40 NATIONAL BIOFUEL
POLICY DEBATE
Cabinet approves new
biofuels policy
o The Union Cabinet approved the National Policy on
Biofuels, 2018.
o The Ministry of
New and Renewable Energy had released a National Policy on Biofuels in 2009.
What is Bioenergy?
o Bioenergy is the largest used renewable energy source
in the world.
o It accounts for 14
per cent of the 18 per cent “renewables used in the global energy mix.”
o Bioenergyincludes
both traditional and modern biomass and biofuels.
o Traditional sources like fuelwood and charcoal,
predominantly used in rural areas and in developing countries for heating and
cooking, account for 90 per cent of bioenergy use.
o Modern
bioenergy like biogas and biofuels account for only 10 per cent of bioenergy
use.
What are Biofuels?
o Biofuels are liquid or gaseous fuels produced from
biomass resources.
o These resources include biodegradable fraction of products, wastes and residues from
agriculture, forestry and related industries, and the biodegradable
fraction of industrial and municipal wastes.
o According to the World
Energy Council, biofuels are the “most viable and sustainable option in
replacing oil dependency.”
o At present, four
per cent of the arable area in the world is dedicated to biofuel production.
o Transport biofuels like bioethanol and
biodiesel that are blended with petrol and diesel are the fastest growing
bioenergy in the world.
o They account
for three to four percent of total road
transport fuel.
o Environmental
concerns and the need to improve energy security by reducing import dependence
on traditional fuels have both contributed to the growth of bioenergy.
Four Generation of
Biofuel
o Broadly speaking, there are four generations of
biofuels.
o First
generation biofuels are manufactured using food crops like sugarcane, maize and
oilseed.
o Second
generation biofuels are produced from non-food produce like organic waste, wood
and food crop waste.
o Third generation biofuels are “based on improvements in the production of biomass” by taking
“advantage of specially engineered energy crops such as algae”.
o Fourth generation biofuels are based on more advanced
technology which aims to capture and
store carbon dioxide (CO2) at every production stage.
o Currently, first generation biofuels are the most
common type of biofuels used, and second, third and fourth generation biofuel
technology are still being developed.
National Policy on
Biofuels, 2018
Key features of the
approved policy include:
1. Categories
of biofuels
§ The policy creates two categories of biofuels: basic and advanced.
§ Basic
biofuels include first generation bioethanol.
§ Advanced
biofuels include second generation ethanol, municipal solid waste, third generation biofuels, bio-CNG.
2. Raw
materials
§ Until now, only ethanol produced from sugarcane was
approved for this purpose.
§ The policy expands
the scope of raw material for ethanol production by allowing the use of
certain items that are unfit for human consumption.
§ These include:
a.
Sugarcane
juice
b.
Materials
containing sugar such as sugar beet
c.
Materials
containing starch such as corn, cassava
d.
Damaged
food grains like wheat, broken rice, and rotten potatoes.
§ It also allows the use of surplus food grains for production of ethanol for blending with
petrol, with the approval of the National Biofuel Coordination Committee.
3. Financial
incentives
§ The policy indicates a viability gap funding scheme of Rs 5,000 crore in six years for
second generation ethanol bio refineries.
§ Further, advanced biofuels will also get additional
tax incentives, and higher purchase price as compared to basic biofuels.
Effects of the Policy
Positive Outcomes
Ø Reduce
the cost of Biofuel
o Under the new policy, feedstock for biofuels includes
sugar beet, corn, damaged foodgrain, potatoes, even municipal solid waste.
o This will likely reduce
the cost of producing biofuels and improve affordability for consumers,
particularly during times when oil prices reach discomforting levels.
o In India, industrial-scale availability of ethanol so
far has been only from sugar factories, which were free to divert it to other
users such as alcohol producers, who would pay more.
Ø Benefit
to the Farmers
o The new policy will also benefit farmers, who will be able to sell various types of agricultural
waste to industry at remunerative prices.
Ø Save
Foreign Exchange
o The government estimates that ethanol supply of around 150 crore litres in 2017-18 could save foreign
exchange worth over ₹4,000 crore.
Ø Curb
Atmospheric Pollution
o The production
of biofuels from agricultural waste, it is hoped, will also help curb atmospheric pollution by
giving farmers an incentive not to burn it, as is happening in large parts of
northern India.
Caution
o There is also a need
for caution in using surplus foodgrain to produce ethanol.
o And while removing the shackles on raw material supply
can have definite benefits, it cannot make a significant difference to biofuel
production as long as the supply-chain
infrastructure that is required to deliver biofuels to the final consumer
remains inadequate.
o The government should also take steps to remove policy barriers that have discouraged private
investment in building supply chains. Until that happens, India’s huge
biofuel potential will continue to remain largely untapped.
Negative Outcomes
Ø Ignored
Octane
o National Biofuel Policy, 2018 is silent about octane, which has direct consequences of air quality and
pollution — octane assists in proper combustion of fuels and thereby
impacts vehicular emissions.
o Petrol is blended with cancer-causing imported
aromatics to boost octane rating, with negative consequences on health and
emissions.
Ø Burden
on the Exchequer
o Under the NBP, “a viability gap funding (VGF) scheme for 2G (second generation) ethanol bio
refineries of Rs 5,000 crore in six years in addition to additional tax
incentives, higher purchase price as compared to 1G (first generation)
biofuels,” will be provided.
o The NBP 2018 asks for excessive expenditure from the exchequer for a technology (production
of second-generation biofuels) that is untested
and has not taken off commercially internationally.
o Technologies have not yet evolved enough for second
generation biofuels such as cellulosic ethanol from non-food crops.
Ø Impact
on food Security
o The food versus fuel debate is a dispute over the
impact of biofuel production on food security.
o According to the FAO, the world population will reach 9.1 billion by 2050.
o A 70 per cent
increase in agricultural output is needed to meet the future projected demand
for food.
o It is alleged
that biofuel production from first generation sources are in competition with
food production over land and other resources like water and increases food
prices.
Ø Impact
on prices
o According to a 2008
World Bank report titled ‘A Note on Rising Food Prices’,biofuels production was
responsible for a 70 to 75 per cent increase in the prices of food commodities.
o The report
noted that biofuel related policies adopted by the US and EU, such as subsidies, import tariffs and fuel-blending
mandates, led to increased biofuel production and that, if such policies
had not existed, the impact of biofuel on food prices would have been lower.
o The report goes
on to cite Brazil’s example in
lower-cost ethanol production from sugarcane, which did not cause a significant
rise in sugar prices.
o In this respect, the report states that the removal of
import tariffs in the US and EU would facilitate the sale of more economically
viable biofuels from Brazil and other developing countries and warns against subsidies for biofuel
production.
o On the other hand, another World Bank paper released in July 2010 found that the impact of
biofuels on food prices during the 2008 price boom was “much less than
initially thought” and that the “index fund activity” played an important
role in the price boom.
Ø Impact
on land use
o Future estimates of land demand for biofuel production
vary from 40 to 800 million hectare (Mha).
o Biofuels can impact land use change through direct or
indirect land use.
o Direct
land use change happens when biofuel feedstocks are grown on land made
available by clearing forests, whereas indirect land use change (ILUC) occurs when biofuel feedstock are grown on land previously used
for cultivating other crops, which latter then have to encroach on more
land for their production.
o The pressure
from biofuels on land use in the future could be either weaker or stronger.
o The pressure could be weaker if second and third generation biofuel technology becomes
economically feasible.
o On the other hand, the pressure could be stronger if
energy costs grow and the demand for alternative fuels go up.
Ø Impact
on Environment
o Bioenergy
is often considered carbon neutral, as the carbon dioxide released in combustion is assumed to be
compensated by the CO2 absorbed during plant growth.
o However, indirect
land use change can negate any greenhouse gas savings from biofuel production
based on energy crops.
o Second,
third and fourth generation biofuels would be better at mitigating GHG
emissions but they are not
viable yet.
o Some G1 (first generation) biofuel crops provide net
GHG benefits only under certain conditions such as use of abandoned or degraded
lands (involving no direct or ILUC), utilisation of co products, adoption of
sustainable production practices (excluding use of nitrogenous fertilisers),
and so forth.
xxx
Additional Reading
Biofuels in India
o According to British Petroleum (BP), by 2035, India will have the largest growth in
energy consumption amongst all the major economies and it will remain dependent
on energy imports to meet its needs.
o BP predicts
that India’s need for natural gas will increase by 162 per cent, that of oil by
120 per cent, coal by 105 per cent, renewables by 699 per cent, nuclear by 317
per cent and hydro by 97 per cent.
o This will need
to be met by a 165 per cent increase in oil imports, a 173 per cent increase in
gas imports and a 105 per cent increase in coal imports. Renewables will become the second largest fuel produced in India by
2035, surpassing oil.
o Indian biofuel initiatives began in 2003. The biofuel
programme in India differs from that of other countries because of the government’s focus on producing biofuels
from non-feed stocks “raised on degraded land or wasteland that are not suited
to agriculture.
o This has avoided
a possible conflict of fuel verses food security.”
o Bioethanol
in India is largely produced from molasses (a by-product of sugar production)
and biodiesel is largely produced from non-edible oil like jatropha seeds.
o India
needs to produce 10 GW of energy from biomass to meet its commitments under the
Paris climate treaty.
o India had set a target of 20 per cent blending of bioethanol with petrol and biodiesel with
diesel by 2017.
o A 3.3 per cent blending of bioethanol with petrol was
achieved in 2016.
o The “blend
targets were partially successful in years of surplus sugar production but
unfulfilled when sugar production declines.
o Since sugarcane production in India is cyclical, ethanol production also varies accordingly
and therefore does not assure optimum supply levels needed to meet the demand
at any given time.”
o Ethanol imports have grown over the past years but the
government currently only allows for indigenously
produced ethanol to be used for biofuel generation.
o The government also has plans to set up 12 second
generation ethanol bio-refineries in India.
o In the past, low procurement prices for biodiesel has
been known to be a hindrance to the growth of the industry.
o The regulation of diesel prices by the government in
the past made it competitive with biodiesel, but the deregulation of diesel in 2014 is perceived as incentivising more
investments in biodiesel.
o Before 2015, only state owned firms and private firms
with INR 2,000 crore in oil investments were allowed to retail biodiesel to
customers, but this regulation was
amended in 2015 to make biodiesel more easily available to users by allowing
authorised manufacturers to sell directly to consumers.
o It should be noted that India’s diesel demand is five
times higher than its petrol demand.
o With the recent implementation of the Goods and Services Tax (GST), an 18 per
cent tax is now levied on both biodiesel and ethanol.
o This has resulted in biodiesel becoming more expensive than diesel and has almost
brought the sale of biodiesel to a “halt”.
o Ethanol, on the other hand, which is a bigger
industry, could survive the GST.
o Petroleum ministry is working towards the reduction of
the GST levied on biofuels.
o Interestingly, GST
has not been levied on petroleum products yet, although recent reports suggest
that the central government is interested in levying GST on petroleum products,
which could level the field for biofuels.
Ethanol Blended Petrol
Programme
o In 2003, the
Ethanol Blended Petrol Programme (EBP) focused on 5 per cent blending of
molasses-based ethanol with petrol.
o By 2008, it
pushed for the blending target of 10 per cent. These targets were not met.
o Yet in 2009,
the National Biofuel Policy (NBP) proposed a target of 20 per cent blending
for ethanol and biodiesel by 2017.
o Fuel blending with ethanol varies from 85 per cent
(E85) in Australia to vehicles run on 100 per cent (E100) ethanol in Brazil,
where the ethanol blending mandate is 27 per cent (E27). India has an abysmal 2-4 per cent blending rate.
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