Trade barriers for biofuels

Tariff barriers
At present there is no specific customs classification for biofuels. Bioethanol is traded under the code 22 07 which covers both denaturated (HS 22 07 20) and undenaturated alcohol (HS 22 07 10). Both types of alcohol can be used for biofuel production. Biodiesel in the form of FAME (fatty acid methyl ester) is classified under the HS code 3824 9099. However, in neither of these cases is it possible to establish whether or not imported alcohol or FAME are used for biofuel production.

Despite this lack of specific customs classification, there is already evidence demonstrating that the use of tariffs is common practice in countries keen to protect their domestic agricultural and biofuel industries from external competition. According to IEA (2004), bioethanol import duties are US$ 0.10/lt in the EU, US$ 0.14/lt in the US, US$ 0.06/lt in Canada, US$ 0.23/lt in Australia and zero in Japan and New Zealand. In addition the US also applies an extra US$ 54 cents/gallon, an amount that equates to Brazil’s production costs. In Brazil, imports of bioethanol are taxed at 30 per cent. For biodiesel classified under HS code 3824 9099, on the other hand, the US applies duty of 6.5 per cent while the EU applies a 5.1 per cent tariff on biodiesel from the US. Furthermore, import tariffs on biofuel input materials, including feedstocks but particularly on other more value added materials such as oils and molasses are also substantial (see section 5.1.1.2 on Tariff Escalation). However, tariffs applied to different countries may vary as both the EU and the US have signed preferential trade agreements and have a Generalised System of Preferences that grant preferential market access conditions for certain countries and products.

Tariff escalation

The use of tariff escalation that favours production of crops over other more value added forms of biofuels is also common practice. In the case of soya, for instance, the EU, the US, Canada and Japan impose no tariffs on soyabean imports. However, the EU applies a tariff of 8.8 per cent and the US applies a 19.1 per cent duty on soya oil imports (both of which should be gradually reduced to 6.4 per cent to comply with WTO agreements). The US applies a 6.4 per cent tariff on rapeseed and Canada applies an 11 per cent duty. Canada also applies a 9.5 per cent tariff on sunflower seed oil80 and a tariff of 11 per cent on palm oil. The EU applies a 3.8 per cent tariff on imports of crude palm and 9.0 per cent and 10.9 per cent on imports of refined palm oil and stearin respectively, from Indonesia and Malaysia.

In the case of bioethanol, it is alleged that as a result of pressure from domestic producers, the EU has recently removed Pakistan – the second largest bioethanol exporter to the EU – from the General System of Preferences (GSP). This implies that a 15 per cent import duty has been levied on industrial alcohol and bioethanol produced in Pakistan, which favours the production and export of raw molasses over other more value-added products such as industrial alcohol and ethanol. As a result two of the seven operating distilleries have closed, and another five new distilleries will probably abandon plans to begin operations due to uncertainty market conditions.

Quotas

The use of quotas to regulate trade in biofuels is also a common practice in industrialised countries. The CBI and CAFTA, for instance, have established a complex import quota system for bioethanol from Caribbean countries. The use of quotas on feedstock trade is also important. For example, the EU regulates sugar imports through a complex system of duty free tariff quotas that favour imports from ACP countries and India.

The role of domestic policies in biofuel market development

Domestic policies to support biofuel production respond to different policy goals associated with biofuel production. Earlier experiences such as those of the US and Brazil were mainly motivated by pressure to reduce the import bill and increase energy security, though rural support appeared as an important driver in a later stage of these experiences. Today a new policy interest is added, driven by the potential of biofuels to contribute to ameliorating the problem of global warming. All this implies that these policies cover a range of sectors, typically including energy, agriculture, industry and trade.

Given that, on the one hand, costs of biofuels production are higher than those of conventional fuels and, on the other hand, there are positive externalities associated with biofuels, the use of some form of public policy is essential to make biofuel production competitive in the earliest stages of industry development. The use of policy tools such as the setting of national targets for the blending of biofuels with standards fuels, tax benefits, subsidies and loan guarantees to encourage greater production and consumption has been the rule rather than the exception behind the development of this market. Some of the main experiences are briefly described below.

In Brazil, for instance, the 1975 PROALCOOL programme (presented in detail in Box 1) was promoted as a reaction to the oil crisis and aimed to replace gasoline with blends of bioethanol produced from sugarcane. In order to do this several policy measures were introduced including: production quotas and a fixed purchasing price for bioethanol; control of domestic bioethanol sales and distribution by a monopolistic agent (Petrobras); subsidies to bioethanol blend gasoline producers; tax incentives to car owners using bioethanol blend gasoline; and soft loans to implement the necessary technical changes for vehicles.

Although the Government liberalised this market in the early 1990s (abolition of Petrobras’s monopolistic distributional arrangement; liberalisation of bioethanol prices and reduction of subsidies on bioethanol blend gasoline producers), the Government still fixes minimum rates of blending with oil (currently at 20 to 25 per cent). In 2001 some additional measures were introduced as a means to revive the PROALCOOL programme, including a tax reduction on flexi-fuel cars (FFA), subsidies for FFA car purchasers and subsidies for sugar storage in order to secure future bioethanol supply. Even though the current level of Government support for bioethanol in Brazil is minimal compared to other countries, historically it was a key factor behind the development of the market and it still has a role to play.

Brazil would like to replicate the bioethanol programme for biodiesel, and in 2004 the Government launched the National Programme for the Production of Biodiesel (PROBIODIESEL Programme). In early 2005 the Government passed a bill, making the production of a 2 per cent biodiesel fuel blend made from castor oil and soya oil compulsory by 2007. This obligation will be increased to 5 per cent and 20 per cent by 2013 and 2020, respectively. In addition to the setting of targets for biodiesel-diesel percentage blends, the regulation also involves a framework that includes differential rates depending on the oilseeds used, where they are grown, and whether they are produced by large agribusiness concerns or family farmers. Biodiesel feedstocks and the fuel itself are exempted from Industrial Products Tax (IPI). The programme has also instituted a ‘Social Fuel’ seal which aims to promote social inclusion throughout the new fuel’s production and value chain. It establishes the conditions for industrial producers of biodiesel to obtain benefits and credits. In order to receive the seal, an industrial producer must purchase feedstock from family farmers and enter into a legally binding agreement with them to establish specific income levels and guarantee technical assistance and training.

In the US, interest in biofuels also began in response to the 1970s oil crisis, and legislation to promote the production and use of bioethanol as a transport fuel was passed.56 However, it was only in the 1980s that the US began assisting production to address the crisis in the corn industry. Bioethanol then attracted further interest as an antiknocking agent57 when lead was phased out from petrol.58 The 1990 Clean Air Act Amendments set up the oxygenated fuel programme that required petrol sold in areas with high carbon monoxide levels to contain 2.7 per cent oxygen. Later, the Reformulated Gasoline Programme required petrol containing 2 per cent oxygen to be sold in areas with high levels of photochemical smog. However, it was only with the prohibition of MTBE as oxygenate in early 1990s, that bioethanol started to be widely Used.

Several other initiatives have also stimulated uptake of bioethanol in the US. There is a US$ 0.51/gallon tax credit for bioethanol; federal agencies are required to use alternative fuels in their fleets; the Clean Cities Programme created a market for alternative-fuelled vehicles, various states offer incentives and assistance, and several have bioethanol mandates. The 2005 Energy bill incorporates the tax credit within a larger mandate, requiring gasoline refiners to nearly double their use of renewable energy additives (read bioethanol) in the coming years. In particular, it introduced a Renewable Fuel Standard that requires US fuel production to include a minimum amount of renewable fuel each year. It starts at 4 billion gallons in 2006, increasing gradually before reaching the goal of 7.5 billion gallons in 2012.59 From 2013 onwards renewable fuel production must grow by at least the same rate as gasoline production.60 In addition, US domestic producers are insulated from imports as the US adds on a US$ 0.54/gallon secondary duty to the normal tariff of 2.5 per cent to shield domestic producers from competitive imports.

Regarding biodiesel, in 2004 the US approved a tax credit of US$ 1 per gallon of vegetable oil or animal fat-based biodiesel blended with petrodiesel, which is framed in the context of the 2004 American Job Creation Act.61 Moreover, the Renewable Fuel Standard introduced in the 2005 Energy Bill also applies to biodiesel production. In the EU, biodiesel began to be promoted in the 1980s as a means to prevent the decline of rural areas while responding to increasing levels of energy demand. However, it only began to be widely developed in the second half of the 1990s. Key policies affecting the European market for biofuels include energy, agriculture and climate change policies.

In 2003, the EU approved two draft directives concerning energy supply diversification and the reduction of GHG emissions. Directive 2003/30/EC sets indicative targets for biofuel consumption in the transport sector: biofuels must constitute 2 per cent of all gasoline and diesel motor fuels by 200562 and 5.75 per cent 2010. Although these targets are not mandatory, member states must keep the EC informed about the measures taken to reach them. Directive 2003/96/EC complements this policy providing a legal framework to differentiate taxation between biofuels and conventional fuels. The minimum excise rates for unleaded premium, diesel fuel and heating oil effective from January 2004 were: € 359/m3, € 302/m3 and € 21/m3, respectively. For diesel, the minimum rate will be raised to € 330/m3 by January 2010. In addition, a number of EU countries have implemented tax credit for biofuels, including Germany, Sweden and Spain, at 100 per cent.
On the agricultural side, the 2003 EU Common Agricultural Policy (CAP) Reform introduced the ‘Carbon Credit’, which pays € 45/ha to growers of energy crops, up to 1.5 million hectares. Carbon credit is available for all agricultural crops except sugar beets and hemp, as long as they are used for approved energy uses and have a contract for this purpose.66 EU farmers cannot get carbon credit for energy crops grown on set-aside land. The amount of oilseeds that can be grown within the EU is set by the Blair House Agreement (BHA), which restricts the maximum EU oilseeds area for food use to 4.9 million/has and also limits the annual output of side products (oil meals) from oilseeds (rapeseed, sunflower seed and soyabeans) planted on set-aside land for industrial purposes to 1 million MT annually of soyabean equivalent.

In 2005 the EU released the Biomass Action Plan, which suggests a possible revision of the 2003 Biofuels Directive. It encourages, among other things, a closer look at the second generation of biofuels, and the use of bioethanol to reduce demand for diesel, and public procurement of clean vehicles – including those using high biofuel blends. In February 2006 the EU launched the Biofuels Strategy, which is a coordinated action plan to promote sustainable large-scale production and use of biofuels in the EU and developing countries. The strategy is a cross-sectoral initiative that contains seven policy axes, some of them based on measures described above but also including some new areas: stimulating demand; capturing environmental benefits; developing the production and distribution of biofuels; expanding feedstock supplies; enhancing trade opportunities; supporting developing countries; and supporting research and development.

In addition to the examples above, many other countries – in the industrialised and developing world – have either implemented or are implementing policy tools to support biofuel market development. Table 3 summarises some of these.

These policies play a crucial role in the industry’s development. However, the existence of a learning curve – as the Brazilian experience shows – suggests that the level of support can be diminished over time. On the other hand, they can also constitute very costly barriers to trade, especially for those most efficient developing countries that have less financial capacity to support their industry. The next chapter on biofuels and the rules of international trade elaborates further on this point.

Future prospects for biofuels

While ten years ago there were only a handful of countries producing biofuels, by 2006 many countries around the world are using biofuels on a large scale. Forecasts for the future of this market are very optimistic as all types of countries, industrialised and developing, large and small, are implementing or planning to implement @directives to promote greater use of biofuels. Accordingly, production capacity is expected to rise as suggested by the establishment of many new projects around the World.

According to IEA (2004), with the entering into force of the Kyoto Protocol in 2005 and the first target period under the EU Biofuels Initiative coming into effect in December 2005, world biofuel production is expected to quadruple to over 120,000 ML by 2020, accounting for about 6 per cent and 3 per cent of world motor petroleum use and total road energy use, respectively. A more recent estimate from IEA increased this figure to 10 per cent of world fuel use for transport by 2025. Biofuels are not expected to totally replace oil-based fuel in the transport system; rather they are an alternative or a complement to it.

Brazil is expected to continue as the leading bioethanol producer and exporter. Although the internal market will still account for the largest part of production, exports will rise sharply. According to the São Paulo Sugar and Bioethanol Institute, the value of Brazil’s bioethanol exports are expected to jump from US$ 1 billion a year to US$ 8 billion by 2007.

The US is expected to continue demanding large quantities of bioethanol. The stronger demand will be served both by internal production and imports, mainly from Brazil and CBI countries. Other sugar-producing countries such as Indonesia and Southern Africa are also predicted to become exporters.

In order to implement the European Directive 2003/30/EC that sets a target of 5.75 per cent of biofuel within the mix of transport fuel by 2010, 18.6 million tonnes of oil equivalent of biofuels is needed. This will require imports to sustain the programme. Indeed, Malaysia and Indonesia are already expanding palm oil plantations to meet greater demand and are together expected to supply up to 20 per cent of this market. Brazil is also expected to be the main beneficiary of EU imports of soya for biodiesel.

Other promising import markets are likely to be Asian countries like Japan, Korea and Taiwan, which have very little land available for increased production. Japan, for instance, has been highlighted as potentially the world’s largest bioethanol importer.

Currently Japan allows a 3 per cent bioethanol content in gasoline, which requires 1.8 billion litres of alcohol-based fuel each year. Discussions are taking place on increasing the blend cap to 10 per cent, which would result in a 6 billion litres market. In order to secure this future supply, Japan and Brazil have recently formed a joint venture company that will produce bioethanol. Japan is also examining the options of palm and coconut oil from the Philippines to make B5 available from April 2006. In China, although supply capacity is increasing fast, growth in demand might well exceed growth in production. Projections show that 22.7 metric tonnes of biofuels will be needed to blend 10 per cent biofuels into all Chinese cars by 2020. The present target is only 11 metric tonnes capacity expansion. See more details about biodiesel project from http://www.biodieselproject.com.

Trends in global biofuel trade

At present only limited amounts of biofuels enter the international market as the bulk of production is consumed domestically. In the case of bioethanol, less than 10 per cent of global production enters the international market. However, international trade is expected to grow very rapidly in the coming years as the global increase in consumption and the scaling up of production will not coincide geographically.

Brazil as the largest bioethanol exporter, providing about 25 per cent of global bioethanol exports in this year. More recent data, however, suggest that Brazil has increased its exports to 50 per cent of global bioethanol exports. The second largest exporter of bioethanol is the US (14 per cent), followed by France (11 per cent) and UK (8 per cent). Exports from these EU countries are destined to other European countries. Countries from the Caribbean Basin Initiative (CBI) such as Guatemala, Costa Rica, El Salvador and Jamaica are also important exporters. Bioethanol is reprocessed in these countries and re-exported to the US. Peru exports to Japan and to the US under the Andean Pact. Other important exporters are sugar producing countries like Pakistan–the second largest exporter to the EU after Brazil, South Africa, Swaziland and Zimbabwe, which enjoy preferential access to the EU market.

As suggested above, Brazil now supplies about 50 per cent of the international demand for bioethanol. The main destinations for Brazilian bioethanol exports in 2004 were India (20 per cent), the US (18 per cent), Korea (10 per cent) and Japan (9 per cent).

The US is the main importer of bioethanol, accounting for 31 per cent of global imports. US imports represent 5 per cent of domestic production and they mainly come from Brazil (54 per cent) and CBI countries. Other significant importers are Mexico, Korea and Germany with 11 per cent, 10 per cent and 10 per cent of global bioethanol imports, respectively. These are followed by Italy (5 per cent), France (5 per cent), Netherlands (4 per cent) and Nigeria (4 per cent). Venezuela also imports bioethanol from Brazil. The EU imports a large proportion of the bioethanol it uses, mainly from Brazil and Pakistan. Other important EU suppliers are Guatemala, Ukraine and Peru. The main EU importer is Sweden. As suggested before, there are also significant intra EU trade flows of bioethanol.

Also find more about biodiesel machine.

Five Biofuel Policies

(1) Development of biofuels can not sacrifice the basic interests of the people (including access to food, water and land).
(2) biofuels must be sustainable environment.
(3) biofuels must truly help reduce greenhouse gas sources.
(4) the development of biofuels should be based on commercial principles, to be fair, the people’s rights to get a reasonable return (including labor rights and intellectual property).
(5) cost and profit of biofuels should be evenly distributed. Oil palm can do all five requirements.

Catalytic Conversion Of Glycerol Fine Utilization

Catalytic conversion of glycerol fine Utilization

Biomass energy mainly refers to bio-ethanol, bio-diesel and bio-hydrogen production. Wherein, biodiesel is an alternative to animal fats in the glyceryl group with methanol or ethanol and other lower alcohols obtained long-chain fatty acid alkyl monoester. The main characteristics of biodiesel is low sulfur content, high oxygen content, free of environmental pollution caused by aromatic hydrocarbons; has good low temperature performance; has better lubricating properties; has a good safety performance; with more good combustion properties (high cetane number); diesel engine without modification, can be added directly.

The main byproduct of biodiesel production is glycerin, each producing about 9 kg of biodiesel to obtain 1 kg of crude glycerol byproduct. Purification of the latter subject to filtration, purification, chemical additives and distillation process, if used in food, cosmetics, pharmaceuticals and other areas, it needs to be further bleaching, deodorization, ion exchange to eliminate trace impurities. The cost of crude glycerin made by the pure glycerol is very expensive, how to use new technology and new technology research and development and processing costs low, there is a huge potential for development of crude glycerin, key and guarantee for sustainable development of biodiesel industry.

Characteristics of food waste in kitchen

1, high moisture content, up to 80% – 95%
2, high salt content, in some areas, high chili and acetic acid
3, high organic content, mainly proteins, cellulose, starch and fat
4, rich in nitrogen, phosphorus, potassium, calcium and various trace elements
5, the presence of pathogenic bacteria, pathogenic microorganisms
6, perishable, spoiled, stink, mosquitoes breed

But the waste cooking oil can be used for biodiesel production.