Biodiesel Promotion Policies: A Global Perspective

Shashi Kumar Jain

Sunil Kumar

A. Chaube

Introduction

As energy is essential for human development, today’s world faces a dual challenge: to provide reliable and affordable energy to a growing population, while mitigating the effect of climate change. A significant portion of the world’s population, which inhabits developing and under-developed countries, is energy deprived and living in dire circumstances. Hence, the provision of cheap and clean energy is a dual challenge that will have ramifications for every nation’s economic, energy security, and environmental goals.

As shown in Table 17.1, primary energy consumption grew at a rate of 2.3% in 2018, almost double its ten-year average of 1.5% per year, and the fastest since 2010 (IEA, 2019a). In terms of fuel, energy consumption growth was driven by natural gas, w'hich contributed more than 40% of the increase. All fuels grew faster than their ten-year averages, apart from renewables, although these still accounted for the second largest increment to energy growth. China, the USA. and India together accounted for more than two-thirds of the global increase in energy demand, with US consumption expanding at its fastest rate for 30 years. Carbon emissions grew by 2.0%, the fastest growth for seven years (BP, 2019).

Consumption of Oil

Oil continues to play a leading role in the world’s energy mix, with growing demand driven by commercial transportation and feedstocks for the chemicals industry. It is predicted that commerce and trade will drive transportation energy consumption up more than 25% from 2017 to 2040. Global transportation demand is driven by differing trends for commercial transportation and light-duty passenger vehicles. As economic activity expands, especially in developing regions, commercial transportation is expected to grow. The majority of the growth comes from heavy-duty trucking as a result of goods movement. Passenger vehicle ownership is expected to expand as a result of the dramatic grow'th in the middle class and increased urbanization, leading

TABLE 17.1

Total Primary Energy Demand in the World

Energy Demand (Mtoe)

Growth Rate (%)

Shares (%)

2018

2017-2018

2000

2018

Total primary energy demand

14 301

2.30

100

100

Coal

3 778

0.70

23

26

Oil

4 488

1.20

37

31

Gas

3 253

4.60

21

23

Nuclear

710

3.30

7

5

Hydro

364

3.10

2

3

Biomass and waste

1 418

2.50

10

10

Other renewables

289

14.00

1

2

Source: IEA (2019a). Mtoe: Million tons of oil equivalent.

TABLE 17.2

Oil Energy Demand in the World

Oil Primary Energy Demand

2018

United States

20

China

13

India

5

Europe

15

Rest of the World

46

WORLD

99

Source: IEA (2019a).

Growth Rate

  • 2017-2018
  • 2.70
  • 3.50
  • 4.50
  • 0.10
  • 0.20
  • 1.30

to increased passenger vehicle travel. The fuel mix continues to evolve with more alternatives, such as electric vehicles.

Aviation demand will see the highest annual growth rate at 2.2% from 2017 to 2040 due to both rising economic activity as well as rapid growth of the middle class, specifically in emerging economies (ExxonMobil, 2019). As seen in Table 17.1, oil energy is one of the major contributors to meeting the primary energy demand of the world. In order to mitigate the harmful effects of oil consumption, as a policy matter suitable techno-economically feasible energy alternatives must be harnessed and used globally. Table 17.2 clearly shows that the major onus for identifying and using viable alternatives to oil energy must address the fact that all nations are increasing their energy as well as their oil demand.

Carbon Emissions

Climate experts expect global carbon emissions from fossil fuels and cement production to rise in 2020, from an estimated 36.8 billion tonnes of CO, last year (Guardian, 2020). Table 17.3 shows very alarming data as economic development in the USA, China, India, and other parts of the world has led to positive growth in CO, emissions. Hence, the global energy system needs imminent transformation. The present energy supply system mainly based on fossil fuels has to be based, instead, on renewable energy. This can eventually lead to fulfilment of the United Nations’ SDG 7 which ensures access to affordable, reliable, sustainable, and modern energy for all - not for just some.

Energy Intensity

Global energy intensity, defined as the ratio of primary energy supply to GDP, is the indicator used to track progress on global energy efficiency. The original target was an annual reduction of 2.6% until 2030, although the world has fallen short of this goal since it was announced, such that the required rate of improvement has risen to 2.7% after an improvement of only 1.7% in 2017. The further slowdown in 2018, with an improvement in energy intensity of only 1.2% according to IEA analysis, means that from 2019 to 2030 global energy intensity must improve by 2.9%

TABLE 17.3

CO2 Emissions in the World

Total CO2 Emissions (Million Tonnes) Growth Rate (%)

2018

2017-2018

United States

4 888

3.10

China

9 481

2.50

India

2 299

4.80

Europe

3 956

-1.30

Rest of the World

11 249

1.10

WORLD

33 143

1.70

Source: IEA (2019a).

TABLE 17.4

Energy Intensity Improvements in the World

Energy Intensity Improvements (toe per $1000, PPP)

Growth Rate (%)

7.099 pt

2017-2018

United States

0.112

0.80

China

0.125

-2.90

India

0.092

-3.10

Europe

0.079

-1.60

Rest of the World

0.109

-1.10

WORLD

0.108

-1.30

Source: IEA (2019a). Toe: Tons of oil equivalent.

annually to satisfy SDG 7.3. Meeting this objective will require an important step up in the implementation and expansion of energy efficiency policies (IEA. 2019b).

In terms of energy security, importing countries reduced their exposure to oil market instability through technical efficiency improvements. Technical efficiency gains continue to deliver cuts in energy-related emissions. Between 2015 and 2018, technical efficiency improvements reduced energy-related carbon emissions by 3.5 gigatonnes of carbon dioxide (GtCO2), roughly the equivalent of the energy-related emissions of Japan over the same period. This is helping to bring the world closer to an emissions trajectory consistent with achieving global climate change goals. Table 17.4 shows that huge scope exists for improvement in energy intensity across various countries in the world. Localized renewable energy generation and utilization offers a great opportunity for improvement in energy intensity.

Policy Paralysis in the Biofuel Sector

As per the available statistics, diesel (739 MMT) and gasoline (683 MMT) are both consumed substantially throughout the world (IEA, 2019c). Diesel consumption is almost on a par with gasoline consumption. Figure 17.1 shows actual as well as projected

World ethanol and biodiesel production. (Source

FIGURE 17.1 World ethanol and biodiesel production. (Source: OECD/FAO (2019)).

biodiesel production throughout the world. As can be seen, one-third of biodiesel production as compared to ethanol production shows complete policy paralysis. A thorough analysis of prevailing biofuel policies, production, and consumption statistics in biodiesel producing countries has been conducted to obtain a precise look at this state of affairs.

Observations from Global Biodiesel Production Projects

The extent to which biofuels have reached the end consumers varies significantly country by country as well as region by region. The reasons for these differences are complex and include a variety of policy and market issues. While biofuels offer significant environmental, technical, and socio-economic advantages, their prices are sometimes higher than their petroleum product equivalents. As a result, biofuels have been successfully implemented only in those countries that have recognized the value of those benefits and have made appropriate policy decisions to support them. Standardization is one of the key issues in the development and adoption of new products. For the producers and distributors of biodiesel blended fuel, standards for all the possible blend percentages are a vital necessity. The enforcing agencies and authorities require approved standards for the evaluation of performance, safety, and environmental risks. The development of engines is mainly based on the properties of the fuel.

Standards for Biodiesel Blends

Diesel engines cater to a wider variety of applications. Suitable standards for biodiesel blends must be worked upon on a priority basis for its wider acceptance on a national as well as an international level. Major oil consuming countries like China, India, and Japan have not come out with any technical specifications of biodiesel blended fuel. In this case it will be indeed difficult to implement usage of such fuel on a mass scale basis.

The development of a new fuel standard is a complex and long-lasting task, even on the national level. Closer coordination and cooperation are required at the international level for the further development of biodiesel fuel in international markets.

Economic Sustainability of Feedstock

Major oil consuming as well as diesel consuming nations do not have an economic sustainability model for the biodiesel feedstock supply chain. This is the main reason for the poor economic viability and the failure of biodiesel to grab a bigger chunk of the biofuel market globally. The European Union is one the largest consumers of diesel and is itself trying to establish a trade-off between in-house developed biodiesel and imported biodiesel from countries such as Indonesia, Argentina, and Malaysia. Countries like China, India, and Japan do not have a clear-cut policy regarding the identification of suitable feedstock for producing biodiesel.

Populous countries like India and under-developed countries in Africa must come up with a social security and rural development model for the development of suitable biodiesel feedstock at the local level. This will ensure energy independence and economic development in these regions. The proper involvement of actual stakeholders is mandatory for the real success of these social programs.

Wastelands

The large availability of wasteland has often been discussed in many studies. It must be carefully noted that it is impossible to cultivate any biodiesel feedstock without the proper input of the type of land. Hence, the emphasis must be on the identification of suitable land with specific inputs for cultivating a proper crop to act as a feedstock for biodiesel. With institutional support, this will in turn be a revenue generation model for poor rural people.

Policy Interventions

Deploying new technology allows society to do more with less. A policy, like tax incentives, can spur the development of new technology, though these technologies ultimately need to compete without subsidies to reach a large enough scale to impact global markets. Demand for energy begins with the numerous choices that consumers make in their daily lives, such as lower energy costs and lower emissions. Consumer preferences can also be altered over time by policies that incentivize choices, as in the case of standalone diesel generator sets in rural areas that must be operated with biodiesel blended fuel. The biodiesel must be made up of local feedstock. A local level cooperative body must be made accountable for these initiatives. This would help in establishing the proper supply chain of feedstocks.

Energy Demand in the Marine and Aviation Sector

Aviation demand will see the highest annual growth rate at 2.2% from 2017 to 2040 due to both rising economic activity as well as the rapid growth of the middle class, specifically in emerging economies (ExxonMobil, 2019).

In the ‘sustainable development scenario’ (SDS), low-carbon fuels will meet 7% of international shipping and 9% of aviation fuel demand in 2030. However, current biofuel consumption is minimal in both these subsectors. Some progress has been made in aviation. Flights using biofuel blends have surpassed 200,000; a continuous biofuel supply is available at six airports; and policy support was enhanced in the United States and Europe in 2018. Still, aviation biofuel production of about 15 million litres in 2018 accounted for less than 0.01% of aviation fuel demand. This means that very significant market development is needed to deliver the aviation biofuel production required to be on the SDS trajectory in 2030. To scale up biofuel consumption, market and policy framew'orks must be devised that reflect the international nature of these sectors. This task falls within the remit of the ‘International Civil Aviation Organization and the International Maritime Organization’.

Domestic aviation and navigation fall under the jurisdiction of national governments, however, and policy measures that close cost premiums with fossil fuels (e.g. consumption subsidies or carbon pricing) can be employed to increase the economic viability of biofuel use (IEA, 2019d).

Energy Demand for Commercial Vehicles

‘Manufacturing commercial vehicles’ (MCVs) will include 70% alternative fuels, and ‘heavy commercial vehicles’ (HCVs) approximately 20%, mostly biofuels, due to the need for high energy density fuels in long-haul trucks. This w'ould require a rapid acceleration in the early 2020s of both alternate fuels into the heavy-duty fleet as well as infrastructure build-out to support the alternatives (ExxonMobil, 2019).

Observations and Recommendations from a Status Report on the Implementation of Existing Biodiesel Promotion Policies

Table 17.5 presents a comprehensive review of biodiesel supporting policies prevailing in the major oil consuming countries of the world. It is clearly shown that biodiesel promotion policies are either non-existent or had failed in most countries of the world. The real motive of the review was to ascertain the seriousness of federal agencies in executing the sustainable development of biodiesel as part of an energy security initiative. Apart from the serious initiatives of the EU, the USA, Canada, Argentina, and Brazil towards sustainable development of biodiesel, most of the countries in the world are non-committed.

Greenhouse Gas Reduction Initiatives

Notably, only the EU has specified its emission reduction targets as part of reducing ‘greenhouse gas (GHG) emissions’ . It is worth mentioning that the largest economies, like the USA and China, are not able to set up and meet any GHG reductions. Major oil consuming countries like Argentina, India, Japan, and Canada must also emphasize the proper use of biodiesel blends for meeting GHG reduction targets.

TABLE 17.5

Biodiesel Policy Status Report

Povert

GHG

Specific

Energy

Alleviation &

s.

Production

Blending

Reduction

Policy

Type of

Security

Rural

No.

Country

Capacity

Production

%

Consumption

Exports

Targets

Available

Feedstock

Concerns

Development

Reference

1

Argentina

5 billion

2.5 billion

9.6

1.3 billion

1.2 billion

Not

Biofuels Law

Edible

Not specified

Not a major

USDA.

liters

liters

liters

liters

specified

(Law 26093)

issue

2019a

of 2006

2

India

650 million

85 million

0.14

Not specified

Not

Not

National

Non-edible

Critical to

Major issue

USDA.

liters

liters

specified

specified

Biofuel

energy

2019b

Policy 2018

security

3

Canada

500 million

460 million

2

Not specified

340

Not

Renewable

Edible

Not specified

Not a major

USDA.

liters

liters

million

specified

Fuels

issue

2019c

liters

Regulations

2010

4

China

Not

Not

0,2

Not specified

Not

Not

Not specified

Used

Critical but

Not a major

USDA;

specified

specified

specified

specified

cooking oil

not specified

issue

2019d

5

Japan

Not

Not

0,3

Not specified

Not

Not

Not specified

Not

Critical but

Not a major

USDA;

specified

specified

specified

specified

specified

not specified

issue

2019e

6

US

2520

1725

10 - 20%

1975 million

2719

Not

Renewable

Vegetable

Not specified

Not a major

IEA.2018

million

million

gallons

barrels

specified

Fuel

- soybean,

issue

gallons

gallons

Standard

corn and

(RFS) 2005

canola

7

Europe

21181

14442

7,7

16854 million

664

6%

Renewable

Vegetable

Economic

Not a major

USDA;

million

million

liters

million

Energy

-UCO.

tradeoff

issue

2019f

liters

liters

liters

Directive II

soybean,

between

(RED II)

rapeseed.

imports and

palm.

inhouse

sunflower

production

is major

concern

UCO: Used cooking oils.

350 Biodiesel Fuels

Biodiesel Blending Percentage

Brazil has also announced plans to progressively scale up its biodiesel mandate from 11% to 15%. Major oil consuming nations are highly conservative about increasing their biodiesel blending percentage mandate. A very low penetration of biodiesel in Japan. China, and India shows the lackluster concern of policy makers in these countries towards its sustainable development. In the marine sector, the use of biodiesel should be promoted to ascertain the technical feasibility of keeping economics in consideration.

Usage of Higher Percentage Biodiesel Blends

Vehicles adapted to high biofuel blend levels or unblended biofuel usage must be developed and used, especially for energy intensive usage. Drop-in biofuels can be used unblended or at high blend shares without modifications to engines, maintenance regimes, or fuel supply infrastructure.

Production Capacity

Most countries are reporting under-utilization of production capacity. This itself represents poor planning and execution amongst policy makers, business houses, and federal agencies. Biodiesel production projects can be viable only if the larger interests of society are taken into consideration before implementation. The minimum in-house requirement of biodiesel fuel must be ensured before coming up with fully fledged production units.

Certain countries are setting up plantations in other countries, such as underdeveloped African nations, as part of their supply chain for feedstock and improving the livelihoods of poor people. This is also a contentious issue. In the longer run, this should not lead to land grabbing in poor countries or the setting up of colonial rule.

Sustainable Development of Biodiesel Production

Sustainable development is essential to ensure that scaling up of biodiesel consumption delivers tangible social, economic, and environmental benefits, including lifecycle GHG emission reductions.

Policy makers must establish frameworks to ensure only sustainable biofuels receive policy support. Adherence to sustainability criteria can be demonstrated by third-party certification of biofuel supply chains.

In Mexico and South Africa transport biofuel industries are at an infancy stage. Therefore, market development and technology leapfrogging are needed to get on track with the SDS.

Rapidly increasing transport fuel demand ably supported with policy initiatives for biodiesel production is a means to raise energy security while ensuring demand for strategically important agricultural commodities as a feedstock.

Biodiesel from non-food-crop feedstocks as w'ell as ‘used cooking oils’ (UCO) need to command a more substantial share of biodiesel consumption in the ‘safety data sheet’ (SDS). This is because they mitigate land use change concerns and generally offer higher lifecycle GHG emission reductions than conventional biodiesel.

The European Union, the United States, and Brazil have established frameworks to ensure biofuel sustainability, but there is a need for other countries to ensure that rigorous sustainability governance is linked to biofuel policy support (IEA, 2019d).

Scaling up Advanced Biofuels Is Essential

Technologies to produce biodiesel and ‘hydrotreated vegetable oil’ (HVO) from waste oil and animal fat feedstocks are technically mature and provided 8% of all biofuel output in 2018. However, production of novel advanced biofuels from other technologies is still modest, with progress needed to improve technology readiness. These technologies are important, nevertheless, as they can utilize feedstocks with high availability and limited other uses (e.g. agricultural residues and municipal solid waste) (IEA, 2019d).

Policy Support to Commercialize Advanced Biofuels

Most of the countries around the world are not able to follow the policy guidelines for production and usage of biodiesel. This can be due to unrealistic estimates regarding cost, availability of cheap and abundant feedstock, tax benefits for parity with petro-products, improper support from established petro-product suppliers/produc-ers, and projections of high yields. Policy guidelines must be able to facilitate the technology learning and production scale-up necessary to reduce costs.

Relevant policies should include advanced biofuel quotas and financial derisking measures, e.g. loan guarantees from development banks. These would be particularly effective in those countries which possess significant feedstock resources.

Countries and regions should consider policies that specify reductions in fuel lifecycle carbon intensity (such as California’s Low Carbon Fuel Standard), which are effective in boosting demand for biodiesel and HVO from waste oil. fat, and grease feedstocks, as well as biomethane. They could also support the deployment of novel advanced biofuels once production costs fall (IEA, 2019d).

References

BP. 2019. BP Statistical Review of World Energy. London: British Petroleum.

ExxonMobil. 2019. Outlook for Energy: A Perspective to 2040 Irving. TX: ExxonMobil.

Guardian. 2020. Carbon Emissions from Fossil Fuels Could Fall by 2.5bn Tonnes in 2020. 12 April 2020.

IEA. 2018. United States - 2018 update. Paris: International Energy Agency.

IEA. 2019a. Global energy & CO2 status Report. Paris: International Energy Agency.

IEA. 2019b. SDG7: Data and Projections. Access to Affordable. Reliable, Sustainable and Modern Energy for All. Paris: International Energy Agency.

IEA. 2019c. Oil Information 2019: A Comprehensive Reference on Current Developments in Oil Supply and emand. Paris: International Energy Agency.

IEA. 2019d. Tracking Transport: Transport Biofuels. Paris: International Energy Agency.

OECD/FAO. 2019. OECD-FAO Agricultural Outlook. Paris: Organisation for Economic Co-operation and Development.

USDA. 2019a. Argentina Biofuels Annual 2019. Washington, DC: USDA Foreign Agricultural Service.

USDA. 2019b. India Biofuels Annual 2019. Washington. DC: USDA Foreign Agricultural Service.

USDA. 2019c. Canada Biofuels Annual 2019. Washington, DC: USDA Foreign Agricultural Service.

USDA, 2019d. China Biofuels Annual 2019. Washington, DC: USDA Foreign Agricultural Service.

USDA, 2019e. Japan Biofuels Annual 2019. Washington, DC: USDA Foreign Agricultural Service.

USDA: 2019f. EC Biofuels Annual 2019. Washington. DC: USDA Foreign Agricultural Service.

 
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