Productive inclusion of smallholder farmers in Brazil’s biodiesel value chain: Programme design, institutional incentives and stakeholder constraints

Abstract

One of the principal challenges in sustainable development, especially in developing countries,
\nis to build institutions that generate positive environmental and social externalities by helping
\nindividuals to perceive a positive relationship between self-interest and “the common good”.
\nCollective engagement can enable individuals to overcome self-interestedness and work toward
\nshared goals, but “getting the institutions right” requires an understanding of how the particular
\nset of market and non-market relationships really work for participants. In the context of the
\nbiodiesel value chain in Brazil, this paper explores how institutional arrangements need to evolve
\nif they are to foster the productive and sustained inclusion of small farmers and promote
\nsustainable innovation as a regional economic development strategy, one that helps reduce
\nsocial vulnerability without increasing environmental risks. The paper uses the institutional
\nanalysis and design (IAD) framework, which looks at how actors are involved in repetitive
\nsituations affected by a biophysical world, a cultural world and a set of rules, in order to
\nunderstand how different institutional structures can accommodate the power of both internal
\nand exogenous forces that shape the trajectory of sustainable innovation. After a general
\noverview of stakeholders and policy instruments in the biodiesel programme, the paper provides
\na brief institutional analysis of the interaction between actors and processes, with a view
\nto offering insights into the current effectiveness of the programme as a sustainable rural
\ndevelopment tool.
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