Ethanol makes fuel cleaner, but costlier?

IT’S THE LAW: Gasoline used by motor vehicles must be pre-mixed this month with ethyl alcohol to the extent of 10 percent — unless the government again postpones the April 2013 deadline for blending.

Noting the seeming lack of notice and scant interest, we reassessed in our last Postscript the intent and effects of the Biofuels Law of 2006 (RA 9367) that mandated the addition of ethanol into motor fuel.

The law aims to cut fuel prices, reduce dependence on imported crude, shield the environment from toxic and greenhouse gases, spur countryside development, and protect food reserves and biodiversity.

Ethanol (CH₃CH₂OH) is produced from farm feedstock and biomass. Raw materials include sugar cane, potato and corn, and such food items that alcohol producers may tap in big volume.

*      *      *

SPOTTY BENEFITS: A discussion ensued after we pointed out, without implying that RA 9367 is a bad law, that:

• Pricing — Adding ethanol to gasoline to the extent of 10 percent has not caused a drop in pump prices of fuel. Local ethanol is more expensive: it costs P47/liter versus P30/liter of the imported variety.

• Air pollution — We still have to see local research showing that the ethanol blend has reduced pollution or measurable degradation of the atmosphere from motor vehicle exhaust.

• Countryside development — Neither have we seen data showing that production of ethanol for blending has spurred development in the countryside.

• Import substitution — Four local ethanol producers supply only 15 percent of the blending needs of oil firms, which are forced to import the shortfall. Imported crude has been simply replaced by imported ethanol.

• Farmers’ lot — Of the P47/liter price of ethanol, farmers get only around 50 centavos. The ethanol program is benefiting mainly producers and traders.

It may be too early for total impact assessment, but a review at this stage is in order as far as the law’s judicious implementation is concerned.

*      *      *

INDUSTRY SIDE: Among the readers who have reacted was engineer Queenie Riva N. Rojo, executive director of the Ethanol Producers Association of the Philippines. She said among other things that:

• While we have a mandatory 10-percent blending of ethanol, Thailand is moving to 20 percent and even promoting 85 percent with incentives for both the blend and the importation of flex-fuel vehicles.

• We must compare our local ethanol price with that of gasoline, not with imported ethanol. Ethanol production is a regulated industry — its books can be opened for audit anytime. Oil companies are deregulated, and their books cannot be accessed.

• Imported ethanol is cheaper because of dumping. The excess of Thai and Brazil requirements can be sold cheap. Also, ethanol plants in Brazil are 35 years old and Thailand 12, while Philippine plants are two years old.

*      *      *

FARMERS’ PAYMENT: As for the food versus fuel issue — or the balancing of the cultivation of land for crops for food or for fuel, Rojo said this is an old question that has been answered.

“This will not and cannot happen in the Philippines,” she said. “Our officials made sure by issuing the Joint Memorandum of Agreement for the implementation of the Biofuels Law which says that ethanol producers cannot use food crops such as rice and corn.”

Ethanol producers buy sugar feedstocks based on domestic price, not world market price. She said: “We process the excess — to date local domestic price of sugar is P1,300, and world export price is P750.”

Rojo added: “A bioethanol plant ensures that farmers get the premium price of sugar, it’s P550 more and it’s paid upon delivery. If they sell to sugar millers, farmers must wait to be paid, for how long they cannot say.”

*   *   *

NEW PLAYER: Saying that the idea is to replace crude and gasoline with ethanol, Rojo said the Philippines is importing much of its ethanol needs, because it is still building its capacity.

Brazil, the United States and Thailand are increasing their mandated blend, she said, because they want to shift their fuel dependence to locally-produced energy alternatives.

The Philippines still needs more ethanol plants, aside from its present four, to firm up its control of the industry.

“And how do we entice investors to build when we always fear reversal of policy?” she asked. “Until now the government is yet to fulfill the law. Note that the mechanism for the oil firms to buy local first only started last April 2012.”

*      *      *

GREENS AGREE: The Partido Kalikasan (Greens PH), on the other hand, agrees that with the way the Biofuels Law has been implemented, it appears to be “working for the traders and producers and not for the farmers.”

Roy Cabonegro, secretary-general of Partido Kalikasan, said it is disheartening that instead of promoting local ethanol production, “because of lack of support, our five percent and soon to be mandated 10-percent required blend will only be complied with through more ethanol imports.”

He said: “We share the call that the impact of this law on environmental targets such as improving air quality and fuel efficiency should be properly assessed. Biofuels development must not compete with food security.”

The Congress must perform its oversight function, he added, to ensure that this important green legislation is implemented as intended and serve the intended public interests for cheaper, cleaner, indigenous and pro-farmer biofuel development.

Cabonegro said their chapters in more than 200 cities and towns in 49 provinces are ready to collaborate on projects on innovative production, post-production, marketing approaches and an impact assessment of the Biofuels Law.

*      *      *

RESEARCH: Access past POSTSCRIPTs at manilamail.com. Follow us via Twitter.com/@FDPascual. Send feedback to [email protected]