Benefiting from positive impacts of bio-fuel use<\/p>\n
Tomohide Sugino, Bogor<\/p>\n
In confronting historically high global oil prices, we have
\nobserved various projects emerging in Asia to develop alternative
\nfuel resources. China, which has experienced skyrocketing oil
\nconsumption due to rapid economic growth, has started selling
\ngasoline mixed with 10 percent ethanol (gasohol) in major cities.
\nJapan, which relies 100 percent on imports for its petroleum
\nneeds, is trying to increase the share of ethanol mixed gasoline
\nuse to 10 percent of total fuel consumption from the current
\nlevel of actual 0 percent. Thailand is hoping to triple its
\nethanol consumption by 2010.<\/p>\n
It was quite timely that Oyos Saroso addressed the issue of
\ngasohol use in Indonesia in his special report (The Jakarta Post,
\nJuly 22, 2005). This particular type of gasohol is a kind of
\n\"bio-fuel\" made from renewable biomass resources like cassava
\nroot and is an environmental friendly energy source. We highly
\nappreciate and fully support the implications of his report that
\ngasohol or bio-ethanol has the potential to mitigate the current
\nfuel crisis in Indonesia and has positive effects on the
\nenvironment and farmers' welfare. However, we should note that
\nseveral critical issues still exist on our way to gain the most
\nbenefit from the positive impacts of bio-fuel use.<\/p>\n
First, the biggest impediment of bio-fuel popularization is
\nits higher price than conventional fuel. Roughly speaking, the
\nproduction cost of bio-fuel is twice as much as gasoline. The
\nforerunners who have successfully increased bio-fuel consumption
\nhave provided tax exemptions or subsidies to their bio-fuel
\nproducers.<\/p>\n
For example, ethanol production in the U.S. has grown rapidly
\nwith support from a federal tax exemption of US$0.54 per gallon
\nand subsidies for ethanol producers. The amount of ethanol fuel
\nconsumption in the U.S. reaches more than 2 percent of current
\ngasoline consumption.<\/p>\n
In Germany, the price of bio-diesel, another kind of bio-fuel
\nmade from vegetable oil, costs less than conventional diesel fuel
\ndue to the exemption of the environment tax, which is imposed on
\npetroleum-based fuels to reduce polluting emissions. In Asia's
\ndeveloping countries, India and Thailand have already adopted
\nsimilar tax exemption schemes to make bio-fuel use and production
\nmore attractive.<\/p>\n
However, it is quite strange that the Indonesian government is
\nwilling to bear the huge cost of its fuel subsidy, but does not
\nsupport bio-fuel consumption. One of the possible solutions to
\nthis problem will be the promotion of foreign investment. The
\nClean Development Mechanism (CDM) is proposed as a part of the
\n\"flexibility mechanisms\" of the Kyoto Protocol.<\/p>\n
CDM allows industrialized countries to fulfill their
\ncommitments to greenhouse gas emission reduction from the
\nreduction in developing countries. Though developing countries
\nhave no obligation in the current protocol, if the industrialized
\ncountries assist their partners in developing countries in bio-
\nfuel production by their investment and technical support, then
\nsuccessfully reducing carbon dioxide emissions through the
\nsubstitution of gasoline and diesel by bio-fuel, it can be
\ncounted as an achievement by the industrialized countries. We
\ncould expect this mechanism would promote investment and
\ntechnology transfer on bio-fuel and contribute to reducing
\ninitial costs of production.<\/p>\n
Second, we need to carefully arrange the procurement of raw
\nmaterials for bio-fuel production to avoid conflict of \"food or
\nfuel\". The study conducted by the Center for Alleviation of
\nPoverty through Secondary Crop Development in Asia and the
\nPacific (CAPSA) has shown that farmers need to increase cassava
\nproduction by 1.2 million tons annually or 6.5 percent of current
\ncassava production in order to offset by 2 percent Indonesia's
\npredictions of premium gasoline usage of 15.17 million kiloliters
\nthis year by ethanol.<\/p>\n
If we try to meet this increasing demand only by area
\nexpansion, the government would need to expand its cassava-
\ngrowing areas by 82 thousand hectares, assuming no change to the
\ncurrent yield. This figure appears to be quite a challenge since
\nthe external area expansion will be difficult due to the rapid
\nconversion of arable land into non-agricultural use.<\/p>\n
A more appropriate path would be the effort to improve
\nproductivity of cassava farming. The average yield of cassava in
\nIndonesia is 15 tons per hectare; about 12 percent lower than
\nThailand (17 tons\/ha), which has successfully developed its
\nhighly integrated cassava industry. If we could increase the
\nyield to the level of our neighbor, farmers would be able to meet
\nthe huge demand from the bio-fuel industry and enjoy financial
\nbenefits without significant environmental deterioration or a
\ndisturbance to food production.<\/p>\n
To fulfill this strategy, institutional support by the
\ngovernment is crucial. Since Indonesia's agricultural policy has
\nput more emphasis on rice production, cassava and the other
\nsecondary crops (course grains, pulses, root and tuber crops),
\nwhich are major material for bio-fuel production, have not been
\ngiven much attention by policy planners. Institutional support
\nsuch as better market access, credit supply and technology
\ndevelopment should be strengthened for secondary crop farmers.<\/p>\n
Third, technical innovations could change the situation
\ndramatically. The production of ethanol from starchy crops like
\ncassava is an almost matured technology. It seems to be difficult
\nfor us to expect significant reduction in production costs.<\/p>\n
However, if cellulose-based products, such as rice straw, wood
\nchips or municipal garbage could be used for ethanol production,
\nthe production cost would be dramatically reduced and bio-fuel
\nwould achieve price competitiveness with gasoline without any
\npreferable tax schemes. The conversion of raw material from
\nexpensive starchy crops to cheaper cellulose-based products is a
\nmajor focus of current research activities on bio-fuel
\nproduction.<\/p>\n
This may be welcome news from the viewpoint of the bio-fuel
\npromotion. However, if farmers invested their scarce resources
\ninto increasing cassava production, and let's say, after 10
\nyears, the material for bio-fuel suddenly changes to cellulose-
\nbased products, it would mean a tragedy for farmers. The above
\nmentioned policy support of cassava farmers should be carefully
\ndesigned with a good perspective of technological developments.<\/p>\n
There is no doubt about the positive effects of bio-fuel
\ndevelopment on energy security, environmental conservation and
\nthe development of agriculture. The achievement of real power of
\nbio-fuel relies on well-designed policies.<\/p>\n
The writer is the Project Leader of AGRIDIV Project Center for
\nAlleviation of Poverty through Secondary Crops' Development in
\nAsia and the Pacific (CAPSA), Bogor. He can be reached at
\nagridiv@uncapsa.org.<\/p>",
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