Institutional support for small scale producers of biofuel could include financing and loans, factors of production such as fertiliser, transport, legal and contract assistance, technology research and development, bargaining support, training and capacity building and marketing and market information. Various actors in the biofuel value chain could provide such support from cooperative small scale producer entities to government and large bioenergy companies (Practical Action Consulting 2009).

Switch grass producers in the United States advocated the formation of coopera­tive organisations as a way of countering corporate dominance in bioenergy projects. It was seen as a way of addressing some of the risks of becoming involved in a new sector. Some producers also saw government involvement as a way of avoiding corporate dominance in bioenergy but expressed reservations about the feasibility of such an approach (Rossi and Hinrichs 2011).

Through co-operatives, small scale producers can collectively provide the “crit­ical mass” that allows them to facilitate the harvesting, transport and marketing of their products. Cash flow regulation to individual members of the cooperative is a further opportunity to be realised by following a collaborative approach (Keyworth 2000).

Co-operatives are an ideal vehicle for emerging business people to establish themselves in a competitive market. Due to the democratic nature of representation, in simple terms one member one vote, it is difficult for a co-operative to be dominated by a minority of members. This can also be a drawback in that it can slow down decision-making, which can be a major disadvantage in competitive markets (Keyworth 2000).

Another type of institutional arrangement is that of outgrower schemes. South African timber companies have achieved success with such outgrower arrangements where they increase the supply of timber to mills by entering into partnership arrangements with small scale growers who have access to land where timber can be grown. The timber companies provide technical inputs (extension advice, seedlings, etc.), capital in the form of soft loans against the proceeds from the sale of the harvested timber and a market for the timber. In return, the grower provides land and labour as the means of growing the trees and undertakes to sell the timber to the processing companies at a market related price (Howard et al. 2005).

It is estimated that there are 24,000 small growers in formal schemes, and between 5,000 and 10,000 independent small growers in South Africa (Chamberlain et al. 2005). One of the more significant economic impacts of outgrower schemes in South Africa is that revenue is circulated within the community when growers employ the labour of both family and community members to work in their planta­tions. Small-scale growing has also created entrepreneurial opportunities for others, which has contributed to growth and diversification of economic opportunities of the broader community. In many cases growers do not have their own means of transporting timber from their land to the mill, creating an opportunity for the development of local transport contracting businesses where community members who have vehicles sell their services these growers (Howard et al. 2005).

Outgrower schemes not only contribute directly to the economies of rural communities but also empower some of the poorest of the poor. The effect of poverty on women and female-headed households is compounded by many cultural norms, for example lack of rights and independence (Lewis et al. 2003). Timber outgrower schemes have, however, provided women with an economic alternative. It is reported that within the Sappi Project Grow outgrower scheme, 80 % of the growers are women (van Loggerenberg 2004).

9.2 Conclusion

Energy from biomass is used by millions of poor people in developing countries as a primary source of energy. It is also becoming increasingly popular in devel­oped countries as a way of mitigating greenhouse gas emissions. Energy pricing programmes in developed countries have enabled consumers to choose renewable energy options while corporate consumers are starting to purchase renewable energy to improve their environmental image and as part of corporate social responsibility programmes (FAO 2005). This developed country focus on renewable energy has led to an increase in demand for bioenergy, often produced in developing countries.

Bioenergy companies that produce biofuels in developing countries often use the arguments of job creation and income generation as a way of justifying large scale biofuel operations. Questions can, however, be raised about the net gain to rural communities from these biofuel plantations. Often these plantations lead to displacement of the rural poor and environmental degradation. While it may seem that rural people are willing to engage in these biofuel production activities it cannot be assumed that these operations have positive social impacts (Van der Horst and Vermeylen 2011).

Several issues should be considered when bioenergy projects are planned in developing countries. These include:

• The potential to improve the sustainability of traditional biomass use (or even to substitute it with more sustainable forms of energy).

• The appropriate level and scale of bioenergy development.

• Definition of land tenure issues and economic opportunities for the rural poor.

• Feedstock choice in relation to land and environmental suitability.

• Sustainable land use planning to reduce conflicts and environmental degradation (Cushion et al. 2010).

Biofuel development driven by agreements between small scale producers and bioenergy companies could be seen as a potential way of ensuring social and environmental benefits, especially when it addresses local development. Carefully controlled development of biofuels that recognises the dangers of rapid unregulated expansion is more likely to result in a bioenergy industry that minimises its social and environmental impact and that ensures equitable benefits sharing (Phalan 2009). Sustainable long term business ventures could be established between small scale producers and bioenergy companies if care is take to define the relationship between the various actors, spread and share risks amongst the actors and define institutional structures. Timber outgrower schemes could serve as an example for such bioenergy business arrangements between small scale producers and bioenergy companies.