“Biofuel” can be designated as the fuels, which are immediately derived from the living matter. It can be produced directly from flora, and indirectly from farming, commercial, household, and/or manufacturing wastes. In the context of increased cost of fossil fuels, the production of the biofuel seems to be the best probable solution today. The economic as well as the environmental concerns (emission of green house gases, global warming, air and water pollution and many others) are compelling the nations to establish legal mandates and governmental assistance to promote the use of biofuel. Here, in the brief span of this report the author has discussed the mandates regarding biofuel of two successful producer countries of the same. The countries are: France and Philippines.
France or the French republic is a sovereign state of Western Europe. The total area of the country can be estimated as 643,801 sq km; 551,500 sq km (The World Factbook — Central Intelligence Agency, 2016). The natural resources of the the metropolitan France are mainly “coal, iron ore, bauxite, zinc, uranium, antimony, arsenic, potash, feldspar, fluorspar, gypsum, timber, arable land, fish”. “Gold deposits, petroleum, kaolin, niobium, tantalum, clay” can also be found in the French Guiana (The World Factbook — Central Intelligence Agency, 2016). However, the country is facing a few grave environmental issues like, forest damage due to acid rain, massive air pollution due to industrial as well as vehicle emissions. On the other hand, France is also facing the threat of water pollution from urban and agricultural waste.
The total population of the country was 66,736,000 in 2015 (The World Factbook — Central Intelligence Agency, 2016). The majority of the population (38.31%) comes under the age group of 25 to 54. Various ethnic groups and the oversees people are residing in the country and they are from diversified religious background (The World Factbook — Central Intelligence Agency, 2016).
Figure 1: Map of France
Source: (The World Factbook — Central Intelligence Agency, 2016)
The economy of France is diversified. It is a capitalist country. However, the social and economic equity is being maintained with the help of people oriented laws, social spending and tax policies. The total GDP of the country was $2.647 trillion in 2015 (The World Factbook — Central Intelligence Agency, 2016). The HDI of the country is very high, which is “0.888”. However, the country’s unemployment rate is increasing and the GDP growth rate is not very satisfactory (The World Factbook — Central Intelligence Agency, 2016).
France can be identified as the second largest consumer of the biofuels among the EU countries. As mentioned by the ministry of industry of France, the consumption has increased by 62.7% in the recent years. In the market of biofuel, biodiesel holds the largest share. The indisputable biodiesel trader within Europe is the French corporation “Diester Industrie”. It is manufacturing almost 2 million tons of the fuel every year. In the market of bioethanol, “Téréos”, the agro-industrial company of France is increasing its production capacity.
In the legal boundary, it can be discerned that the EU Renewable Energy Directive and Fuel Quality Directive have bound the country. However, France has not implemented any legislation, which promotes the renewable energy. As a member of EU, the country has to abide by the regulations like, “Directive 98/70/EC”, “Directive 2003/17/EC”, “Directive 2003/30/EC” and others, of the “European Directives and Regulations on biofuels.” (Doumax et al., 2014). On the other hand, as a member of CEN (European Committee for Standardization), France has replaced its own domestic legal standards by the standards mentioned by CEN without any modification.
Figure 2: The EU biofuel mandates
(Source: Kelly, 2012)
However, France is following a number of legal and economic incentives to encourage the production and marketing of biofuel. The French government has launched “Plan ‘climat’” in 2004 to meet the specifications of Kyoto protocol. As mentioned by Chakravorty & Hubert, (2013), the “climate plan” stated that France would meet the goal of 5.75% biofuel usage in 2010. On the other hand, the country had a law, which provided internal tax exemption on a few petroleum products (TIPP). Later biodiesel got 100% and bio-ethanol got 80% TIPP exemption. Moreover, the implementation of the “Plan ‘véhicules propres” in 2003, which was related to promoting sustainable transportation, has influenced the production and marketing of biofuel in the country (Charles et al., 2013). The country is also following the strategy of tax reduction for encouraging the production of biofuel in the country.
France is encouraging the domestic production of biofuel largely. However, there are a few economic challenges regarding the use of biofuel, which the country is facing today. Such economic challenges are as following:
As opined by Smeets et al., (2014), in spite of all the benefits related to the use of biofuels, it cannot be ignored that they involve a high production cost in the present market. As France is promoting the use and export of biofuel in the domestic as well as the international market, the product cost will be substantially high in future.
As discussed by according to Chakravorty et al., (2016) the European Common Agricultural Policy (CAP), France is using the “set aside” lands for the production of biofuel. However, the production of biofuel is likely to restrict the opportunity of agricultural expansion. As opined by Louhichi et al., (2012), “monoculture” can be referred as a process of cultivating the same plants for an extended period, rather than cultivating a variety of crops. It decreases the nutrients level and restricts production power of the land. Thus, it is creating an economic threat to the agricultural sector of France.
As discussed by Timilsina, (2014) the governmental tax benefits and financial incentives provided to the producers of biofuel are lowering the national earning. As mentioned by Martinet, (2013) it has reduced the national income of the country. Thus, the promotion of bio fuel production is creating a financial challenge to France.
The recent advancement in the domestic as well as international automotive sector is creating an economic opportunity to the country. On the other hand, the country is providing financial and tax benefits for the usage of biofuel. The “Plan ‘véhicules propres” was aimed to promote sustainable transportation (Azad et al., 2015). Hence, this encouragement of the biofuel use will provide an economic growth to the industry as well as the country.
As discussed by Timilsina & Shrestha, (2014), the recent trend of environmental consciousness over the world is encouraging the usage of the eco friendly substances in every sector of life. On the other hand, the growing usage of the biofuel and its non-polluting nature can be helpful for the country’s economic growth in the long-run.
As opined by Cochran, (2015), not every country is rich in the storage of petroleum. However, the locally grown plans and the production of domestic biofuel have reduced the country’s dependence on petroleum. As mentioned by Farine et al., (2012) the cost of crude oil is continuously raising, in such a context, providing an alternate option to the energy market can provide the country a great potential for economic development.
As discussed by Banse et al., (2014) France do not have any source of fossil fuel. Hence, importing crude oil was creating a huge dent in the economy. Starting to shift towards biofuel is saving a huge amount of money. Thus, the advancement of the biofuel industry is strengthening the economy.
As discussed by Doumax et al., (2014) France is facing an issue with falling employment rate. On the other hand, the unemployment rate is substantially increasing in France. In such a context, the growth of the biofuel industry is creating a great horizon for employment. On the other hand, the growth of this particular industry is providing the French economy a great level of economic sustainability, which is in turn creating opportunity for employment.
As mentioned by Cansino et al., (2012) with the encouragement in the production of biofuel through various mandates, the country has experienced increased level of agricultural income in certain sector. On the other hand, the mandates have helped the country to reduce its dependence on the foreign energy sources. However, the mandates regarding biofuel are providing a huge range of tax benefits to the produces. It is in turn, hurting the national income of the country. Moreover, most of the producers are the capitalists. Hence, by providing support to them is being oppressive to the non-privileged group of the country. Moreover, the production of the biofuel has also led the country to experience increased food price.
The EU mandates are helping the country to achieve its goal of environment preservation. The countries like France, which are industrially advanced, must concentrate on the land usage of biofuel production. It is important to control the food price. However, as discussed by Timilsina, (2014), the country is the second largest consumer of biofuel among the EU countries. Hence, the biofuel mandates are being helpful for the country to be independent regarding the energy sources. These above discussed mandates have helped some of the French companies to earn a substantial portion of foreign dollars. Hence, it can be concluded that the biofuel mandates are being economically sustainable to the country.
Philippines or the Republic of the Philippines is a island country in south east Asia. It comprises 7641 islands. The total area of the country is 300,000 sq km and the water body is stretched around 1,830 sq km. The natural resources of the country can be identified as “timber, petroleum, nickel, cobalt, silver, gold, salt, copper.” It has 25.9% forest in its total landscape (The World Factbook — Central Intelligence Agency, 2016). The country is facing some environmental issues like, unrestrained deforestation mainly in watershed locations; ‘soil erosion’; air and water contamination in chief town centers; “coral reef” depletion; mounting pollution in the “coastal mangrove swamps” which are vital fish reproduction cites (The World Factbook — Central Intelligence Agency, 2016).
Figure 3: Map of Philippines
(Source: The World Factbook — Central Intelligence Agency, 2016)
The country is now experiencing total $793.193 billion GDP as well as $2,978 per capita income. In addition, the country has a medium HDI level, which is 0.668 (The World Factbook — Central Intelligence Agency, 2016). The country is suffering from the issue of huge import of the fossil fuel; however, the dependence has reduced in the few previous years. As opined by Wahid et al., (2015) the country is a developing economy and the unemployment rates is decreasing.
The population of the country has been estimated as almost 100,998,376 in 2015. The majority of the population (36.72%) belongs to the age group of 25 to 54 years. The ethnic groups of the country are “Tagalog”, Cebuano, Ilocano and many more. The official language of the country is Filipino and English (The World Factbook — Central Intelligence Agency, 2016).
The government of the country is typically helping the investors to play in the market of biofuel. It has provided a substantial growth to the market. The country is now producing 14,500 barrels per day of biofuel. The main players of the country’s biofuel market are “Metrohm AG”, “Pöyry Energy”, “GreenGold Ray Energies, Inc. (GRYE)” and many others.
As mentioned by Katz, (2012), the country has launched “Biofuels Act of 2006”, which is aimed to develop and exploit renewable power, to diminish lethal and “greenhouse gas” effects, to reduce the Philippine’s dependence on the imported energy sources or fuels and to augment the opportunity of rural employment and profits. As mentioned by Georges, J. (2012), this law mandated the integration of “1% biodiesel in diesel and 5% bioethanol in gasoline” within 2009. The country also has the “Renewable Energy Act of 2008”. This particular act is providing a number of encouraging incentives to the use and production and biofuel. These are: duty free incorporation of related machinery for 10 years, income tax exemption for seven years for commercial operation, cash incentives to the developers, 10% corporate tax, “tax exemptions for carbon credits”, and many more (Morales, 2013).
On the other hand, as mentioned by Acosta et al., (2013), in 2009, the Department of Energy announced 12 products for “Coconut Methyl Ester (CME) for biodiesel with a total production capacity of 395,620,165 liters” and the “Sugar Regulatory Administration (SRA)” has accredited two producers of bioethanol (from sugarcane) with a total production capacity of 39 million liters per year. Thus, the country is encouraging the usage and production of biofuel (Kelly, 2012).
The country is a developing economy. Agriculture can be identified as the major source of domestic income. In such a context, encouragement to the production of biofuel may debar the agricultural production and the related income of the country (Ackrill & 2014). This threat of loss of agricultural income can be identified as an economic challenge of the usage of biofuel (Morales, 2013). Moreover, the use of cultivable land for the production of biofuel may cause a threat to the production of food crops in Philippines.
Production of biofuel is a capital-intensive program. The government is encouraging the production of biofuel even in the cost of reduced national income. Philippines is a developing country. Such tax benefits is creating huge liability to the government (Acosta et al., 2014). With increased production of biofuel the country will face this particular economic challenge.
As mentioned by Menguita-Feranil, (2013) biofuel is more expensive than the fossil fuels in the current market. According to Urbanchuk, (2012) “biodiesel is about $0.27 per liter more expensive than the diesel equivalent.” It is posing a threat to the market of biofuel in Philippines.
As discussed in the “Biofuel Act, 2006”, the government is providing a substantial support to the production and usage of the biofuel. It has encouraged the market growth of the fuel. As the Act has specified the blend percentages, the fuel production houses are trying to follow it. This has created the demand of the biofuel in the domestic market.
As discussed earlier, because of the Governmental encouragement, the demand of biofuel has been created. As mentioned by Shi & Goto, (2013) the market of Philippines can be characterized by a substantial demand-supply gap. The local market is facing a lack of supply of biofuel. Hence, if the companies, which are playing in this market, can address this supply gap they can earn a huge rate of profit.
Figure 4: Fuel consumption in Philippines
Source: Morales, (2013)
As stated by Acosta et al., (2014) the country is experiencing surplus production of biofuel mainly biodiesel. With the increased demand of the biofuel in the international market, a sheer opportunity of exporting biodiesel has been emerged to Philippines. The country can expert biofuel and earn foreign dollar. By exporting biofuel to the American countries, Philippines can experience a substantial leverage in its export sector.
The likely economic outcomes of the biofuel mandates can be as followed:
As opined by Yamaguchi et al., (2013) poverty reduction can be identified as one of the crucial objectives of promoting sustainable development. The increased usage and production of biofuel can help in increasing the income opportunity, as it requires intensive labor force for the production of the crops. On the other hand, as discussed by Wahid et al., (2015) the increased production of biofuel will utilize the previously unused lands; it will increase the income opportunity of the landholders. Moreover, by creating likelihood of opening the fuel refining infrastructure the government can ensure increased income opportunity in the rural sectors. Thus, the mandates regarding biofuel will be helpful for the rural economy of the country.
Import of fossil fuels is has made the country typically dependent on the foreign lands for energy sources. As mentioned by Katz, (2012), the demand for foreign fossil fuel and related products has reached the approximate level of 106.5 million barrels of fuel oil in 2004. It provides a clear picture of the country’s dependence. As stated by Morales, (2013) “in terms of foreign exchange, the importations volume has reached an equivalent to roughly US$ 3.8 billion of currency outflow”. To respond to this scenario, the government passed the “Republic Act No. 9367” in 2007. It has reduced the dependence of the country to a great range.
As discussed by Acosta et al., (2014) with the increased investment in the biofuel industry, will ensure employment opportunity both in the rural as well as urban sector. As discussed previously, the country is facing a high unemployment rate. However, it is gradually decreasing with the advancement in the biofuel market.
As opined by Banse et al., (2014) a decrease in the import level was expected while laying the biofuel mandates in the country. Now, it can be declared that the country has achieved this goal of lowering the outflow of domestic currency regarding energy sources. Moreover, with the biofuel mandates the country has achieved a growth in the rural economy. Philippines can be identified as one of the developing economies of the world. Now, the advancement in the rural economy is crucially important for such countries. On the other hand, the increased production of biofuel has provided the country a substantial future opportunity of income through export of biofuel. With the increased usage of biofuel in the international scenario, the country has opened a door to the future income. Moreover, as the country has a substantial part of coastal land, the mandates are being helpful in producing a better quantity and quality of biofuel. Hence, it can be concluded that the biofuel mandates are being sustainable for Philippines.
Both the countries are following well-structured mandates and legal regulations regarding the use, production and blend of biofuel. However, Philippines are following mostly its own regulations whereas France is mainly following the EU declarations. Both the countries are reaping the profit of biofuel production and usage. As described by Banse et al., (2014) the use of biofuel is providing them energy independence and security. However, as opined by Wahid et al., (2015) being a developing nation, Philippines is gaining more than that of France.
The biofuel mandates are helping it to uplift its rural population whereas; France has to look for utilizing the unused lands in the country. Both the countries are earning foreign money through biofuel export. However, Philippines is experiencing a surplus of production of biofuel and thus exporting the excess. On the other hand, France is still struggling to mitigate the domestic demand of the biofuel. As described by Kumar et al., (2013) Philippines is correctly utilizing its status of a developing nation by promoting the production of biofuel. The tax benefit to the producers is cutting down the national income of France. However, this particular strategy is helping Philippines to encourage the industrial sector.
Now, if a review on the biofuel market of Australia can be done, it can be noticed that in 2014, the average annual production of the country was almost 800 million ton liter (Cochran, (2013). The biofuel market of Australia is continuously increasing. As opined by Puri et al., (2012) usage of biofuel will be economically viable for Australia.
Figure 5: Gasoline sales report of Australia in 2015
(Source: Cochran, 2013)
The Biofuel excise policy talks abot providing excise benefits to the production of biofuels. As mentioned by Rajcaniova et al., (2015) in 2011, the government has provided “effective excise free status for the next 10 years” to some renewable fuels like (ethanol, biodiesel and renewable diesel). On the other hand, the government is also providing fuel tax benefits to some companies, which are using biofuel for their industrial operation. Such tax benefits can also be claimed in the usage of biofuel in the heavy vehicles. Various state governments have also provided some encouraging regulations. However, the governmental regulation imposes 10% cap on the concentration of fuel ethanol blends. Recently, the government is providing excise exemption to the domestically produced ethanol until 30th July, 2021 (Shi & Goto, 2013). The government is also providing capital grants to the produces.
The drives, which motivated the Australian Government to opt for laying down the biofuel mandates, can be identified as followed:
As opined by Cochran, (2013), with the development of the economy as well as the industrial activities, the demand of energy sources is continuously increasing. Moreover, the countries like Australia are continuously facing the issue of energy demand regarding the transport activities (road, air and water). Hence, the government of Australia though about encouraging the usage and production of biofuel by introducing a few mandates regarding this.
As opined by Timilsina, (2014), the civilized and economically advanced countries need to focus on reducing the level of green house gases in the world. Australia has already signed the pact titled “East Asian Energy Security Pact.” Through this pact the national authorities has decided to uphold the expansion of biofuel to lessen the dependence on the fossil fuel and encourage cleaner sources of energy within the country as well as the international energy market. The increased anxiety regarding the green house gases and the threat of global warming has driven the country to promote biofuel.
The whole world is facing this particular issue. As the fossil fuels are the only sources of energy in the current circumstances, the cost of it is continuously increasing (Acosta et al., 2014). Moreover, the countries those do not have any source of fossil fuels are being dependent on the foreign imports. Hence, the national authority of Australia has concentrated on the production of biofuel by considering it a potential source of future energy requirements.
Reviewing the cases of the two above discussed countries, the followings can be recommended:
From this above discussion, it can be concluded that the countries like France and Philippines has gained substantial economic as well as environmental growth by promoting biofuel. Environment is growing concern today. Hence, to reduce the threat of ecological degradation the nations needs to be more conscious regarding the production of biofuel. Legal mandates can be helpful in this regard. Countries need to focus on promoting the use and production of this green fuel.
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