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Thursday, August 16

40. NATIONAL BIOFUEL POLICY DEBATE




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.
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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.
 Initiatives
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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