Fanie Brink, managing director of Biofuels Industry Development, said at a recent biofuels conference that the Draft Biofuels Industrial Strategy mainly caters for the requirements of the local petroleum industry to the exclusion of role-players such as feedstock and biofuels producers.
After three years the development of an acceptable policy framework for the establishment of a local biofuels industry is in an advanced stage and the industry awaits the finalisation of the concept strategy later this year. The white paper on renewable energy and the Cabinet decisions of 2005 and 2006 set definite goals for the development of renewable fuel from 2003 to 2013. Finance minister Trevor Manuel has since 2002 announced tax incentives to achieve these goals which were generally welcomed by industry role-players. But the proposed process by the Department of Minerals and Energy to implement the draft strategy doesn’t meet the expectations of most role-players as the proposed regulations were mainly drawn up to meet the requirements and aspirations of the local petroleum industry.
The draft strategy views the high prices of crude oil as the most important reason for the development of biofuels. However, most countries including the US and Brazil as leaders, mainly develop and support the production of biofuels for two reasons: to reduce their dependence on crude oil and to limit the level of detrimental gases which result in global warming. T he production of biofuels in the US currently accounts for 3% of its total fuel consumption and targets have been set to increase the production of biofuels to 5% in 2012, 20% in 2017 and 25% in 2025. The SA target has been set at an of average of 4,5% by 2013 with no vision for further development. In contrast with the long-term vision and support that biofuels receive in other countries, the local strategy proposes that mandatory blending won’t be supported by government after 2013 and that regulatory measures should be scaled down. This is one example of how the Department of Minerals and Energy is attempting to protect the fuel market for the local petroleum industry. This is despite the objectives contained in the policy framework for the production of biofuels in light of the worst crisis of global warming facing the world.
According to a Cabinet decision in December 2005, the mandate of the task team was to investigate the creation of jobs throughout the value chain of the fuel industry, as well as to reduce SA’s dependence on imported fuel, and to establish emerging farmers in the sugar and grain industries. In last year’s State of the Nation address President Thabo Mbeki identified the agriculture and biofuels industries as two of the economic sectors for accelerated economic growth within government’s Accelerated and Shared Growth Initiative. he production of biofuels and the accompanying development within the total value chain, from the provision of production inputs for the production of raw materials, technology development, the creation of new markets for sugar, grain and oilseeds to the value-adding of the by-products, may make the biggest contribution to the target of 6% economic growth, poverty alleviation and job creation by 2014. Government must not underestimate this opportunity to stimulate the economy.
Petroleum industry favoured?
It is therefore unacceptable that the Department of Minerals and Energy in the proposed strategy is attempting to regulate biofuels out of the hands of feedstock and biofuels producers by placing the petroleum industry in a position to do what it likes, at prices it wants to pay and in the volumes it is prepared to blend with fossil fuels. Government should also not allow the petroleum industry alone to use ethanol for the manufacturing of Ethyl tertiary butyl ether as an octane enhancer. Ethyl ether is almost as dangerous and harmful to humans and the environment as methyl ether, which is banned in most US states as an octane enhancer. Should the Petroleum Products Act be amended to create a market for ethyl ether, ethanol producers should be allowed to manufacture it. Petroleum companies can build their own ethanol plants if they wish to manufacture ethyl ether and not be allowed through regulation to ride on the back of the biofuels industry. he price of crude oil plays no role in the profitability of the petroleum industry because its profit margins are guaranteed irrespective of the price levels at which crude oil is traded.
Why must the profitability and sustainability of the biofuels industry be exposed to the volatility of the crude oil price and the landed costs of petroleum products, while sugar, grain and oilseeds are used in the production of biofuels as raw materials? Provision is made in the white paper for the revision of the target for renewable energy to be made during 2008 and government should seriously consider raising the targets to 10% in 2017 and 20% in 2020. – Peter Hittersay |fw