DOE still undecided on ethanol import control

MANILA, Philippines - The Department of Energy (DOE) has yet to decide on its stance over the control of ethanol imports.

Energy Secretary Jose Ibazeta said they are still studying the issue, noting whatever decision they make will greatly impact on both the industry and the consumers.

“It’s just that the issue is very complex, similar to the sugar industry where it is cheaper to source abroad than locally. We have to weigh what the benefits are for consumers. It’s something we are studying,” he said.

Ibazeta said the Biofuels Board, the industry’s policy-making body, has also yet to firm up the guidelines in ethanol pricing. “There are still rules to be set by the Biofuels Board on pricing,” he said.

Ibazeta said he wants the DOE policy on ethanol pricing to be on the safe side.

“That’s something I’m trying to avoid,” he said, when asked about the DOE’s policy on ethanol importation.

“I have my own views on subsidies – I don’t believe in giving out subsidies. It’s a matter of making things efficiently. The reason why ethanol plants are expensive is because of their small scale compared to Brazil where facilities are bigger.”

He said there is also no reason to mandate oil companies regarding pricing. “In life, you can’t mandate anyone. That’s the one thing you learn. There’s no such thing as a free lunch. Efficiency will and should always be key, oil companies will always buy from you if prices are uncompetitive. The important thing is not talking about low prices or rate, but you always need to talk about fair prices.”

Last month, the Ethanol Producers Association of the Philippines (EPAP) said they support the DOE’s move to issue a circular on biofuels.

“We strongly support the February circular of the DOE and call on the incoming administration to stand solidly behind the spirit of the Biofuels Law,” the group said, contradicting the oil companies’ position not to recognize the DOE’s authority to control ethanol importation. 

EPAP executive director Tetchi Cruz-Capellan cited in their position paper that “the Biofuels Act of 2006 clearly mandates all liquid fuels for motors and engines in the Philippines to contain locally-sourced biofuels.”

“We cannot understand why the oil companies refuse to heed the law,“ said Capellan.  “The DOE was empowered by the Biofuels Act to regulate ethanol importation in order to reduce dependence on imported fuels and build local capacity to produce ethanol.”

Brazil, Thailand and Vietnam are aggressively pursuing their respective energy independence agenda. Brazil is the recognized global leader in ethanol production, exporting some 3.5 billion liters of ethanol and supplying the domestic market of approximately 14 billion liters in 2007. Fuel ethanol in Brazil displaces no less than 40 percent of gasoline that would otherwise be used. 

“If the Departmentof Energy fails to control the importation of ethanol from Brazil, we are simply replacing Middle East oil imports with Brazilian ethanol imports. This was not the intention of the law. Our national vision, in accordance with the Biofuels Act, is to attain energy independence, protect public health and ecosystems from noxious substances, as well as create rural employment for our people,” Capellan said.

Currently, ethanol imports are levied by the Philippine government with a one percent tariff. This level of protection is practically zero compared to Brazil’s 30-percent import tax and Vietnam’s 20-percent duty. Such uneven playing field slowed the entry of investments in the biofuels sector and consequently undermines the alternative fuels program of the government, EPAP said.

Alto Power Inc, a potential producer of 40 million liters of ethanol, announced last month they would pull out their investments in an ethanol plant project in Cagayan de Oro due to government’s weak support for the industry. This sudden decision to stop all development works in the project has derailed EPAP’s 200-million liter target ethanol output by 2011.

EPAP figures show that only 80 million liters of local ethanol will be produced this year by San Carlos Bioenergy and Roxol Energy. Inc. Another 50 million liters are scheduled to be supplied by Green Futures Inc. when its commercial operations begin in 2011.