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Biofuels Polices in Asia: Trade effects onWorld Agricultural and Biofuels Trade
Keiji Ohga* and Tatsuji Koizumi **
* Professor, College of Bioresource Science, Nihon University, Japan
** Economist, Policy Research Institute, Ministry of Agriculture,
Forestry and Fisheries, Japan
USDA Agricultural Outlook Forum, March 2, 2007
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. Chinese bio-ethanol Program
The number of automobile in china is increasing
26,937
0
5,000
10,000
15,000
20,000
25,000
30,000
1985 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Source: China Statistical Yearbook 2005
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Chinese petroleum consumption is increasing and its
import of crude oil and oil products are rising too
Source: China Statistical Yearbook 2005
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
1980 1990 1995 2000 2002 2003 2004 2005
Export
Import
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The increase in petroleum consumption is causing serious air
pollution problems
In order to deal with energy security and the air pollution problem, the
Chinese government is strongly promoting the National Fuel- ethanolprogram
In June 2002, the government started to make the use of fuel-ethanol
blended gasoline mandatory
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Chinese Fuel-Ethanol Program
Motorization
Increasing petroleumconsumption
Concern for Energy Security
Fuel-Ethanol Program ( 2002
Inferior Corn
High Economic Growth
Concern for
Environment
Promoting
IndustrializationSurging gasolineprice
Demand
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The Chinese Fuel-Ethanol Program
In 2004, the government introduced the compulsory use of a 10%
ethanol blended in gasoline (E10) in provinces of Helongjiang, Jilin,Liaoning, Henan, and Anhui
The government expands the E10 program to 27 cities in theprovinces of Shandong, Jiangsu, Hebei, and Hubei in 2006
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Current and Future Fuel-Ethanol Production (1)
P rovince Company Nam e Raw mater ia l
2005
production
(MT/Year)
2007
production
capacity
(MT/Year)
Su pply locat ion
Supply
volume
(MT/Year)
HeilongjiangChina Resources
Alcohol Co.Corn 100,000 100,000 H eilongjiang 100,000
J ilin Corn 300,000 600,000 J ilin 100,000
Liaoning 200,000
Hena n Whea t 200,000 200,000 Hena n 86,842
Hubei (9 cit ies) 113,158
Hebei (4 cities)
Anhui Anhui BBCA Corn 320,000 320,000 Anhui 100,000
Biochemica l Co. Shandong (7 cit ies) 220,000
J iangsu (5 cities)
GuangxiChina Resources
Alcohol Co.Cassava 0 110,000 Guangxi 110,000
HebeiChina Resources
Alcohol Co.
Sweet potat o,
corn et c
0 230,000 Hebei 230,000
HubeiTian Gua n Fu el-
Eth an ol Co.Gra ins 0 100,000 Hubei 100,000
Tota l 920,000 1,660,000
Henan Tian Guan
Fu el-Et ha nol Co.
J ilin F uel Etha nol Co.
Source: Law Concerning Testing of the Extensive Use of Ethanol-Blended Gasoline for Automobiles
and Regulations Concerning the Conduct of Testing of the Extensive Use of Ethanol-Blended
Gasoline for Automobiles (2006)
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China ResourcesAlcohol Co, Heilongjang
(Corn)
Jilin Fuel EthanolCo, Jilin (Corn)
Anhui BBCABiochemicalCo. (Corn)
Henan TianGuan Fuel-Ethanol Co,Henan (Wheat)
China Resources AlcoholCo, Guangxi (From 2007,Cassava)
China ResourcesAlcohol Co, Hebei(From 2007: Sweat
potato, corn etc)
Tian Guan Fuel-EthanolCo.Hubei (From 2007,Grains)
Fuel-Ethanol Production Sites
Source: Law Concerning Testing of the Extensive Use of Ethanol-BlendedGasoline for Automobiles and Regulations Concerning the Conduct ofTesting of the Extensive Use of Ethanol-Blended Gasoline forAutomobiles (2006)
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Corn is the major source of fuel-ethanol in China
1) Corn
80 % of fuel-ethanol is made from corn in China
Ethanol facilities in Heilongjiang, Jilin, and Anhui use corn
2) Wheat
Wheat is used in Henan
3) Cassava
The Guagxi Zhuang autonomous region plans to build a fuel-ethanol plantThe plant is scheduled to begin operations in October of 2007 at a
production capacity of 110,000 MT
4) OthersPotato, sorghum, rice, sugar, and lignocellulose are on experimental stage
for fuel-ethanol production
http://images.google.com/imgres?imgurl=http://www.tepco.co.jp/cc/press/betu06_j/images/060208_01.gif&imgrefurl=http://www.tepco.co.jp/cc/press/06020801-j.html&h=156&w=281&sz=35&hl=ja&start=3&tbnid=3xHOJHY-v6fbrM:&tbnh=63&tbnw=114&prev=/images%3Fq%3D%25E3%2582%25AD%25E3%2583%25A3%25E3%2583%2583%25E3%2582%25B5%25E3%2583%2590%26svnum%3D10%26hl%3Dja%26sa%3DG8/6/2019 APAC Biofuels Perspective
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Chinese fuel-ethanol production cost and agricultural production
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
0 1,000 2,000 3,000 4,000 5,000 6,000
Cassava
Sorghum
Wheat
Corn
Production(103 tons)
Production cost (Yuan/ton)
Note: Production data is derived from FAS, USDA, PS&D (2006)
Production cost is derived from the Chinese National Development and Reform Commission
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Chinese ethanol production cost is higher than other producers
0.44
0.20
0.25
0
0.05
0.1
0.15
0.2
0.25
0.3
0.35
0.4
0.45
0.5
China Brazil USA
US$/Liters
Note: Chinese production cost is derived from the Chinese National Development and Reform Commission.
Brazilian cost is derived from Sao Paulo Sugarcane Agroindustry (2005)The US cost is derived from USDA (2006)
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Corn use for Fuel-Ethanol production
Although Chinese central government ordered to use inferior corn for
fuel-ethanol production, facilities in Heilongjiang and Jilin use normalcorn
If China continues to expand corn-based fuel-ethanol production,
corn utilization ratio for ethanol will increase
Chinese central government stated to regulate corn-based fuel-ethanol production (Statement from National Development and ReformCommission in 21/12/2006)
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Chinese corn production, consumption and ending stocks
Fuel-ethanoltest plan
started (2002)
Regulation for corn-based ethanol
production(2006.12)
E10 Programs in5 states
(2004.10
E10 Programs in 27cities (2006
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000Consumption
Production
Ending Stocks
95/96 06/0704/0502/032000/0197/98
(103 tons)
Source: FAS, USDA, PS&D(2007).
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If China expands ethanol production from cassava, China will have
to rely on imported cassava
Source: USDA, Grain Report, China, Peoples Republic of Bio-fuels An Alternative Future for
Agriculture, CH6049 (2006).
Chinese cassava imports
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
4,000,000
2000 2001 2002 2003 2004 2005 2006
( Jan- M ay)
Thailand
Vietnam
Indonesia
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Summary (Chinese Bio-Ethanol Program)
80% of fuel-ethanol was made from corn in China in 2005
Chinese central government wants to regulate corn-based ethanolproduction
Chinese government wants to diversify the sources of fuel-ethanolproduction, especially to cassava
Technological innovation is required for developing cassava-basedfuel-ethanol production
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Malaysian Biodiesel ProgramMalaysian petroleum consumption has increased rapidly
since 1990
0.0
100.0
200.0
300.0
400.0
500.0
600.0
700.0
800.0
1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Production
Consumption
Source: OPEC, OPEC 2005 (2006)
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Malaysia is the second largest producer of palm oil
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
1980/81 90/91 2000/01 06/07
Indonesia
Malaysia
Rest of
the
World
Source: FAS, USDA, PS&D. (2007)
http://www.procnews.com/photos/palmoil_nuts2.jpghttp://www.procnews.com/photos/palmoil_nuts2.jpghttp://www.procnews.com/photos/palmoil_nuts2.jpghttp://www.procnews.com/photos/palmoil_nuts2.jpghttp://www.procnews.com/photos/palmoil_nuts2.jpghttp://www.procnews.com/photos/palmoil_nuts2.jpghttp://www.procnews.com/photos/palmoil_nuts2.jpghttp://www.procnews.com/photos/palmoil_nuts2.jpghttp://www.procnews.com/photos/palmoil_nuts2.jpghttp://www.procnews.com/photos/palmoil_nuts2.jpghttp://www.procnews.com/photos/palmoil_nuts2.jpghttp://www.procnews.com/photos/palmoil_nuts2.jpghttp://www.procnews.com/photos/palmoil_nuts2.jpghttp://www.procnews.com/photos/palmoil_nuts2.jpghttp://www.procnews.com/photos/palmoil_nuts2.jpghttp://www.procnews.com/photos/palmoil_nuts2.jpghttp://www.procnews.com/photos/palmoil_nuts2.jpghttp://www.procnews.com/photos/palmoil_nuts2.jpghttp://www.procnews.com/photos/palmoil_nuts2.jpghttp://www.procnews.com/photos/palmoil_nuts2.jpg8/6/2019 APAC Biofuels Perspective
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Malaysia is the world largest exporter of palm oil
0
5,000
10,000
15,000
20,000
25,000
30,000
1980/81 90/91 2000/01 06/07
Malaysia
Indonesia
Rest of the
World
Source : FAS, USDA, PS&D(2007)
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International palm oil prices are unstable
Note : Palm Okein RBD,Mal.cif.Rottesdam
Source: Oil World, Oil World Annual 2006 (2006),
Oil World, Oil World No.51/52, Vol.49. (2006)
0
100
200
300
400
500
600
700
800
1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10
US$/Tonne
1998 1999 2000 2001 2002 2003 2004 2005 2006
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Malaysia is promoting National Biofuel Policy
National Biofuel Policy
(August 2005)
Energy Security
Depletion of fossil fuel
Escalating petroleumprices
Agricultural Development
EnvironmentalConcern
Unstable palm oil price
Biodiesel boomin EU
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National Biofuel Policy (Objectives)
Supplementing the depleting supply of fossil fuels with renewable
resources
Mobilizing local resources
Exploiting local technology to generate energy for the transportation and
industrial sectors
Enhancing exports of biofuels
Benefiting from the spin-off effect of more stable prices of palm oil
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National Biofuel Policy (Implementation Plan)
Short term
Malaysian standard specifications of B5 (5 percent processed palm oil
and 95 percent diesel) will be established
Selected government departments with their fleets of diesel vehicles will
participate in trials for using B5 diesel
B5 diesel pumps for the public will be established at selected stations
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National Biofuel Policy (Implementation Plan)
Medium Term
Malaysian standard specifications of palm-oil-based biodiesel for
domestic use and export will be established
Legislation to mandate the use of B5 diesel will be passed and
enforced
Long Term
The proportion of processed palm oil in the diesel blend will be
gradually increasedGreater uptake of biofuels technology by Malaysian companies
and foreign companies abroad
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Biodiesel production in Malaysia
Biodiesel production in Malaysia is estimated 158 thousand tons in
2006 and 1.3 million tons in 2007
(PECC, Pacific Food System Outlook 2006-2007)
Government has granted licenses to 32 biodiesel plants, with
potential annual capacity of 2.6 million tons(PECC, Pacific Food System Outlook 2006-2007)
If Malaysia promotes B5 program in all regions, 500 thousand tons ofbiodiesel will be newly required
Malaysia may export biodiesel to European markets at the range of300-350 thousand tons by 2010 (Asian Palm Oil for Euro Biodiesel, 2005).
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Main Biodiesel Projects in Malaysia (2006)
MPOB, Golden
Hope PlantationBhd(60,000t)
MPOB, JC CjangJoho(60,000t)
Golden HopePlantations Bhd
(30,000t)
Source: F.O.Licht, World Ethanol & Biofuels Report, Vol.4, No11,2006
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Biodiesel Production costs in Malaysia
Raw material cost contributes about 80 percent of total production
cost
(US $/Liter)Raw m aterial
Crude Palm Oil (CPO) 0.39
M ethanol 0.02
Conversion from CPO to Biodiesel
Capital Cost 0.07
Variable Cost 0.05
Total 0.54
Note: Based on date from Japan Petroleum Energy Center (2004).
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Production Costs (International comparison)
0.54
0.43
2.9
0
0.5
1
1.5
2
2.5
3
3.5
Palm Oil (Malaysia) Palm Oil (Brazil) Rapeseed (Japan)
Note: Malaysians cots is based on date from Japan Petroleum Energy Center (2006).
Brazilian cost is derived from Biodiesel in Brazil (2005)
Japanese cost is derived from Japans Ministry of Agriculture, Forestry and Fisheries
P l Oil d i i M l i
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Palm Oil production in Malaysia
Malaysian palm oil production will expand to the future
Particularly in Sarawak, East Malaysia
Source: MPOB (2005)
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
1998 1999 2000 2001 2002 2003
East
M alaysia
Peninsula
M alaysia
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Malaysias potential for palm area expansion is estimated to be
about 2.0 million ha, which can produce 10 million ton of CPO
CPO Production in Malaysia
Source: Japan Petroleum Energy Center (2004)
Current palm Area 3.6 m illion ha
Potential area expansion About 2.0 m illion ha
Total national land area 33.0 m illion ha
Current production 12.1 m illion t /year
Production prospect14 m illon ton in 2005
19 m illion ton in 2020
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Malaysian biodiesel export
Malaysia wants to export biodiesel to European market
Malaysian palm oil may become a raw material of European biodiesel
production
Whether European market chooses CPO or biodiesel from Malaysia is
uncertain. It depends on the quality and cost of biodiesel
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Benefits for Malaysia
New demand for palm oil
Mutual beneficial effects on petroleum and palm oil sectors
Efficient utilization of raw materials
Mitigating the effects of petroleum price escalation
Savings in foreign exchangeEnvironment-friendly source of energy
Achieving socio-economic safety net
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Concerns for biodiesel expansion
Expansion of palm oil production is possible in Malaysia
1.0% of palm oil production is used for biodiesel in 2006, and 7.9 %
of palm oil production will be used for biodiesel in 2007
The expansion may cause a high international palm oil price
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In Malaysia, 11% of the total land area is already devoted to palm oil(F.O.Licht 2006)
Between 1985 and 2000, the development of palm oil plantations was
responsible for an estimated 87 % of deforestation in Malaysia (Friends of theEarth 2005)
Sustainability of palm oil production and biodiversity are main concern
for expanding bio-diesel production
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Summary (Malaysian Biodiesel Program)
Malaysia will expand biodiesel production from palm oil
Malaysia may meet both domestic and international demand
Malaysian biodiesel programs can contribute to mitigate energy in security and be
beneficial for palm oil producers
However, this program may cause to increase international palm oil price
This program can damage for sustainability of palm oil production and
biodiversities in Malaysia
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Japanese Bio-Ethanol program
Preventing global warming
Development of strategic industries
Vitalization of rural and farming communities
Biomass Nippon Strategy was formulated in December 2002
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Revised Biomass Nippon Strategy
Kyoto Protocol was put into effect in February 2005
Revised Biomass Nippon Strategy was formulated in March 2006
Promotion of utilization of biomass for transportation fuel, particularly
of domestic biomass
Current Bio-Ethanol Production
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Current Bio Ethanol Production
Japanese bio-ethanol production is at an experimental stage
Current production level is 30 kl (April 2006)
Tokachi area, Hokkaido (From wheatand corn unsuited to food)
Shinjo city, Yamagata (From sorghum)
Sakai city, Osaka (From wasted woods)
Maniwa city, Okayama (From wasted woods)
Ie village, Okinawa (From Molasses)
Miyako Island, Okinawa (From Molasses)
For Further Promotion of Domestic Bio Ethanol
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For Further Promotion of Domestic Bio-Ethanol
The abandoned arable land can be used to grow crops for bio-ethanol
production
Farmland planted with crops may be used to provide raw materials for
bio-ethanol
Technological innovation is the key
E pected Res lt
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Expected Result
Food and Agriculture
Reinforcement of international competitiveness to agriculture
Improvement and maintenance of food supplying capability
Environment
Contribution to fulfillment of the target dedicated by the Kyoto Protocol
Actions in consideration of Post-Protocol situation
Energy
Action to cope with rising crude oil price
Diversification of energy sources (energy security)
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Production cost and fuel-tax need to be reduced to expand bio-ethanol
production in Japan
53.853.8
53.8
52.0
76.4
7.0
66.2
46.0
83.4
18.2
53.8
0
20
40
60
80
100
120
140
160
Gasoline Dom estic M olasses
Im ort Tariff
Im port
PriceGate price
from oil
M anufacture
Fuel
Tax
Processing
Cost
Raw
M aterial
Cost
121.0yen
148.4yen 144.2yen151.8yen
Im ported Ethanol
from Brazil
W heat (Non-food
grade)
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Summary (Japanese Bio-Ethanol Program)
Japanese government promotes bio-ethanol production and
utilization for automobile
Securing raw materials for bio-ethanol, reduction of production cost,
tax reduction for bio-ethanol are needed to expand bio-ethanol
production in Japan
Further technical innovation is the key factor to promote domestic
bio-ethanol production
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Concluding Remarks
The governments in Asian countries are promoting bio-fuel programs
Their raw materials for bio-fuels have various sources
Increasing bio-fuel consumption would compete with food and feed
The governments in Asian countries are working for bio-fuel programs,
which will not conflict with food security
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