Argentina Takes Controversial Step Backwards in Biofuel Production

by Daniel Gutman (Inter Press Service News Agency) Argentina, historically an agricultural powerhouse, has become a major producer of biofuels in recent years. However, this South American country is now moving backwards in the use of this oil substitute in transportation, a decision in which economics weighed heavily and environmental concerns have been ignored.

On Jul. 15, with the support of the government of centre-left President Alberto Fernández, Congress passed a new Biofuels Regulatory Framework, which will be in force until 2030.

The new law published on Aug. 4 reduced from 10 to five percent the minimum mandatory blend of soybean oil biodiesel in diesel fuel, and gave the executive branch the option of lowering it to three percent if deemed necessary to cut fuel prices for consumers.

With respect to gasoline, the law maintained the current 12 percent bioethanol – based on corn and sugar cane – blend, but gives the government the option of lowering it to nine percent.

“The mandatory blends of petroleum-derived fuels with biofuels came into effect in 2010 and since then have generated the largest reduction in greenhouse gas (GHG) emissions in Argentine history, at least until 2019,” energy consultant Luciano Caratori, a researcher at the Torcuato Di Tella Foundation, which focuses on environmental issues, and former undersecretary of energy planning, told IPS.

Caratori said the reduction in biofuel use is inconsistent with the climate change mitigation commitments Argentina submitted in December 2020, in the update of its Nationally Determined Contribution (NDC) under the Paris Agreement.

One of the ways to reach these goals, according to the NDC, is to reduce emissions from transportation – a sector that accounted for 33 percent of total energy demand in 2019 – through the use of biofuels and hydrogen and electrification.

“There don’t seem to be too many opportunities in Argentina to offset the emissions savings lost from reducing biofuel use, and 2030 is just around the corner,” said Caratori.

“To mitigate we need all the available tools,” he stressed. “And in this case, perhaps the worst thing is the setback in an area in which the country has gained a great deal of know-how and capacity, making it one of the largest users of renewable energy in transportation worldwide.”

In the Senate, the ruling party’s Rubén Uñac, chair of the energy commission, acknowledged that the biofuels industry made possible the creation of “new companies and thousands of jobs” over the last decade, through “more than three billion dollars in investments.” But he said the system was in need of “in-depth reform.”

In the opposition, the chair of the Senate commission on the environment and sustainable development, Senator Gladys González, denounced “fierce lobbying by the oil companies” and argued that the government “says one thing and does another,” because it expresses in public a deep commitment to the fight against climate change that does not translate into action.

A study published in July by Caratori and Jorge Hilbert, an expert with the government’s National Institute of Agricultural Technology (INTA), points out that the current installed biodiesel and bioethanol production capacity could cover between 4.5 and 8.0 percent of Argentina’s international commitment to GHG emissions reduction.

“The decarbonisation opportunity offered by biofuels is considered to be very significant with minimal investment,” the paper underscores.

“Less than five percent of Argentina’s arable land is involved in biofuel production,” Claudio Molina, executive director of the Argentine Biofuels and Hydrogen Association, which has been promoting biofuel production for 15 years, told IPS. “Only three percent of the total corn harvest is used to make bioethanol.”

The pandemic’s impact on demand and a rise in the price of biodiesel put pressure on the government and left it with two alternatives that it wants to avoid: authorise an increase in consumer fuel prices or reduce the profit margin of the oil companies, especially the state-owned YPF.

This is included in the text of the new law, which states that the government reserves the right to further reduce the percentage of biofuels in the fuel blends when an increase in the prices of biodiesel or bioethanol inputs “could distort the price of fossil fuels at the pump.” READ MORE