Summary

Biofuels could play unique and significant roles in the emerging global energy transition. This article briefly examines some biofuel policies in some leading top-producer countries.

Biofuels Policies and the Energy Transition

Decarbonization and the energy transition have become somewhat synonymous with the adoption of renewable energy technologies. It is easy to understand why this is the case, given the share of power generation in GHG emissions and the general ease of government policies to make tangible shifts towards a sustainable future. Nonetheless, other ‘renewables’ still play a vital role in weaning our economies off fossil fuels. Biofuels have been subtly but confidently growing in the background. While global renewable energy consumption has grown an average of 13.3 percent annually from 2000 to 2020, biofuel consumption trailed closely with an annual average growth of 12.5 percent (BP, 2021).

Although the sustainability of biofuels and their potential ramifications for land and water usage and deforestation remain contested, there seems to be a relentless commitment to their advancement. This is particularly because of the intersection of its promising environmental benefits with its ability to provide social and economic wins, not to mention improvements in energy security. Biofuel production in the US, Brazil, and Indonesia accounts for 67 percent of the total biofuel production globally as of 2020 (BP, 2021). The US alone produces 34 percent, as seen in the figure below. As such, this piece wishes to draw attention to the growing trend of government support for the biofuel industry. We will discuss the status of biofuel policy and its role in decarbonization by looking at the latest policy developments in the three largest producing countries.

 

 

USA

Amidst the contention over the usefulness of biofuels for sustainability, the U.S. has taken the lead in not only stimulating the growth of a bioeconomy but also pushing the boundaries of biofuel technology. The National Biofuels Action Plan (NBAP) was the foundational strategy for total supply chain support of biofuel production. The NBAP was later extended in the National Bioeconomy Blueprint to address barriers and workforce requirements. However, it was the introduction of the Renewable Fuel Standard (RFS) that catapulted the industry. First introduced in 2005 under the Energy Policy Act, the U.S. Environmental Protection Agency (EPA) mandated that 2.78 percent of gasoline sold nationwide must be renewable. In 2009, the standard was increased to 10.21 percent and is now authorized by the Energy Independence and Security Act of 2007 (U.S. EPA, 2023). The RFS further incentivized the production of biofuels by guaranteeing markets for investors. The U.S. Department of Energy Co-Optimization (Co-Optima) encourages the production and technological development of both renewable fuels and engines capable of efficiently and proficiently running on renewable fuels. Research and development efforts target refining fuel properties to deliver on vehicular performance and reduce emissions footprints. New fuel and technology are targeted for 2025 and slated to reduce GHG emissions by 60-80% relative to conventional diesel (U.S. DoE, 2021).

More recently, the US government revealed the Inflation Reduction Act 2022, which availed U.S. $10 million in grants for biofuel industries, with an additional U.S. $500 million for the construction of supporting infrastructure (Shahid, 2022). Akin to the initiation of the bioeconomy, production incentives were followed by the security of fuel demand. In June 2023, the EPA reaffirmed its commitment to developing low-carbon fuels and supporting agricultural communities by extending the Renewable Fuel Standard. Unlike the previous iterations of the RFS, the EPA has shifted away from mandating fuel content to mandating the volumes of biofuel that refineries, fuel blenders, and importers are obligated to sell. As such, the EPA has set incremental volume targets for the sale of cellulosic biofuel, biomass-based diesel, advanced biofuel, and other renewable fuels for 2023, 2024, and 2025 (U.S. EPA, 2023).

 

Brazil

While Brazil’s biofuel production is second only to that of the U.S., the country has played a pioneering role in ethanol production since the 1920s and 1950s, given the need to reduce the country’s import dependencies. The National Alcohol Program (Proálcool) emerged with a similar object amidst the 1973 oil crisis (Grangeia et al., 2022). Brazil has several geographical advantages for developing a vibrant biofuel sector, including a favorable climate and significant agricultural experience. Accordingly, almost all of Brazil’s bioethanol is generated from locally produced sugarcane, while biodiesel is mostly produced from soyabean oil. Brazil’s initiation of biodiesel into its energy mix with the institution of the National Biodiesel Production and Use Program (PNPB) in 2004. The following year, the Brazilian government introduced its mandate of 2 percent biodiesel content by 2008 and 5 percent by 2013. The National Council of Energy Policy continued its consecutive marginal increase, reaching 10 percent in 2019. Concurrently, a 27 percent blend of ethanol in gasoline was instituted in 2015. In 2017, the country established RenovaBio, a new framework that coupled the thrust for energy security with the aim of reducing GHG emissions via renewable fuels (U.S. DoA, 2021). The program also mirrored the US’s plan for renewable fuel standards, which include a system of tradeable credits for lowering carbon emissions. This makes room for new technologies like biomethane.

 

Indonesia

Unlike the U.S. and Brazil, Indonesia does not have a significant history of biofuel production. The industry began with a presidential order to establish a National Energy Policy (KEN) for developing a biofuel supply chain in 2006. This included the identification of feedstock, incentivizing consumption, and promoting technological development. A 5 percent consumption mandate was also set as a 2025 target. Indonesia is the world’s largest palm oil producer, making the product a substantial source of biodiesel production. However, fuel-grade bioethanol is yet to be produced, given the absence of domestically available feedstock (U.S. DoA, 2023).

By 2008, a blueprint for biofuel development was created as the national strategy for the emerging industry. It entailed a renewed consumption mandate of 10 percent, which was mainly geared towards public procurement of renewable fuel. The consumption requirement reached 15 percent by 2015 (Kharina et al., 2016). The blueprint aimed to reduce poverty and unemployment through agricultural development by securing palm oil markets in biofuel industries. In 2018, the requirement was expanded to a nationwide program called B20, which called for a 20% blend of biofuels with fossil fuels. As of 2022, Indonesia stands out of the three nations with the highest biodiesel blending mandate of 35 percent and continues to test the viability of fuel blends at 40 percent (U.S. DoA, 2023).

 

Final Thoughts

We can see a positive outlook for biofuels and their role in climate action, but the three main producers exhibit a strong and progressive commitment to biofuels. Brazil follows the lead of the U.S., while Indonesia sets its impetus with a drive for greater biofuel blends. The ‘double dividends’ of biofuels are compounded by their role in aiding in energy security and supporting development in agriculture-dependent nations. The question arises as to whether these policies are geared toward maintaining a strict criterion of sustainable development and green growth. This and other questions will be discussed in upcoming articles.

 

Isaiah Gangadeen

(Gangadeen is a doctoral candidate in Energy and Environmental Policy at the University of Delaware.)