ASSESSMENT OF THE SUSTAINABILITY OF THE

EMERGING BIOFUELS INDUSTRY IN THE PHILIPPINES

Jessi Anne Nakol V. Aligato

2013-69505

BS Agribusiness Economics

May 2016

Abstract
Biofuels are renewable gasses such as bioethanol and biodiesel. Philippines
started to develop biofuels on 2007 under the Biofuels Act of 2007. Many developed and
developing countries have already sustained and have been keeping the sustainability of
the emerging biofuels industry. This study explores the challenges Philippines has been
experiencing today. Drawing from critical perspectives on biofuels industry on the other
countries, this paper examine the different techniques and solution they have conducted
in their country in order to sustain the production of biofuels. By using the cause and
effect approach, this study will provide the biofuels industry in the Philippines solution
on how to be sustainable as biofuels continue to emerge in the country.

Introduction
Securing sufficiency to energy is one of the challenges developing countries experience
today. In 2007, the Philippines became the first country in Southeast Asia to pass a biofuels
legislation through the Republic of the Philippines Act No. 9367 or Biofuels Act signed by
former President Gloria Macapagal-Arroyo. The act aimed at "reducing dependence on imported
fuels, enhancing the quality of the environment, and creating opportunities for countryside
development(USDA, 2013).
The Department of Energy (DOE) is the central agency in authority for the Philippine
Biofuels Program. Its plan for the country is defined in the Philippine Energy Plan 2012-2030
(PEP 2012-2030) and National Biofuels Plan (NBP 2013-2030). United States Department of
Agriculture (2013) stated that the PEP 2012-2030 reflects the Philippine Governments (GPH)
mission to ensure the delivery of secure, sustainable, sufficient, affordable and environmentfriendly energy to all economic sectors. With accordance to one of the missions of the Philippine
government, this study will analyze the sustainability of the emerging biofuel market in the
Philippines.

Nature and Significance of the Study

Fossil fuels have provided the world with a means for transportation, lighting, heating
cooking, manufacturing and information. They have greatly contributed to over-all development
economic growth, employment, and communication but has high environmental cost .The total
human carbon emissions in CO2 equivalence for all greenhouse gasses is now over 50 billion
tons, or more than 200 times global volcanic emissions. According to the Intergovernmental
Panel on Climate Change (IPCC, 2001), carbon dioxide levels in the atmosphere are 30% higher
than the highest levels registered during the last 400,000 years with the proven adverse climate
impacts and associated social and economic costs.
Furthermore, current carbon dioxide count has reached the 400 parts per million (ppm)
thresholds having the highest record on February 2016 at 403.48 ppm. Therefore, irrespective of
the supply and demand situation, continued utilization of fossil fuels is, and will increasingly
become, a source of atmospheric carbon concentrations. This will be unsustainable from an
environment and economic point of view.
Biofuels have the potential for mitigating the grave threats of global warming, reducing
the worlds dependence on imported oil from insecure sources and reducing the skyrocketing
costs of oil that are threatening to undermine the worlds economies and are devastating the
people in non-oil producing developing countries. For the people in these countries, biofuels
offer a promising road to enhance development since they use local materials, can provide local
jobs, and do not require the import of expensive equipment and expertise.
One of the challenges faced by some developed and developing countries is the
sustainability of biofuel production and consumption. This study focuses mainly on the research
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question if biofuel can sustain in the Philippines taking into account that the Biofuels Act is
implemented completely without having any changes and intervention. Furthermore, this study
will also address future challenges by providing possible solutions that the Philippines might
experience in the future. The purpose of this study is to assess the Philippines sustainability on
the emerging biofuels market.

Objective of the Study

To assess the sustainability of the Philippines on the emerging biofuel market, as guided by
the abovementioned problems, this study mainly aims to:
1. Determine the Biofuels Act of 2006
2. Identify future challenges that might occur
3. Determine potential solutions to future challenges
Review of Related Literature
Biofuels
A biofuel is any fuel derived from biomass. Biomass includes organic matter available on
a renewable basis, such as forest and mill residues, agricultural crops and residues, animal
wastes, and the organic portion of relevant industrial wastes.

This study will concentrate on

bioethanol and biodiesel because they are the most widely used liquid biofuels.
Bioethanol which is an alcohol produced by the biological fermentation of carbohydrates
derived from plant material can be directly used as a type of renewable energy (RE) designed to
run engines of vehicles such as cars and motorcycles. Ingram (2012) stated that the gasoline is
blended with ethanol to lessen the use of irreplaceable fossil fuels and to have a cleaner and
sustainable domestic fuel. No engine modification is typically needed to use the blend. Ethanol
5

can be used as an octane-boosting, pollution-reducing additive in unleaded gasoline, thereby

substituting for chemical additives such as Methyl Tertiary Butyl Ether (MTBE); a gasoline
additive, used as an oxygenate to raise the octane number. Biodiesel is a biofuel intended as a
substitute for diesel .According to United Nations Conference on Trade and Development
(UNCTAD, 2006) A synthetic diesel-like fuel produced from vegetable oils, animal fats or
recycled cooking grease. It can be used directly as fuel, which requires some engine
modifications, or blended with petroleum diesel and used in diesel engines with few or no
modifications.
While a range of estimates exist, most studies have found that, depending on the
feedstock and energy used to refine the fuels, both bio-ethanol and bio-diesel can provide
significant reductions in greenhouse gas emissions compared with gasoline and diesel fuel.
Biofuels can provide air quality benefits when used either as pure fuels or when blended with
petroleum fuels. Ethanol and biodiesel can be used to enhance certain characteristics of gasoline
and diesel, thereby aiding fuel performance (IEA , 2004).
Market and regulatory frameworks in selected developed and developing countries
Countries and companies across the globe are investing extensively in biofuel
development programs, motivated by concerns and opportunities related to global climate
change, energy security, and economic development. Many countries have ambitious biofuel
targets or mandates.
The following sections will present the biofuels industry per country in every continent.
These information will be used as our guide in providing solutions to the emerging biofuels
industry in the Philippines. The order of presentation will be according to the size of land area of
each continent from smallest to largest starting with Australia, Europe, South America, North
America, Africa and finally Asia where the main focus of this study is located, Philippines.
Antarctica is not included in this paper because biofuels are not yet developed there.
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I.

AUSTRALIA - Australia
Federal government regulations apply to the quality of petrol and diesel fuel in Australia.

The Fuel Quality Standards Act 2000 provides a legislative framework for setting national fuel
quality and fuel quality information standards. Fuel quality standards apply to petrol, diesel,
biodiesel, autogas and ethanol E10. The standards were implemented to reduce the amount of
toxic pollutants in vehicle emissions. Suppliers who supply petrol containing ethanol must
comply with the Fuel Quality Information Standard (Ethanol) Determination 2003 (labeling
standard). The labeling standard is in place to inform consumers that the fuel they are purchasing
contains ethanol. The Australian Government capped the level of ethanol that can be added to
petrol at 10 percent in July 2003. This was the result of vehicle testing that showed petrol
containing ethanol blends of 20 percent or more could cause engine problems in some older
vehicles.
Under the Fuel Quality for Ethanol-e85 (a fuel blend of 7085 per cent ethanol with the
remainder petrol), the fuel may only be used in cars that have been specifically built or modified
to use E85. The Fuel Quality Standard for biodiesel defines biodiesel as a diesel fuel obtained
by esterification of oil derived from plants or animals.
However, Australia has been experiencing a decline on ethanol use in recent years
because of concern over possible engine damage from using the fuel, declining availability of
E10 pumps and a consumer preference for regular unleaded over E10. The lack of a price
differential between E10 and regular petrol has contributed to the decline. The Australian
Competition and Consumer Commission (ACCC) is alert to the emerging market for ethanol

blended petrol and biodiesel in Australia and is monitoring developments in readiness to consider
issues of compliance with the competition and consumer laws it administers.

II.

EUROPE: The European Union

In 2001, the European Commission launched a policy to promote the use of biofuels for

transport in order to reduce greenhouse gas emissions and the environmental impact of transport,
as well as to increase security of supply, technological innovation and agricultural
diversification. The policy is a "regulated market-based approach", where market forces play a
role, but market interventions are regarded as necessary to achieve the stated goals.
The European Commission is considering establishing mandatory targets since the 2005
target was not achieved (biofuels attained an EU-wide share of only 1.4 percent of transport
fuel). To meet the 5.75 per cent target, the Commission is envisioning a scenario where the EC
produces 50 per cent of the needed feedstock, requiring 8 million hectares of energy crop
plantation, and the remaining 50 percent of needed feedstock is imported(UNCTD 2006).
Action to reduce emissions from road transport therefore has high priority for the
European Union (EU) and is a major focus of legislation. 70 percent of the crops produced as
food will be allotted on the transport sector.
The European Union have doubts about whether the current provisions for assuring
sustainability take full account of the broader impacts on biodiversity and ecosystem services of
providing biomass feedstock, or the full energy costs of biofuel production. There are also, in the
case of biofuels produced from edible crops, major questions about the competition. It is
proposed that the proportion of biofuel derived from edible plant material that counts towards the
mandatory target should be limited to about the current level of biofuel production.

Regarding the issue about the indirect land use change (ILUC, which occurs when
existing plantations are used for biomass cultivation), The indirect land use change impacts of
biofuels, also known as ILUC, relates to the unintended consequence of releasing more carbon
emissions due to land-use changes around the world induced by the expansion of croplands for
ethanol or biodiesel production in response to the increased global demand for biofuels. It is
recommended that measures to protect biodiversity should be enacted for all agricultural
production, not just for biofuels.
The European Commission also conducted a lifecycle analysis where researchers
calculate the amount of greenhouse that is going to be emitted in the atmosphere in order to for
them to produce the exact amount of biofuels to ensure that the use of biofuels leads to a real
reduction in greenhouse gas emissions.

III.

SOUTH AMERICA: Brazil

After World War I some experimenting took place in Brazil's Northeast Region, and as

early as 1919, the Governor of Pernambuco mandated all official vehicles to run on ethanol. The
first ethanol fuel production plant went on line in 1927, the Usina Serra Grande Alagoas
(USGA), located in the Northeastern state of Alagoas, producing fuel with 75% ethanol and 25%
ethyl ether. As other plants began producing ethanol fuel, two years later there were 500 cars
running on this fuel in the country's Northeast Region.
The government of Brazil started the world's largest commercial program on biomass to
make ethanol from sugarcane and develop the needed technology. The government-sponsored
program in 1975 aims to reduce dependence from imported petroleum products. However, this
program raised red flag because of environmental and social considerations. Nearly half of
Brazil's annual sugar cane harvest is devoted to producing ethanol. From about 50 Mt in 1970,
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Sugar cane production expanded to over 280 Mt in the 2004-2005 harvest. Brazil intends to
increase its ethanol production to above 20 billion litres in the next decade.
Total Brazilian ethanol production for 2015 is projected at 26.9 billion liters, a 5 percent
increase compared to 2014. The biodiesel industry remains regulated by the government which
recently increased biodiesel blend requirements to 6 percent effective July 1, 2014 and 7 percent
effective November 1, 2014. As a consequence, biodiesel production for 2015 is projected at 4.4
billion liters, up 900 million liters from 2014.
One of the major challenges Brazil has experienced is the consumption and production of
biofuels in the market is declining. The Government of Brazil, lack of long-term planning about
the biofuels, manufacturers prefer to produce sugar, rather than ethanol, due to more attractive
prices and there has been newly discovered source of fossil fuel leaving biofuel not so very
important.
Experts interviewed by BBC Brazil agree that the growth and consolidation of the
Brazilian ethanol industry will only occur when the government puts in place a policy with longterm focus. The lack of government planning is the main cause for the ethanol crisis, says
bioenergy professor Luis Augusto Barbosa Cortez from The University of Campinas in the state
of So Paulo. This industry has existed in the country for over 40 years and, even now, there is
no consolidated policy. The government takes action only sporadically, which does not solve the
problem.
There should be economic incentives to revive the ethanol industry. The government
announced in April 2013 a package of incentives to the sector, which included tax cuts and
subsidized credit lines. The purpose of this package is to encourage producers to opt for the

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manufacture of fuel over sugar, whose prices in international markets are currently more
attractive.

IV.

NORTH AMERICA: United States

UNCTD (2006) explained that in the United States, ethanol is produced from maize ( Zea

mays), with a greater consumption of fossil fuels in the production process and a lower energy
balance compared with ethanol produced from sugarcane outside the United States. In 2005 data,
almost 20 percent of United States maize crop was used to produce ethanol. The consumption
was brought about partially by the need to reduce air pollutants in big cities in order to comply
with the Clean Air Act which requires cities with significant air quality problems to promote
cleaner fuels, and partly by subsidies and tax breaks for producing ethanol.
There were also legislations which has implications on biofuels consumption, the Farm
Security and Rural Investment Act of 2002, American Jobs Creation Act of 2004 and the Energy
Policy Act of 2005. The Farm Bill establishes new programs and grants for procurements of
biofuel products to support development of bio-refineries(a facility able to produce a variety of
outputs such as electricity, chemicals, plastics, food and fibres in addition to biofuels); to educate
the public about benefits of biodiesel fuel use; and to assist suitable farmers , ranchers and rural
small business in purchasing renewable energy systems. In order to sustain biofuels production,
numerous states also subsidize the production of biofuels. Incentives include grants for the
construction of plants, exemptions from or reductions in state fuel-excise tax, and various
benefits or tax holidays provided by municipalities.
According to Nibarger (2013), United States faces challenges on keeping the biofuels
industry sustainable. Competition with cheap shale gas, Electrified Vehicles and imported
biofuels are some of the problems they are experiencing today.
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V.

AFRICA: South Africa

South Africa's government published its "White Paper on Renewable Energy" in

November 2003. Initially, the country depends chiefly on domestic coal and imported oil to meet
its energy demand. The White Paper calls on the government to develop the physical
infrastructure and institutional capacity needed to expand the budding domestic biofuel market.
The South African government recognizes the need for financial incentives to make the emerging
biofuels market competitive with existing fossil fuels.
To successfully implement its renewable energy agenda, the government will focus on
four strategic areas: financial instruments, legal instruments, technology deployment, and
education in the form of awareness programs and capacity building.
National legislation serves as both an incentive and a product of South Africa's renewable
energy agenda. First, the government has called on resources from the Central Energy Fund, a
fuel tax deposit fund enacted as law in 1977, to help fund ethanol and landfill gas projects. Also,
biofuel production is hoped to spur rural job creation in line with the 2000 Integration
Sustainable Rural Development Strategy which promotes the sustainable development of rural
areas. Furthermore, the Federal Gas Act of 2001 granted a 30 per cent tax reduction to fuels
derived from renewable sources in order to stimulate domestic biofuel production. Ethanol
production in 2005 accounted for 390 million litres.

VI.

ASIA: China
China launched its biofuels initiative (The National Biomass Ethanol Gasoline Pilot

Project) in 2002 in response to the nation's rapidly increasing fuels needs, raising levels of air
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pollution and rural economic development goals. The pilot project was initially launched in four
provinces throughout China's central and northeastern region to create a market infrastructure
and demonstrate production potential. The sites were chosen for their abundance of maize which,
at the time, was over- produced and underpriced.
As of 2005, China's bioethanol production capacity was around 3.6 billion litres, thanks
to a series of financial and tax policy measures. Those include the exemption of bioethanol from
China's consumption tax, the total refund of VAT on bioethanol, and subsidies for loss associated
with the production, transportation and sale of bioethanol.
China is, however, planning to manufacture ethanol using stalks and plants produced
from wasteland and low-quality land not suitable for grain production. The maize-for-ethanol
project has spurred market demand for maize and the prices of maize have been increasing
strongly in the past year. Contrary to bioethanol, biodiesel does not benefit from special incentive
programmes and only a few small plants in the country are currently producing biodiesel.
In February 2005, the National People's Congress passed "The Renewable Energy Law of
the People's Republic of China", a framework law which entered into force on 1 January 2006.
The law includes a "punishment and reward" system designed to encourage the entire society,
particularly companies, to develop and use renewable energy, financially punishing those
companies and individuals that do not meet the obligations as set out by law.
The legislation, which draws particular attention to energy derived from biomass,
confirms the importance of renewable energy in China's national energy strategy, encourages
investment into the development of biomass, removes barriers to the development of the
renewable energy market, and sets up a financial guarantee system for the development of
renewable energy. .

Thailand
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The Thai government aggressively pursues the production and use of biofuels to meet
the country's rapidly growing energy demand and has prioritized the development of domestic,
renewable biofuels in the midst of restructuring and privatizing its energy sector. By 2012,
Thailand's ethanol and biodiesel programs are estimated to save the country an annual $325 and
$675 million respectively.
The National Biofuels Committee (NBC) is responsible for all policy formulation and
project implementation concerning biofuels. While they work in conjunction with the ministries
of finance, agriculture, energy, industry, and science, the NBC has its own funding mechanisms
called Special Purpose Vehicles (SPV) to aid project implementation.
The government-sponsored program on gasohol (a blend of gasoline and ethanol) aims to
increase ethanol production to levels sufficient to replace the entire national gasoline demand
with a blend of gasoline and 10 percent ethanol by 2012. To stimulate initial demand, all
government vehicles are required to use gasohol. Because Thailand is a major exporter of
molasses, sugar, and cassava, primary feedstocks for ethanol, the country is poised to become a
major Asian exporter of ethanol as well.

Philippines
The Biofuels Act or Republic Act (RA) 9367 was signed in January 2007 making the
Philippines the first country in Southeast Asia to have biofuels legislation in place. RA 9367
mandated that by February 2009, the annual total volume of gasoline sold and distributed by oil
companies in the country shall comprise at least five percent ethanol, increasing to a ten percent
blend by February 2011. RA 9367 also mandated a minimum one percent biodiesel blend in all
diesel fuels by February 2007, to increase to a two percent blend after 2 years. Sugarcane and
14

molasses are used in Philippine ethanol production, and coconut methyl ester (CME) is the
preferred biodiesel feedstock. Mainly due to the expanding population and continued growth of
the Philippine economy, overall fuel consumption is expected to continue increasing through
2025.
This study will use the RA 9367 to be the basis of how Philippines will evaluate the
emerging biofuel market and how will the challenges be addressed by the government.
Republic Act 9367 Biofuel Act 2006
Biofuels Act of 2006 states the direct use of biofuels in the Philippines, establishment of
the purpose of biofuel in the said program, assigning of appropriate funds and other purposes.
Section 2 provides the declaration of the policy.
SEC. 2. Declaration of Policy. - It is hereby declared the policy of the State to reduce
dependence on imported fuels with due regard to the protection of public health, the
environment, and natural ecosystems consistent with the countrys sustainable economic growth
that would expand opportunities for livelihood by mandating the use of biofuels. As a measure
to:
a) Develop and utilize indigenous renewable and sustainably-sourced clean
energy sources to reduce dependence on imported oil;
b) Mitigate toxic and greenhouse gas (GHG) emissions;
c) Increase rural employment and Income; and
d) Ensure the availability of alternative and renewable clean energy without any
detriment to the natural ecosystem, biodiversity and food reserves of the country.

15

The goals of the Philippines Biofuel Industry are unquestionably advantageous to

the market economy of the country. However, if other countries experienced and faced
challenges on the biofuel industry in their country, Philippines will also be maintaining the
sufficiency and sustainability of the said biofuels.
Biofuel in the Philippines
This section is based on Blesielda Flores M., Potential Use of Clean Development
Mechanism (CDM) in Fostering Biofuels Development in the Philippines.
The Philippine government is actively promoting the integration of biofuel in the market
as means of increasing its energy self-sufficiency, environmental stewardship, and economic
development. The demand for gasoline in the Philippines is expected to increase over 60 percent
in this year, 2016 , and the country is highly dependent on imported energy.
Biofuels demand also increased because of its concern in the environment including air
quality and global climate change. UNCTD (2006) also emphasized that the Philippines is
actively promoting itself as a host to projects financed under the Clean Development
Mechanisms (CDM) of the Kyoto Protocol.
Three biofuels constitute the primary focus for the country. Coco-methyl ester (CME) is
produced from indigenously-abundant coconut oil. Its qualities as a diesel fuel substitute are
significant both for immobile and motorized engines. The oil industry is, however, still unwilling
to promote CME blends, citing lack of testing on rust implications and pipeline capabilities as
rationales for their discretion. Jatropha-methyl ester (JME) is made from the vegetable oil of
seeds from the jatropha curcus plant. In 2005, the Philippines produced around 83 million litres
ethanol, mainly from sugar.
In 2004, President Macapagal Arroyo required all government bodies and affiliates to
substitute at least 1 percent of their diesel use with CME. Government agencies also launched a
program to substitute CME for diesel fuel in the island province of Romblon to demonstrate its
16

potential benefits. Throughout the pilot project, environmental impact assessments will be
conducted and operating data will be carefully tracked for use in future undertakings.
In November 2005, the government offered economic incentives for the promotion of
renewable energy including duty-free input imports, tax credits for domestic capital equipment,
and tax exemptions for real estate. Furthermore, the government set up a profit sharing scheme
for the proceeds from renewable energy development projects.
Beshielda Flores M. highlighted The Philippine government has implemented the
following five strategies to encourage the expansion of biofuel markets: (i) build capacity for
national authorities to develop and implement a new regulatory framework; (ii) expand external
assistance and support through the coordination of regional and international initiatives; (iii)
establish national databases for bioenergy sources to facilitate more efficient markets; (iv)
develop programs to more effectively utilize the supply and demand sides of biofuels; (v) launch
pilot projects to verify the technological feasibility and provide lessons for subsequent
activities.
This section is from the report made by the USDA on

Biofuels: Annual Philippine

Biofuels Situation and Outlook

In 2013, the United States Department of Agriculture reported the fuel used projections of
the Philippines. The table below shows the data:

Given the data above, Government can already plan on allocating resources in producing

17

This section is from Marvin Joseph F. Montefrioa & David A. Sonnenfelds The GlobalLocal
Tensions in Contract Farming of Biofuel Crops Involving Indigenous Communities in the
Philippines
Recently, smallholder biofuel crop production has been advocated as a means of
addressing social and environmental impacts of biofuels. Philippines targets smallholder farmers
to be the main actors in producing crops for biofuels. Public and private agencies desire to
finance smallholder biofuel systems. By doing this, Philippines can develop and acknowledge
the importance of public-private partnerships and policies.
Contract farming refers to arrangements between farmers and firms, whether oral or
written, specifying one or more conditions of production and marketing of an agricultural
product( Monteferio, M.J.) The benefits of contract farming to smallholder farmers include
assured market and fair price, increased household incomes, reduced production and price
fluctuation risks, increased access to credit and inputs, and introduction of higher-value crops
and new technologies.
In 2006, President Gloria Arroyo allotted 1 billion pesos for developing nurseries and
plantation for the National Jatropha biofuels program.In a certain group of indigenous people
( the author refuses to name the place for confidentiality purposes), they produces Jatropha a
crop that can be grown on a wasteland and is not edible compared to corn and sugarcane in
producing biofuel. There has been a tension between the Indigenous People and the contractor of
the crops produced for biofuel because many Indigenous people experienced land grabbing and
imbalanced payment for their labor. They were exploited from their own lands which causes
conflict in their relationship with the private contractors and also the production of crops for
biofuels are affected.
Financial Assistance from the Government

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Written under the Republic Act 9367 , Section 6. Incentive Scheme. :

Government financial institutions, such as the Development Bank of the
Philippines, Land Bank of the Philippines and other government institutions providing
financial services shall, in accordance with and to the extent allowed by the enabling
provisions of their respective charters or applicable laws, accord high priority to extend
financing to Filipino citizens or entities, at least sixty percent (60%) of the capital stock
of which belongs to citizens of the Philippines that shall engage in activities involving
production, storage, handling and transport of biofuel and biofuel feedstock, including the
blending of biofuels with petroleum, as certified by the DOE.
Farmers can actually have support from the Government financial Institutions if they
participate in producing crops for bioethanol. They are prioritized when they borrow from coops
or banks.

Methodology
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The data and information used in this study are secondary data. The presentation of the
information is arranged according to the size of the land area of the countries per continent in the
world which has biofuels industry. From smallest to largest, we have Australia, Europe, South
America, North America, Africa and Asia. This paper will discuss the selected countries of each
continents biofuels industry and how do each country face challenges and sustain the industry.
Since the main focus of this study is the Philippines, it will be very helpful to have a comparison
between neighboring countries in Asia such as Thailand.

Results and Discussion

In Australia, suppliers who supply petrol containing ethanol must comply with the Fuel
Quality Information Standard (Ethanol) Determination 2003 the labeling standard which requires
the producers to put labels for the consumers sake. The Australian Government started to cap
the level of ethanol that can be added to petrol at 10 percent in July 2003. There has also been an
engine damage from using the E85 fuel, declining availability of E10 pumps and a consumer
preference for regular unleaded over E10. The lack of a price differential between E10 and
regular petrol has contributed to the decline. In the case of the Philippines, Yu (2013) said
flexible-fuel vehicles (FFVs) can immediately load up on E85, while fuel injected vehicles from
1990 and up can get their vehicles upgraded to run on E85. We have upgraded a couple of
Camrys, Altis and Civics, a Land Cruiser (owned by Sen. Miguel Zubiri), a Ford Expedition, a
Vios and a Hyundai Getz, he noted. He also added that a price of P39.75 a liter, E85 would also
cost about P20 per liter cheaper than unleaded gasoline.

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The European Union also experienced problem on the competitiveness of the biofuels in
their market. The amount of edible crops produced as fuel outweighs the amount of edible crops
produced as food. Regarding the issue about the indirect land use change (ILUC), EU prevents
firm on using healthy lands for production of crop-based plantation for biofuels. The European
Commission also conducted a lifecycle analysis where researchers calculate the amount of
greenhouse that is going to be emitted in the atmosphere in order to for them to produce the exact
amount of biofuels to ensure that the use of biofuels leads to a real reduction in greenhouse gas
emissions. Similarly, Philippines also had a conflict of land usage in the country. Originally, the
Biofuel Act of 2007 states that biofuels will be converted from sugarcane but because if we
convert sugarcane to biofuel, there will be shortage on the supply of sugar in the market so the
Government of the Philippines discovered the Jatropha plant;a tall bush with highly toxic fruit
and bark that is already part of the rural farming landscape. Since jatropha is a hedge plant, not a
food crop and can be planted in marginal land where food crops are not or cannot be grown, its
oily seeds are increasingly seen as a more sustainable biodiesel raw material than expensive palm
oil or coconut. However, in the case of the Philippines, there has been a tension between the
Indigenous People and the contractor of the crops, jatropha , produced for biofuel because many
Indigenous people experienced land grabbing and imbalanced payment for their labor.
Production of the alternative crop for biofuel has been affected because of the conflict between
the contractors and the indigenous people. Investors of the production of jatropha mostly are
from foreign countries and from private firms. The Government should be the one responsible in
helping the farmers by educating them.
Nearly half of Brazil's annual sugar cane harvest is devoted to producing ethanol. One of
the major challenges Brazil has experienced is the consumption and production of biofuels in the
21

market is declining. There should be economic incentives to revive the ethanol industry. If this
happens to the Philippines, we can be assured that the production of crops for biofuels are being
supported by the government according to the Republic Act 9367 , Section 6. Incentive Scheme
where financial institutions must have high priority to extend financing to Filipino citizens by
providing at least sixty percent (60%) of the capital stock from their finances of which belongs to
citizens of the Philippines that shall engage in activities involving production, storage, handling
and transport of biofuel and biofuel feedstock, including the blending of biofuels with petroleum,
as certified by the DOE.
United States produced biofuels in order to comply with the Clean Air Act which requires
cities with significant air quality problems to promote cleaner fuels, and partly by subsidies and
tax breaks for producing ethanol. As what the Biofuels Act of 2006 included in the benefits of
the production of biofuel which is to mitigate toxic and greenhouse gas (GHG) emissions. The
biofuels industry of the United States was subsidized in numerous states in order to sustain
biofuels production. Incentives included grants for the construction of plants, exemptions from
or reductions in state fuel-excise tax, and various benefits or tax holidays provided by
municipalities. Having a cleaner air and reducing greenhouse emission was indicated in the
Philippines purpose of engaging into biofuels industry . Particulate Matter (PM) is any type of
solid particles in the air in the form of smoke, dust and vapors. Particulate Matter is produced by
many sources, including burning of diesel fuels by vehicles, fossil fuels, mixing and application
of fertilizers and pesticides, road construction, industrial processes and operation of woodstoves.
Some microscopic particles in the air can be breathed into the lungs causing increased
respiratory disease and lung damage. The air quality situation in the Philippines in the first

22

quarter of 2015 is even worse than it was at the 2014, according to the Department of
Environment and Natural Resources' Environmental Management Bureau (DENR-EMB).
The South African government recognized the need for financial incentives to make the
emerging biofuels market competitive with existing fossil fuels. The government established the
four strategic areas: financial instruments, legal instruments, technology deployment, and
education in the form of awareness programs and capacity building. 30 per cent was reduced to
taxes of fuels derived from renewable sources in order to stimulate domestic biofuel production.
Philippine government lacks awareness program for the consumers. We can be able to inform our
consumers by having a Fuel Quality Information Standard Determination law which is a labeling
standard that requires the producers to put labels for the consumers sake just like what Australia
did.
Chinas participation on the biofuels industry is because of their abundance of maize
which, at the time, was over- produced and underpriced. Contrary to bioethanol, biodiesel does
not benefit from special incentive programs and only a few small plants in the country are
currently producing biodiesel. Chinas Biofuels Act included a "punishment and reward" system
designed to encourage the entire society to consume biofuels. To stimulate initial demand, all
government vehicles are required to use gasohol. Philippines could also implement the
punishment and reward system if ever biofuel consumption decline.
Thailand has no imports of ethanol for gasohol production in 2014 due to sufficient
domestic supplies. The Thai government imposes a 2.5 baht/liters (29US cents/gallon) on ethanol
imports. Meanwhile, Philippines imports in 2014 accounted for about 75 percent of total 2014
domestic use compared to the 80 percent level in 2013. The import demand ratio is likely to

23

further decrease to 63 percent in 2015 and 50 percent in 2016 as production increases, and
imports likely to decline through 2016. No ethanol exports are expected through 2016 due to
inadequate production. On July 21, 2015, amendments to the Cabotage Law embodied in
Republic Act 10668 (RA 10668) was approved by President Benigno Aquino III. RA 10668
allows foreign ships to transport import or export cargo directly to and from any local port other
than the Port of Manila. RA 10668 is expected to result in lower cost of importing products to the
Philippines, and will facilitate imports from all countries.
Just like the other countries, Philippines also faces different challenges in sustaining
biofuel production and achieving the mandated blend of biofuel to gasoline and diesel.
According to the biofuel annual report of the United States Department of Agriculture as of
2015, Philippines consumption of bioethanol has a larger amount relative to what the country is
able to produce at a specific year (Table 1.a) . We rely greatly on the imports from foreign
countries. Also, our biodiesel current 2 percent blend is to be raised to 5 percent by 2015, as
stipulated by RA 9367. The local industry was supportive of increasing the blend one year in
advance or in 2014, but this did not happen (Table 2.a) .
An estimated 50 active coconut oil (CNO) mills operate in the country, and around 20
cater to the export market while roughly 30 concentrate in servicing domestic CNO needs,
according to industry contacts. Coconut methyl ester (CME) is the main Philippine biodiesel
feedstock, and is an oleochemical derived from CNO. CNO is obtained from crushing copra.
Oleochemicals are used in the manufacture of soaps, detergents and other cosmetic items and
toiletries. According to the DOE, there were 11 registered and operational biodiesel refineries in
2014, unchanged from the previous year, with an aggregate annual capacity of 585 MLi. Seven
(7) CME producers operate in the island of Luzon, 3 in Mindanao, and one plant in the Visayas

24

islands. In 2012, the same number of refineries was registered but only nine (9) were operational.
Total capacity increased 48 percent from 393 MLi in 2013 to 585 MLi in 2014
We are currently depending on imports from the United States because we cannot sustain
the production in our own country. According to Mari Aperecido de Mores Silva at the State
University of Sao Paulo, Brazil has the lowest cost of production in the world because of the
industrys dependence on labor exploitation, including massive slave labor, and its refusal to
implement environmental regulations. In the case of Brazil, they have treated their labor market
unjustly.
Brazil has been the pioneer in the use of biofuels, allowing it to eliminate its oil imports,
becoming completely energy independent, and demonstrating to the world the potential benefits
of substitution of biofuels for fossil fuels. Indeed, inspired by Brazils example, the United States
in recent years has developed a strong biofuels industry, albeit from the disadvantageous
feedstock of corn. The United States has just created an alliance with Brazil to make major
purchases of its biofuels. The European Union and countries around the world are rapidly
developing their own biofuels potentials. Philippines could also ask neighboring countries for
assistance especially in the ASEAN Union.
In the Philippines, the mandated proportion of ethanol in gasoline was raised to its
current 10 percent (E10, in technical shorthand) back in 2012; in 2020, it is supposed to be raised
to 20 percent. For diesel fuel, the biodiesel proportion is currently set at 2 percent; the
Department of Energy plans to raise that to 5 percent sometime this year. According to a report
by the Global Agriculture Information Network (GAIN)an office of the US Department of
Agriculturebiodiesel production in the Philippines is adequate to meet the mandated targets,
largely because there is greater variety in the sorts of feedstock that can be used to produce it.

25

Ethanol production, on the other hand, is problematic. The GAIN report points out that
the country is nowhere near meeting the E10 standard on a national scale, and is falling behind in
building new ethanol production capacity. The country currently can only produce about 17
percent of its ethanol needs, even in falling short of the E10 standard.
Philippines, having biofuel as an infant industry can do so much better knowing the
history of other countries. Having great amounts of imports or having no export in biofuels
doesnt mean Philippine biofuel market is declining. The government should be very careful in
implementing tariffs and quota to other countries in order to be advantageous in trade with other
countries. But can we really sustain biofuels in the Philippines? Our land area is fixed and most
of it is used for crop production. Converting portions of it into biofuel production is still not
enough to provide everybodys need.

Summary and Conclusion

Biofuels may contribute to the crucial goals of enhancing energy security, energy
diversification and energy access; improving health from reduced air pollution; and boosting
employment and economic growth for rural communities. It may also offer new end-markets for
agricultural products and, therefore, add value to them. These markets may also be more stable
than markets for traditional export commodities, thus providing improved income stability for
farmers. The above-mentioned goals are crucially important for all countries, but particularly for
developing countries. People in developing countries suffer the most from limited access to
commercial energy, from outdoor and indoor air pollution, and from the declining prices of their
agricultural exports.

26

Philippines emerging biofuel industry should not be a disadvantage to our economy. All
countries suffer the challenges of developing biofuels and they were able to find solutions on
how to sustain biofuel industry.
Most agree that the energy challenge of this century providing an affordable energy
needed to achieve, expand and sustain prosperity for all, while avoiding intolerable
environmental disruption cannot be met without a huge increase in the global energyinnovation effort. Alternative energy sources, including biofuels, form part of this effort. Several
developed and developing countries are establishing regulatory frameworks for biofuels, often
including blending targets of biofuels with mineral fuels. They are also providing different kinds
of subsidies and incentives to support emerging biofuel industries. These developments are
expected to branch a sustained worldwide demand and supply of biofuels in the years to come.
The production, use and international trade of biofuels offer an opportunity to slow down the
process of global warming. While use of biofuels will not be enough to halt climate change by
itself, it offers an important and potentially cost-effective contribution. The emergence of biofuel
markets provides an opportunity for developing countries to diversify agriculture production,
raise rural incomes and improve quality of life.
Biofuel use could enhance energy security and reduce developing countries expenditure
on imported fossil energy, thereby freeing up resources for other uses. In this context, it is
important to identify technologies, organizational strategies and government support services that
allow small producers to engage in biofuel production. Technical and financial assistance will be
necessary to facilitate the process. Data collection and information sharing will assist decisionmaking. Conscious decisions will need to be made if smaller-scale biofuel production is to be

27

successful. Social equity, geographical distribution and poverty impacts should be essential
components of domestic biofuels policies.
Recommendation
Public and private should support the Research and Development of improved
technology. It may be instrumental to make biofuel production less costly and more competitive
with mineral-fuel production. In the long run, it may diminish the need to subsidize the biofuel
sector. Further studies are needed for measuring sustainability of biofuels industry.

28

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Research Opportunities, 22-31.
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Corpuz, P. (2013). Philippine Biofuels Situation and Outlook. Biofuels Annual, 2-14.
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Zarrilli, S. (2006). United Nations Conference on Trade and Development . THE EMERGING
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Appendices
Table 1.a Bioethanol Production in the Philippines

Source: United States Department of Agriculture Biofuel Annual Report

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Table 2.a Biodiesel Production in the Philippines

Source: United States Department of Agriculture Biofuel Annual Report

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