
Banana in Uganda Social Benefits Costs and Consumer Perceptions IFPRI Discussion Paper
767 Environment and Production Technology Division International Food Policy Research
Institute Washington D C USA
Copyright Kikulwe copy 2009
Potential implications for decision making (1)
bull Gain more andor better information about technology impacts for decision making - may support valuable technologies
bull Need to balance gains in information additional costs amp effort and impacts on innovation
bull Potential for introducing uncertainty that can lead to an unworkable system
Potential implications for decision making (2)
bull Additional requirements will increase the cost of regulatory compliance
bull Potentially regulatory delays will likely cause a
ndash reduction in the number of technologies especially those released by the public sector and cropstraits of a public good nature
ndash some public sector institutions may not be able to deploy technologies due to fixed costs necessary to enter market
Time to change and develop functional biosafety and decision making systems
ldquoTo continue making things as we have done until now is not an option we must develop a shared vision between agriculture and environment agendas and move towards a paradigm shiftrdquo ldquoWe must face the challenges with technology not ideologyhellipincluding developing proper governance and regulatory processes that workrdquo From a declaration of scientists at the 2012 Central American Conference on Agriculture and Environment (CIAA)
SOCIO-ECONOMIC CONSIDERATIONS IN BIOTECHNOLOGY REGULATION Edited by bull Karinne Ludlow Monash University Australia bull Stuart J Smyth University of Saskatchewan Canada and bull Joseacute Falck-Zepeda International Food Policy Research Institute
USA Discusses 15 methodological areas ranging from impacts on producers and society and environment to trade indigenous knowledge and ethicalequity Includes also discussions on background and issues related to decision making Springer Editors Spring 2014
Joseacute Benjamin Falck-Zepeda PhD
Senior Research Fellow Leader Policy Team Program for Biosafety Systems
IFPRI 2033 K Street NW
Washington DC 20006-1002 USA
jfalck-zepedacgiarorg
Brief biopubs httpwwwifpriorgstaffprofilejose-falck-zepeda Blog httpsocioeconomicbiosafetywordpresscom
Follow me on Twitter josefalck
Food safety issue
RISK scientific RISK socially constructed RISK modern RISK political
High cholesterol foods High Moderate Moderate Low - moderate
Foods high in sugar High Moderate Moderate - high Moderate
High sodium foods Moderate Low Moderate Low
Dead mouse in beverage bottle
Low ndash high High High Low
Dead frog in package of frozen vegetables
Low ndash moderate
High High Low
E-coli in hamburgers High Low Moderate Low
Salmonella High Low Moderate Low
Mycotoxins High Moderate High - moderate Low
Filth and extraneous materials (insect fragments stones twigs rodent manure)
High High High Low
GM foods Low High High High
Contrasting baseline net benefit levels from GE crop adoption with higher costs in the Philippines
Notes 1) Source Bayer Norton and Falck Zepeda (2008) 2) Baseline values for each technology expressed in millions US$ using a
discount rate for the estimation of Net Present Value = 5 3) Change in Net benefits defined as the total benefits estimated using the
economic surplus minus total regulatory costs
Contrasting benefit levels from GE crop adoption with larger regulatory lags in the Philippines
Notes 1) Source Bayer Norton and Falck Zepeda (2008) 2) Baseline values for each technology expressed in millions US$ using a
discount rate for the estimation of Net Present Value = 5 3) Change in Net benefits defined as the total benefits estimated using the
economic surplus minus total regulatory costs
Issues and implications
bull Regulatory costs are not likely to have a significant impact on the returns to investment
bull Exception are organizations that have budgetfinancial constraints
ndash National research organizations in developing countries
ndash International research systems developing public good products
ndash Small private firms in developing countries
bull Regulatory delays have a significant negative impact on net returns
ndash Impact on the number and type of technologies
ndash More ldquohigher returnrdquo products and less public good products
Issue 3 Regulatory and knowledge costbenefit tradeoffs
Cost and benefit tradeoffs
bull Learning process - gains in knowledge through increased experimentation andor inclusion of socioeconomic in decision making are possible
bull Delays may have a positive impact if it helps avoid potential negative impacts
bull Face the issue of irreversibility ndash Costs and benefits that may not be ever reversed
ndash One foundation of the precautionary principleapproach and regulatory protocols such as the Cartagena Protocol on Biosafety
Case study 3 The case of fungal resistant bananas in Uganda
bull Ex ante study ndash used the real options approach
bull Conclusions ndash If approval delayed forego
potential annual (social) benefits of +- US$200 million
ndash Maximum total development costs cannot exceed US$108 million
ndash Even considering irreversibility adoption still benefits Uganda
Citation Kikulwe E J Wesseler and J Falck-Zepeda 2008 Introducing a Genetically Modified
Banana in Uganda Social Benefits Costs and Consumer Perceptions IFPRI Discussion Paper
767 Environment and Production Technology Division International Food Policy Research
Institute Washington D C USA
Copyright Kikulwe copy 2009
Potential implications for decision making (1)
bull Gain more andor better information about technology impacts for decision making - may support valuable technologies
bull Need to balance gains in information additional costs amp effort and impacts on innovation
bull Potential for introducing uncertainty that can lead to an unworkable system
Potential implications for decision making (2)
bull Additional requirements will increase the cost of regulatory compliance
bull Potentially regulatory delays will likely cause a
ndash reduction in the number of technologies especially those released by the public sector and cropstraits of a public good nature
ndash some public sector institutions may not be able to deploy technologies due to fixed costs necessary to enter market
Time to change and develop functional biosafety and decision making systems
ldquoTo continue making things as we have done until now is not an option we must develop a shared vision between agriculture and environment agendas and move towards a paradigm shiftrdquo ldquoWe must face the challenges with technology not ideologyhellipincluding developing proper governance and regulatory processes that workrdquo From a declaration of scientists at the 2012 Central American Conference on Agriculture and Environment (CIAA)
SOCIO-ECONOMIC CONSIDERATIONS IN BIOTECHNOLOGY REGULATION Edited by bull Karinne Ludlow Monash University Australia bull Stuart J Smyth University of Saskatchewan Canada and bull Joseacute Falck-Zepeda International Food Policy Research Institute
USA Discusses 15 methodological areas ranging from impacts on producers and society and environment to trade indigenous knowledge and ethicalequity Includes also discussions on background and issues related to decision making Springer Editors Spring 2014
Joseacute Benjamin Falck-Zepeda PhD
Senior Research Fellow Leader Policy Team Program for Biosafety Systems
IFPRI 2033 K Street NW
Washington DC 20006-1002 USA
jfalck-zepedacgiarorg
Brief biopubs httpwwwifpriorgstaffprofilejose-falck-zepeda Blog httpsocioeconomicbiosafetywordpresscom
Follow me on Twitter josefalck
Food safety issue
RISK scientific RISK socially constructed RISK modern RISK political
High cholesterol foods High Moderate Moderate Low - moderate
Foods high in sugar High Moderate Moderate - high Moderate
High sodium foods Moderate Low Moderate Low
Dead mouse in beverage bottle
Low ndash high High High Low
Dead frog in package of frozen vegetables
Low ndash moderate
High High Low
E-coli in hamburgers High Low Moderate Low
Salmonella High Low Moderate Low
Mycotoxins High Moderate High - moderate Low
Filth and extraneous materials (insect fragments stones twigs rodent manure)
High High High Low
GM foods Low High High High
Contrasting benefit levels from GE crop adoption with larger regulatory lags in the Philippines
Notes 1) Source Bayer Norton and Falck Zepeda (2008) 2) Baseline values for each technology expressed in millions US$ using a
discount rate for the estimation of Net Present Value = 5 3) Change in Net benefits defined as the total benefits estimated using the
economic surplus minus total regulatory costs
Issues and implications
bull Regulatory costs are not likely to have a significant impact on the returns to investment
bull Exception are organizations that have budgetfinancial constraints
ndash National research organizations in developing countries
ndash International research systems developing public good products
ndash Small private firms in developing countries
bull Regulatory delays have a significant negative impact on net returns
ndash Impact on the number and type of technologies
ndash More ldquohigher returnrdquo products and less public good products
Issue 3 Regulatory and knowledge costbenefit tradeoffs
Cost and benefit tradeoffs
bull Learning process - gains in knowledge through increased experimentation andor inclusion of socioeconomic in decision making are possible
bull Delays may have a positive impact if it helps avoid potential negative impacts
bull Face the issue of irreversibility ndash Costs and benefits that may not be ever reversed
ndash One foundation of the precautionary principleapproach and regulatory protocols such as the Cartagena Protocol on Biosafety
Case study 3 The case of fungal resistant bananas in Uganda
bull Ex ante study ndash used the real options approach
bull Conclusions ndash If approval delayed forego
potential annual (social) benefits of +- US$200 million
ndash Maximum total development costs cannot exceed US$108 million
ndash Even considering irreversibility adoption still benefits Uganda
Citation Kikulwe E J Wesseler and J Falck-Zepeda 2008 Introducing a Genetically Modified
Banana in Uganda Social Benefits Costs and Consumer Perceptions IFPRI Discussion Paper
767 Environment and Production Technology Division International Food Policy Research
Institute Washington D C USA
Copyright Kikulwe copy 2009
Potential implications for decision making (1)
bull Gain more andor better information about technology impacts for decision making - may support valuable technologies
bull Need to balance gains in information additional costs amp effort and impacts on innovation
bull Potential for introducing uncertainty that can lead to an unworkable system
Potential implications for decision making (2)
bull Additional requirements will increase the cost of regulatory compliance
bull Potentially regulatory delays will likely cause a
ndash reduction in the number of technologies especially those released by the public sector and cropstraits of a public good nature
ndash some public sector institutions may not be able to deploy technologies due to fixed costs necessary to enter market
Time to change and develop functional biosafety and decision making systems
ldquoTo continue making things as we have done until now is not an option we must develop a shared vision between agriculture and environment agendas and move towards a paradigm shiftrdquo ldquoWe must face the challenges with technology not ideologyhellipincluding developing proper governance and regulatory processes that workrdquo From a declaration of scientists at the 2012 Central American Conference on Agriculture and Environment (CIAA)
SOCIO-ECONOMIC CONSIDERATIONS IN BIOTECHNOLOGY REGULATION Edited by bull Karinne Ludlow Monash University Australia bull Stuart J Smyth University of Saskatchewan Canada and bull Joseacute Falck-Zepeda International Food Policy Research Institute
USA Discusses 15 methodological areas ranging from impacts on producers and society and environment to trade indigenous knowledge and ethicalequity Includes also discussions on background and issues related to decision making Springer Editors Spring 2014
Joseacute Benjamin Falck-Zepeda PhD
Senior Research Fellow Leader Policy Team Program for Biosafety Systems
IFPRI 2033 K Street NW
Washington DC 20006-1002 USA
jfalck-zepedacgiarorg
Brief biopubs httpwwwifpriorgstaffprofilejose-falck-zepeda Blog httpsocioeconomicbiosafetywordpresscom
Follow me on Twitter josefalck
Food safety issue
RISK scientific RISK socially constructed RISK modern RISK political
High cholesterol foods High Moderate Moderate Low - moderate
Foods high in sugar High Moderate Moderate - high Moderate
High sodium foods Moderate Low Moderate Low
Dead mouse in beverage bottle
Low ndash high High High Low
Dead frog in package of frozen vegetables
Low ndash moderate
High High Low
E-coli in hamburgers High Low Moderate Low
Salmonella High Low Moderate Low
Mycotoxins High Moderate High - moderate Low
Filth and extraneous materials (insect fragments stones twigs rodent manure)
High High High Low
GM foods Low High High High
Issues and implications
bull Regulatory costs are not likely to have a significant impact on the returns to investment
bull Exception are organizations that have budgetfinancial constraints
ndash National research organizations in developing countries
ndash International research systems developing public good products
ndash Small private firms in developing countries
bull Regulatory delays have a significant negative impact on net returns
ndash Impact on the number and type of technologies
ndash More ldquohigher returnrdquo products and less public good products
Issue 3 Regulatory and knowledge costbenefit tradeoffs
Cost and benefit tradeoffs
bull Learning process - gains in knowledge through increased experimentation andor inclusion of socioeconomic in decision making are possible
bull Delays may have a positive impact if it helps avoid potential negative impacts
bull Face the issue of irreversibility ndash Costs and benefits that may not be ever reversed
ndash One foundation of the precautionary principleapproach and regulatory protocols such as the Cartagena Protocol on Biosafety
Case study 3 The case of fungal resistant bananas in Uganda
bull Ex ante study ndash used the real options approach
bull Conclusions ndash If approval delayed forego
potential annual (social) benefits of +- US$200 million
ndash Maximum total development costs cannot exceed US$108 million
ndash Even considering irreversibility adoption still benefits Uganda
Citation Kikulwe E J Wesseler and J Falck-Zepeda 2008 Introducing a Genetically Modified
Banana in Uganda Social Benefits Costs and Consumer Perceptions IFPRI Discussion Paper
767 Environment and Production Technology Division International Food Policy Research
Institute Washington D C USA
Copyright Kikulwe copy 2009
Potential implications for decision making (1)
bull Gain more andor better information about technology impacts for decision making - may support valuable technologies
bull Need to balance gains in information additional costs amp effort and impacts on innovation
bull Potential for introducing uncertainty that can lead to an unworkable system
Potential implications for decision making (2)
bull Additional requirements will increase the cost of regulatory compliance
bull Potentially regulatory delays will likely cause a
ndash reduction in the number of technologies especially those released by the public sector and cropstraits of a public good nature
ndash some public sector institutions may not be able to deploy technologies due to fixed costs necessary to enter market
Time to change and develop functional biosafety and decision making systems
ldquoTo continue making things as we have done until now is not an option we must develop a shared vision between agriculture and environment agendas and move towards a paradigm shiftrdquo ldquoWe must face the challenges with technology not ideologyhellipincluding developing proper governance and regulatory processes that workrdquo From a declaration of scientists at the 2012 Central American Conference on Agriculture and Environment (CIAA)
SOCIO-ECONOMIC CONSIDERATIONS IN BIOTECHNOLOGY REGULATION Edited by bull Karinne Ludlow Monash University Australia bull Stuart J Smyth University of Saskatchewan Canada and bull Joseacute Falck-Zepeda International Food Policy Research Institute
USA Discusses 15 methodological areas ranging from impacts on producers and society and environment to trade indigenous knowledge and ethicalequity Includes also discussions on background and issues related to decision making Springer Editors Spring 2014
Joseacute Benjamin Falck-Zepeda PhD
Senior Research Fellow Leader Policy Team Program for Biosafety Systems
IFPRI 2033 K Street NW
Washington DC 20006-1002 USA
jfalck-zepedacgiarorg
Brief biopubs httpwwwifpriorgstaffprofilejose-falck-zepeda Blog httpsocioeconomicbiosafetywordpresscom
Follow me on Twitter josefalck
Food safety issue
RISK scientific RISK socially constructed RISK modern RISK political
High cholesterol foods High Moderate Moderate Low - moderate
Foods high in sugar High Moderate Moderate - high Moderate
High sodium foods Moderate Low Moderate Low
Dead mouse in beverage bottle
Low ndash high High High Low
Dead frog in package of frozen vegetables
Low ndash moderate
High High Low
E-coli in hamburgers High Low Moderate Low
Salmonella High Low Moderate Low
Mycotoxins High Moderate High - moderate Low
Filth and extraneous materials (insect fragments stones twigs rodent manure)
High High High Low
GM foods Low High High High
Issue 3 Regulatory and knowledge costbenefit tradeoffs
Cost and benefit tradeoffs
bull Learning process - gains in knowledge through increased experimentation andor inclusion of socioeconomic in decision making are possible
bull Delays may have a positive impact if it helps avoid potential negative impacts
bull Face the issue of irreversibility ndash Costs and benefits that may not be ever reversed
ndash One foundation of the precautionary principleapproach and regulatory protocols such as the Cartagena Protocol on Biosafety
Case study 3 The case of fungal resistant bananas in Uganda
bull Ex ante study ndash used the real options approach
bull Conclusions ndash If approval delayed forego
potential annual (social) benefits of +- US$200 million
ndash Maximum total development costs cannot exceed US$108 million
ndash Even considering irreversibility adoption still benefits Uganda
Citation Kikulwe E J Wesseler and J Falck-Zepeda 2008 Introducing a Genetically Modified
Banana in Uganda Social Benefits Costs and Consumer Perceptions IFPRI Discussion Paper
767 Environment and Production Technology Division International Food Policy Research
Institute Washington D C USA
Copyright Kikulwe copy 2009
Potential implications for decision making (1)
bull Gain more andor better information about technology impacts for decision making - may support valuable technologies
bull Need to balance gains in information additional costs amp effort and impacts on innovation
bull Potential for introducing uncertainty that can lead to an unworkable system
Potential implications for decision making (2)
bull Additional requirements will increase the cost of regulatory compliance
bull Potentially regulatory delays will likely cause a
ndash reduction in the number of technologies especially those released by the public sector and cropstraits of a public good nature
ndash some public sector institutions may not be able to deploy technologies due to fixed costs necessary to enter market
Time to change and develop functional biosafety and decision making systems
ldquoTo continue making things as we have done until now is not an option we must develop a shared vision between agriculture and environment agendas and move towards a paradigm shiftrdquo ldquoWe must face the challenges with technology not ideologyhellipincluding developing proper governance and regulatory processes that workrdquo From a declaration of scientists at the 2012 Central American Conference on Agriculture and Environment (CIAA)
SOCIO-ECONOMIC CONSIDERATIONS IN BIOTECHNOLOGY REGULATION Edited by bull Karinne Ludlow Monash University Australia bull Stuart J Smyth University of Saskatchewan Canada and bull Joseacute Falck-Zepeda International Food Policy Research Institute
USA Discusses 15 methodological areas ranging from impacts on producers and society and environment to trade indigenous knowledge and ethicalequity Includes also discussions on background and issues related to decision making Springer Editors Spring 2014
Joseacute Benjamin Falck-Zepeda PhD
Senior Research Fellow Leader Policy Team Program for Biosafety Systems
IFPRI 2033 K Street NW
Washington DC 20006-1002 USA
jfalck-zepedacgiarorg
Brief biopubs httpwwwifpriorgstaffprofilejose-falck-zepeda Blog httpsocioeconomicbiosafetywordpresscom
Follow me on Twitter josefalck
Food safety issue
RISK scientific RISK socially constructed RISK modern RISK political
High cholesterol foods High Moderate Moderate Low - moderate
Foods high in sugar High Moderate Moderate - high Moderate
High sodium foods Moderate Low Moderate Low
Dead mouse in beverage bottle
Low ndash high High High Low
Dead frog in package of frozen vegetables
Low ndash moderate
High High Low
E-coli in hamburgers High Low Moderate Low
Salmonella High Low Moderate Low
Mycotoxins High Moderate High - moderate Low
Filth and extraneous materials (insect fragments stones twigs rodent manure)
High High High Low
GM foods Low High High High
Cost and benefit tradeoffs
bull Learning process - gains in knowledge through increased experimentation andor inclusion of socioeconomic in decision making are possible
bull Delays may have a positive impact if it helps avoid potential negative impacts
bull Face the issue of irreversibility ndash Costs and benefits that may not be ever reversed
ndash One foundation of the precautionary principleapproach and regulatory protocols such as the Cartagena Protocol on Biosafety
Case study 3 The case of fungal resistant bananas in Uganda
bull Ex ante study ndash used the real options approach
bull Conclusions ndash If approval delayed forego
potential annual (social) benefits of +- US$200 million
ndash Maximum total development costs cannot exceed US$108 million
ndash Even considering irreversibility adoption still benefits Uganda
Citation Kikulwe E J Wesseler and J Falck-Zepeda 2008 Introducing a Genetically Modified
Banana in Uganda Social Benefits Costs and Consumer Perceptions IFPRI Discussion Paper
767 Environment and Production Technology Division International Food Policy Research
Institute Washington D C USA
Copyright Kikulwe copy 2009
Potential implications for decision making (1)
bull Gain more andor better information about technology impacts for decision making - may support valuable technologies
bull Need to balance gains in information additional costs amp effort and impacts on innovation
bull Potential for introducing uncertainty that can lead to an unworkable system
Potential implications for decision making (2)
bull Additional requirements will increase the cost of regulatory compliance
bull Potentially regulatory delays will likely cause a
ndash reduction in the number of technologies especially those released by the public sector and cropstraits of a public good nature
ndash some public sector institutions may not be able to deploy technologies due to fixed costs necessary to enter market
Time to change and develop functional biosafety and decision making systems
ldquoTo continue making things as we have done until now is not an option we must develop a shared vision between agriculture and environment agendas and move towards a paradigm shiftrdquo ldquoWe must face the challenges with technology not ideologyhellipincluding developing proper governance and regulatory processes that workrdquo From a declaration of scientists at the 2012 Central American Conference on Agriculture and Environment (CIAA)
SOCIO-ECONOMIC CONSIDERATIONS IN BIOTECHNOLOGY REGULATION Edited by bull Karinne Ludlow Monash University Australia bull Stuart J Smyth University of Saskatchewan Canada and bull Joseacute Falck-Zepeda International Food Policy Research Institute
USA Discusses 15 methodological areas ranging from impacts on producers and society and environment to trade indigenous knowledge and ethicalequity Includes also discussions on background and issues related to decision making Springer Editors Spring 2014
Joseacute Benjamin Falck-Zepeda PhD
Senior Research Fellow Leader Policy Team Program for Biosafety Systems
IFPRI 2033 K Street NW
Washington DC 20006-1002 USA
jfalck-zepedacgiarorg
Brief biopubs httpwwwifpriorgstaffprofilejose-falck-zepeda Blog httpsocioeconomicbiosafetywordpresscom
Follow me on Twitter josefalck
Food safety issue
RISK scientific RISK socially constructed RISK modern RISK political
High cholesterol foods High Moderate Moderate Low - moderate
Foods high in sugar High Moderate Moderate - high Moderate
High sodium foods Moderate Low Moderate Low
Dead mouse in beverage bottle
Low ndash high High High Low
Dead frog in package of frozen vegetables
Low ndash moderate
High High Low
E-coli in hamburgers High Low Moderate Low
Salmonella High Low Moderate Low
Mycotoxins High Moderate High - moderate Low
Filth and extraneous materials (insect fragments stones twigs rodent manure)
High High High Low
GM foods Low High High High
Case study 3 The case of fungal resistant bananas in Uganda
bull Ex ante study ndash used the real options approach
bull Conclusions ndash If approval delayed forego
potential annual (social) benefits of +- US$200 million
ndash Maximum total development costs cannot exceed US$108 million
ndash Even considering irreversibility adoption still benefits Uganda
Citation Kikulwe E J Wesseler and J Falck-Zepeda 2008 Introducing a Genetically Modified
Banana in Uganda Social Benefits Costs and Consumer Perceptions IFPRI Discussion Paper
767 Environment and Production Technology Division International Food Policy Research
Institute Washington D C USA
Copyright Kikulwe copy 2009
Potential implications for decision making (1)
bull Gain more andor better information about technology impacts for decision making - may support valuable technologies
bull Need to balance gains in information additional costs amp effort and impacts on innovation
bull Potential for introducing uncertainty that can lead to an unworkable system
Potential implications for decision making (2)
bull Additional requirements will increase the cost of regulatory compliance
bull Potentially regulatory delays will likely cause a
ndash reduction in the number of technologies especially those released by the public sector and cropstraits of a public good nature
ndash some public sector institutions may not be able to deploy technologies due to fixed costs necessary to enter market
Time to change and develop functional biosafety and decision making systems
ldquoTo continue making things as we have done until now is not an option we must develop a shared vision between agriculture and environment agendas and move towards a paradigm shiftrdquo ldquoWe must face the challenges with technology not ideologyhellipincluding developing proper governance and regulatory processes that workrdquo From a declaration of scientists at the 2012 Central American Conference on Agriculture and Environment (CIAA)
SOCIO-ECONOMIC CONSIDERATIONS IN BIOTECHNOLOGY REGULATION Edited by bull Karinne Ludlow Monash University Australia bull Stuart J Smyth University of Saskatchewan Canada and bull Joseacute Falck-Zepeda International Food Policy Research Institute
USA Discusses 15 methodological areas ranging from impacts on producers and society and environment to trade indigenous knowledge and ethicalequity Includes also discussions on background and issues related to decision making Springer Editors Spring 2014
Joseacute Benjamin Falck-Zepeda PhD
Senior Research Fellow Leader Policy Team Program for Biosafety Systems
IFPRI 2033 K Street NW
Washington DC 20006-1002 USA
jfalck-zepedacgiarorg
Brief biopubs httpwwwifpriorgstaffprofilejose-falck-zepeda Blog httpsocioeconomicbiosafetywordpresscom
Follow me on Twitter josefalck
Food safety issue
RISK scientific RISK socially constructed RISK modern RISK political
High cholesterol foods High Moderate Moderate Low - moderate
Foods high in sugar High Moderate Moderate - high Moderate
High sodium foods Moderate Low Moderate Low
Dead mouse in beverage bottle
Low ndash high High High Low
Dead frog in package of frozen vegetables
Low ndash moderate
High High Low
E-coli in hamburgers High Low Moderate Low
Salmonella High Low Moderate Low
Mycotoxins High Moderate High - moderate Low
Filth and extraneous materials (insect fragments stones twigs rodent manure)
High High High Low
GM foods Low High High High
Potential implications for decision making (1)
bull Gain more andor better information about technology impacts for decision making - may support valuable technologies
bull Need to balance gains in information additional costs amp effort and impacts on innovation
bull Potential for introducing uncertainty that can lead to an unworkable system
Potential implications for decision making (2)
bull Additional requirements will increase the cost of regulatory compliance
bull Potentially regulatory delays will likely cause a
ndash reduction in the number of technologies especially those released by the public sector and cropstraits of a public good nature
ndash some public sector institutions may not be able to deploy technologies due to fixed costs necessary to enter market
Time to change and develop functional biosafety and decision making systems
ldquoTo continue making things as we have done until now is not an option we must develop a shared vision between agriculture and environment agendas and move towards a paradigm shiftrdquo ldquoWe must face the challenges with technology not ideologyhellipincluding developing proper governance and regulatory processes that workrdquo From a declaration of scientists at the 2012 Central American Conference on Agriculture and Environment (CIAA)
SOCIO-ECONOMIC CONSIDERATIONS IN BIOTECHNOLOGY REGULATION Edited by bull Karinne Ludlow Monash University Australia bull Stuart J Smyth University of Saskatchewan Canada and bull Joseacute Falck-Zepeda International Food Policy Research Institute
USA Discusses 15 methodological areas ranging from impacts on producers and society and environment to trade indigenous knowledge and ethicalequity Includes also discussions on background and issues related to decision making Springer Editors Spring 2014
Joseacute Benjamin Falck-Zepeda PhD
Senior Research Fellow Leader Policy Team Program for Biosafety Systems
IFPRI 2033 K Street NW
Washington DC 20006-1002 USA
jfalck-zepedacgiarorg
Brief biopubs httpwwwifpriorgstaffprofilejose-falck-zepeda Blog httpsocioeconomicbiosafetywordpresscom
Follow me on Twitter josefalck
Food safety issue
RISK scientific RISK socially constructed RISK modern RISK political
High cholesterol foods High Moderate Moderate Low - moderate
Foods high in sugar High Moderate Moderate - high Moderate
High sodium foods Moderate Low Moderate Low
Dead mouse in beverage bottle
Low ndash high High High Low
Dead frog in package of frozen vegetables
Low ndash moderate
High High Low
E-coli in hamburgers High Low Moderate Low
Salmonella High Low Moderate Low
Mycotoxins High Moderate High - moderate Low
Filth and extraneous materials (insect fragments stones twigs rodent manure)
High High High Low
GM foods Low High High High
Potential implications for decision making (2)
bull Additional requirements will increase the cost of regulatory compliance
bull Potentially regulatory delays will likely cause a
ndash reduction in the number of technologies especially those released by the public sector and cropstraits of a public good nature
ndash some public sector institutions may not be able to deploy technologies due to fixed costs necessary to enter market
Time to change and develop functional biosafety and decision making systems
ldquoTo continue making things as we have done until now is not an option we must develop a shared vision between agriculture and environment agendas and move towards a paradigm shiftrdquo ldquoWe must face the challenges with technology not ideologyhellipincluding developing proper governance and regulatory processes that workrdquo From a declaration of scientists at the 2012 Central American Conference on Agriculture and Environment (CIAA)
SOCIO-ECONOMIC CONSIDERATIONS IN BIOTECHNOLOGY REGULATION Edited by bull Karinne Ludlow Monash University Australia bull Stuart J Smyth University of Saskatchewan Canada and bull Joseacute Falck-Zepeda International Food Policy Research Institute
USA Discusses 15 methodological areas ranging from impacts on producers and society and environment to trade indigenous knowledge and ethicalequity Includes also discussions on background and issues related to decision making Springer Editors Spring 2014
Joseacute Benjamin Falck-Zepeda PhD
Senior Research Fellow Leader Policy Team Program for Biosafety Systems
IFPRI 2033 K Street NW
Washington DC 20006-1002 USA
jfalck-zepedacgiarorg
Brief biopubs httpwwwifpriorgstaffprofilejose-falck-zepeda Blog httpsocioeconomicbiosafetywordpresscom
Follow me on Twitter josefalck
Food safety issue
RISK scientific RISK socially constructed RISK modern RISK political
High cholesterol foods High Moderate Moderate Low - moderate
Foods high in sugar High Moderate Moderate - high Moderate
High sodium foods Moderate Low Moderate Low
Dead mouse in beverage bottle
Low ndash high High High Low
Dead frog in package of frozen vegetables
Low ndash moderate
High High Low
E-coli in hamburgers High Low Moderate Low
Salmonella High Low Moderate Low
Mycotoxins High Moderate High - moderate Low
Filth and extraneous materials (insect fragments stones twigs rodent manure)
High High High Low
GM foods Low High High High
Time to change and develop functional biosafety and decision making systems
ldquoTo continue making things as we have done until now is not an option we must develop a shared vision between agriculture and environment agendas and move towards a paradigm shiftrdquo ldquoWe must face the challenges with technology not ideologyhellipincluding developing proper governance and regulatory processes that workrdquo From a declaration of scientists at the 2012 Central American Conference on Agriculture and Environment (CIAA)
SOCIO-ECONOMIC CONSIDERATIONS IN BIOTECHNOLOGY REGULATION Edited by bull Karinne Ludlow Monash University Australia bull Stuart J Smyth University of Saskatchewan Canada and bull Joseacute Falck-Zepeda International Food Policy Research Institute
USA Discusses 15 methodological areas ranging from impacts on producers and society and environment to trade indigenous knowledge and ethicalequity Includes also discussions on background and issues related to decision making Springer Editors Spring 2014
Joseacute Benjamin Falck-Zepeda PhD
Senior Research Fellow Leader Policy Team Program for Biosafety Systems
IFPRI 2033 K Street NW
Washington DC 20006-1002 USA
jfalck-zepedacgiarorg
Brief biopubs httpwwwifpriorgstaffprofilejose-falck-zepeda Blog httpsocioeconomicbiosafetywordpresscom
Follow me on Twitter josefalck
Food safety issue
RISK scientific RISK socially constructed RISK modern RISK political
High cholesterol foods High Moderate Moderate Low - moderate
Foods high in sugar High Moderate Moderate - high Moderate
High sodium foods Moderate Low Moderate Low
Dead mouse in beverage bottle
Low ndash high High High Low
Dead frog in package of frozen vegetables
Low ndash moderate
High High Low
E-coli in hamburgers High Low Moderate Low
Salmonella High Low Moderate Low
Mycotoxins High Moderate High - moderate Low
Filth and extraneous materials (insect fragments stones twigs rodent manure)
High High High Low
GM foods Low High High High
SOCIO-ECONOMIC CONSIDERATIONS IN BIOTECHNOLOGY REGULATION Edited by bull Karinne Ludlow Monash University Australia bull Stuart J Smyth University of Saskatchewan Canada and bull Joseacute Falck-Zepeda International Food Policy Research Institute
USA Discusses 15 methodological areas ranging from impacts on producers and society and environment to trade indigenous knowledge and ethicalequity Includes also discussions on background and issues related to decision making Springer Editors Spring 2014
Joseacute Benjamin Falck-Zepeda PhD
Senior Research Fellow Leader Policy Team Program for Biosafety Systems
IFPRI 2033 K Street NW
Washington DC 20006-1002 USA
jfalck-zepedacgiarorg
Brief biopubs httpwwwifpriorgstaffprofilejose-falck-zepeda Blog httpsocioeconomicbiosafetywordpresscom
Follow me on Twitter josefalck
Food safety issue
RISK scientific RISK socially constructed RISK modern RISK political
High cholesterol foods High Moderate Moderate Low - moderate
Foods high in sugar High Moderate Moderate - high Moderate
High sodium foods Moderate Low Moderate Low
Dead mouse in beverage bottle
Low ndash high High High Low
Dead frog in package of frozen vegetables
Low ndash moderate
High High Low
E-coli in hamburgers High Low Moderate Low
Salmonella High Low Moderate Low
Mycotoxins High Moderate High - moderate Low
Filth and extraneous materials (insect fragments stones twigs rodent manure)
High High High Low
GM foods Low High High High
Joseacute Benjamin Falck-Zepeda PhD
Senior Research Fellow Leader Policy Team Program for Biosafety Systems
IFPRI 2033 K Street NW
Washington DC 20006-1002 USA
jfalck-zepedacgiarorg
Brief biopubs httpwwwifpriorgstaffprofilejose-falck-zepeda Blog httpsocioeconomicbiosafetywordpresscom
Follow me on Twitter josefalck
Food safety issue
RISK scientific RISK socially constructed RISK modern RISK political
High cholesterol foods High Moderate Moderate Low - moderate
Foods high in sugar High Moderate Moderate - high Moderate
High sodium foods Moderate Low Moderate Low
Dead mouse in beverage bottle
Low ndash high High High Low
Dead frog in package of frozen vegetables
Low ndash moderate
High High Low
E-coli in hamburgers High Low Moderate Low
Salmonella High Low Moderate Low
Mycotoxins High Moderate High - moderate Low
Filth and extraneous materials (insect fragments stones twigs rodent manure)
High High High Low
GM foods Low High High High
Food safety issue
RISK scientific RISK socially constructed RISK modern RISK political
High cholesterol foods High Moderate Moderate Low - moderate
Foods high in sugar High Moderate Moderate - high Moderate
High sodium foods Moderate Low Moderate Low
Dead mouse in beverage bottle
Low ndash high High High Low
Dead frog in package of frozen vegetables
Low ndash moderate
High High Low
E-coli in hamburgers High Low Moderate Low
Salmonella High Low Moderate Low
Mycotoxins High Moderate High - moderate Low
Filth and extraneous materials (insect fragments stones twigs rodent manure)
High High High Low
GM foods Low High High High