(International Energy Agency) Replacing a portion of gasoline and diesel demand with biofuels is a means of increasing a country’s domestic fuel supply -- Improving security of supply is a fundamental reason for the introduction of biofuel policy support in China, India and Indonesia, which in turn has raised production prospects. Combined, these countries account for 40% (15 billion litres) of biofuel production growth in the main case forecast (2019‑24).
Crude oil import dependency is set to increase in all three countries over the forecast period, meaning that measures to reinforce security of supply are of paramount importance. China already overtook the United States as the largest crude oil importer in 2017, India’s oil demand is set to rise 25% by 2024, and Indonesia’s oil production is expected to fall significantly while demand rises.
...
Blending biofuels with gasoline and diesel slows road transport oil demand growth
Higher vehicle ownership (linked with economic growth) contributes to rising oil import dependency in all three countries. Fuel demand from gasoline vehicles expands by one-fifth (32 billion L) in China and by over 30% (12 billion L) in India during 2019 24. In Indonesia, fuel demand for diesel vehicles increases 10% (by around 2 billion L) by 2024.
Replacing a portion of gasoline and diesel demand with biofuels is a means of increasing a country’s domestic fuel supply. China produces ethanol from corn and cassava, India uses feedstocks such as molasses from its sugar industry (the world’s second-largest) to make ethanol, and Indonesia manufactures biodiesel from palm oil, of which it is the world’s largest producer. However, the production of biodiesel in China and India, and ethanol in Indonesia, is lower because of lower domestic feedstock resources.
Security of supply can be strengthened through the application of mandate polices that prescribe replacing a share of gasoline or diesel consumption with biofuels. All three countries have established (and recently strengthened) such policies (percentages are by volume):
- China: 10% of gasoline demand to be met by ethanol nationwide.
- India: 5% ethanol mandate nationwide, but 10% in major ethanol-producing states; 20% target for 2030.
- Indonesia: 20% biodiesel blending, with vehicle testing under way for 30% in road and rail transport.
Full compliance with these policies would cause domestic supplies to meet a higher share of fuel demand from road transport in 2024.
Nevertheless, security of supply is not the sole motivation for biofuel policy support. In China, India and Indonesia, supporting demand for nationally important agricultural commodities has also been a key factor in the introduction of mandate policies.
In energy terms, biodiesel consumption in Indonesia already resulted in a notably higher share of domestically produced fuel supplies in 2017. By 2024, its contribution could expand to offset 17% of diesel demand. If vehicle testing results indicate that it is possible to use B30 fuel (30% biodiesel blending), it would offset 26% of fossil diesel demand.
In 2017, ethanol use had only a minor effect on domestic fuel supplies in China and India. However, if 10% nationwide ethanol blending is achieved, its contribution will be much more visible in 2024, replacing 6% of gasoline demand. Nevertheless, all three countries would still remain reliant on imported oil to meet transport fuel demand.
Replacing imported oil with domestically produced biofuels also improves national trade balances. Blending 10% ethanol with gasoline in 2024 would improve China’s trade balance by USD 4.9 billion and India’s by USD 1.2 billion, while meeting 20% of road transport diesel demand with biodiesel would improve Indonesia’s by USD 1.3 billion. Furthermore, if Indonesia were to use 30% biodiesel blends across all sectors of the economy, its trade deficit would fall by almost USD 4 billion. However, biofuel subsidisation and fiscal support costs must also be considered alongside these savings.
Given the scale of transport fuel consumption in these countries and ongoing demand growth, offsetting a significant share of gasoline and diesel with conventional biofuels alone would require thorough consideration of sustainability implications, as it could entail considerable land-use change and lead to debate about using edible feedstocks for fuel production. For this reason, China has expressed interest in producing cellulosic ethanol to complement crop-based ethanol production, and India is already developing several cellulosic ethanol plants.
Using biofuels in road transport is not the only way to reduce oil import dependency
Although using biofuels is a key means to slow oil demand growth in the transport sector, raising energy efficiency and harnessing electric mobility can also effectively reduce oil import dependency. Targets to increase vehicle efficiency have therefore been established in India (1.6% per year over 2012 22) and China (5% per year over 2013 20), and both countries are also expanding electric mobility. China has the largest market for electric cars and 2/3 wheelers globally, and although India has a far smaller electric vehicle (EV) fleet, it offers policy support to expand the EV market share. Indonesia, however, has less stringent efficiency requirements and EV deployment targets.
As road transport is only one cause of rising oil demand growth in these countries, the energy security improvements offered by using biofuels in this sector are less evident in the context of total oil demand, which includes consumption of products such as petrochemicals, jet kerosene and fuel oil. According to the main case forecast, ethanol use in road transport in China and India would decrease overall import dependency by less than 1% in 2024, and even if India achieved 20% ethanol blending with gasoline, it would not come close to meeting the target of reducing crude oil imports 10% by 2022.
Indonesia, however, has policies to use biodiesel more widely across its economy (e.g. in rail, industry and electricity generation), so the main case scenario forecasts a close to 5% reduction in import dependency. Developments in the production of aviation biofuels and biomass-based chemicals can make it possible for biomass resources to strengthen energy security over the long term in these and other countries. READ MORE
More Questions than Answers on China, Biofuels Package (Farm Journal AgWeb)
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