New Framework for Biofuels Leaves Many Questions Unanswered

by (Business Maverick) The recently published Biofuels Regulatory Framework is an important step in the attempt to develop a national biofuel industry, but it is far from sufficient to ensure the full benefits of biofuels while minimising the risks. -- On 7 February 2020, the Department of Mineral Resources and Energy published the long-awaited South African Biofuels Regulatory Framework and National Biofuels Feedstock Protocol (BRF), meant to provide a policy and regulatory framework for the implementation of the Biofuels Industrial Strategy of 2007 (BIS). Together with the regulations regarding the Mandatory Blending of Biofuels with Petrol and Diesel of 2012, it aims to achieve the introduction of 4.5% of biofuels in the national liquid fuels mix, on a volume basis.

While the long-awaited regulatory framework for biofuels is a step in the right direction to introduce renewable resources at scale into the national transport fuel mix, after 14 years in the making, it still leaves a lot of uncertainty for this nascent sector and much room for unintended outcomes.

The BIS rightly identifies as its primary objectives poverty alleviation and economic development, and acknowledges the role of biofuels in contributing towards the achievement of the country’s renewable energy goals, energy security and the reduction of greenhouse gas (GHG) emissions. The BIS thus sets the stage for a national biofuels programme where socioeconomic and environmental objectives are in synergy, but adequate regulations are needed to achieve this double dividend.

In its current form, the BRF does not provide the adequate regulatory setting for an industry that is able to deliver on these multiple objectives, as it offers little incentive, or safeguards, to ensure the potential benefits are maximised while the risks are minimised.

The Feedstock Protocol, a key component of the BRF which aims to mitigate the risk of the biofuels programme to food security and to biodiversity, explicitly excludes staple crops such as maize and alien crops such as jatropha as potential biofuel feedstocks. It also prioritises multi-purpose crops, rain-fed crops and crops grown on fallow land. While this is sensible, it is not sufficient to ensure biofuel production does not affect maize prices, as competition for land where maize could be grown remains. It is also not sufficient to ensure the preservation of biodiversity, as the conversion of virgin land for the production of biofuel feedstock with local crops can be just as damaging to biodiversity.

Under the current classification of first and second-generation biofuels, non-food crops processed with first-generation technology that have been shown to deliver better GHG savings, even if land-use change takes place – while delivering the same socioeconomic outcomes – seem to have fallen through the cracks.

An example of this is the multi-product crop solaris, which is similar to soybean in that it is labour intensive and provides a high-quality animal feed alongside the vegetable oil that can be processed into biodiesel, or biojet fuel, but is better suited for the prevailing agro-ecological conditions in South Africa, which translate to higher yields and a better GHG balance. We hope that in its capacity of approver of biofuel feedstock supply plans, the Department of Agriculture, Land Reform and Rural Development will see the benefit of such crops and grant them the same treatment as the crops that are listed as first-generation crops, eligible for support under the Biofuels Farmers Support scheme, in line with the protocol’s stated favourable view of rain-fed and multi-product crops.

Exclusion of second-generation feedstocks such as non-food crops and wastes from the subsidy mechanism on the grounds that first-generation crops offer greater job benefits is also misguided, as the production of non-food crops and collection and pre-treatment of various wastes and residues also offers substantial job creation opportunities. In addition, some second-generation processes can use invasive alien biomass for the production of liquid fuels, with alien clearing activities offering massive employment opportunities as well as synergies with other government programmes. Unlike the BRF claims, bankability of second-generation projects should not be an issue because a number of second-generation commercial plants are already operational around the world.

The BRF should, therefore, consider greater incentives for cultivating biofuel feedstock on agro-ecologically less-suitable or even degraded land, which South Africa has an abundance of, and take a closer look at the potential of bio-remediation as a source of biofuel feedstock.

The department must also still issue a determination of the blending infrastructure required, the acceptable capital costs that will be incurred by the blender as well as the operating costs of blending. Adequately capturing such costs across the multitude of market players will not be a simple task, hence a long period of uncertainty for blenders with regard to recoverable costs is likely, which will again limit sector development in the interim.

The Biofuels Farmers Support and the Biofuels Manufacturers Support schemes, as well as the selection criteria for the biofuels manufacturing projects that will be eligible for the subsidy must also still be elaborated in much more detail.