234
agricultural residues in 2007 could have produced enough biodiesel and ethanol to
provide 4.2–6.0 to 10.5% of current transport fuel demand, respectively (IEA 2010,
9). To be sure, this could be an important partial contribution, but it is still not
enough to serve as the main source for transport fuel.
Many second-generation biofuels – including switchgrass, algae, etc. – require
land and water, just as first-generation ones do. In many cases, waste from forests
and agriculture perform ecosystem services such as returning nutrients to the soil,
so there is a fundamental limitation on how much these resources can be exploited.
In particular, this “waste” is often used by small-scale farmers in the region for fertilizer, so if it is used to produce biofuel, then farmers may be forced to use more
conventional fertilizers (Elder et al. 2008, 13).
14.5 Biofuel Trade: A Scramble for Biofuels?
Much of the existing discussion on biofuel trade has focused on criticizing the common practice of using protectionist policies to provide advantages to domestic biofuel producers and estimating the resulting economic inefficiencies and costs. Much
less attention has been paid to the underlying logic of biofuel trade and its connection to sustainability issues.
At the beginning of the biofuel movement, most interested countries aimed to
nurture domestic producers. However, while some intended to be mainly selfsufficient, others, particularly in Europe and Japan, realized the impossibility of
self-sufficiency, and intended to supplement domestic production with imports,
partly to enhance energy security, but also partly as a way to reduce greenhouse gas
emissions. Soon, it became apparent that some countries which intended to be selfsufficient could not, and overambitious targets would need to be met through
imports. Still others had ambitions to be major biofuel exporters. For example, some
in Indonesia hoped for their country to become the “Middle East of biofuels,” and
indeed, at one time, the EU had hoped to import significant quantities of biofuels
from Indonesia or other Southeast Asian countries.
Now, it has become apparent that many or most countries will not be able to
achieve their targets, even relatively modest ones, and few countries will be able to
develop large-scale exportable surpluses beyond their domestic requirements. There
is not likely to be any “Middle East of biofuels,” in East Asia, not even Indonesia.
In fact, only a small share of biofuel production has been traded globally, about
one-tenth, as can be seen from Figs. 14.1 and 14.2. Moreover, an OECD-FAO study
suggested that increasing global biofuel production will not necessarily lead to
increased global biofuel trade in the future either.
Of course, biofuel trade exists and will continue, but it will ebb and flow based
on marginal supply and demand differences and price fluctuations among feedstocks and between biofuels and fossil fuels, etc. Differences in biofuel and feedstock trade protection policies, biofuel and fossil fuel promotion policies and
subsidies, and blending mandates will also induce trade. In particular, countries
M. Elder and S. Hayashi
agricultural residues in 2007 could have produced enough biodiesel and ethanol to
provide 4.2–6.0 to 10.5% of current transport fuel demand, respectively (IEA 2010,
9). To be sure, this could be an important partial contribution, but it is still not
enough to serve as the main source for transport fuel.
Many second-generation biofuels – including switchgrass, algae, etc. – require
land and water, just as first-generation ones do. In many cases, waste from forests
and agriculture perform ecosystem services such as returning nutrients to the soil,
so there is a fundamental limitation on how much these resources can be exploited.
In particular, this “waste” is often used by small-scale farmers in the region for fertilizer, so if it is used to produce biofuel, then farmers may be forced to use more
conventional fertilizers (Elder et al. 2008, 13).
14.5 Biofuel Trade: A Scramble for Biofuels?
Much of the existing discussion on biofuel trade has focused on criticizing the common practice of using protectionist policies to provide advantages to domestic biofuel producers and estimating the resulting economic inefficiencies and costs. Much
less attention has been paid to the underlying logic of biofuel trade and its connection to sustainability issues.
At the beginning of the biofuel movement, most interested countries aimed to
nurture domestic producers. However, while some intended to be mainly selfsufficient, others, particularly in Europe and Japan, realized the impossibility of
self-sufficiency, and intended to supplement domestic production with imports,
partly to enhance energy security, but also partly as a way to reduce greenhouse gas
emissions. Soon, it became apparent that some countries which intended to be selfsufficient could not, and overambitious targets would need to be met through
imports. Still others had ambitions to be major biofuel exporters. For example, some
in Indonesia hoped for their country to become the “Middle East of biofuels,” and
indeed, at one time, the EU had hoped to import significant quantities of biofuels
from Indonesia or other Southeast Asian countries.
Now, it has become apparent that many or most countries will not be able to
achieve their targets, even relatively modest ones, and few countries will be able to
develop large-scale exportable surpluses beyond their domestic requirements. There
is not likely to be any “Middle East of biofuels,” in East Asia, not even Indonesia.
In fact, only a small share of biofuel production has been traded globally, about
one-tenth, as can be seen from Figs. 14.1 and 14.2. Moreover, an OECD-FAO study
suggested that increasing global biofuel production will not necessarily lead to
increased global biofuel trade in the future either.
Of course, biofuel trade exists and will continue, but it will ebb and flow based
on marginal supply and demand differences and price fluctuations among feedstocks and between biofuels and fossil fuels, etc. Differences in biofuel and feedstock trade protection policies, biofuel and fossil fuel promotion policies and
subsidies, and blending mandates will also induce trade. In particular, countries
M. Elder and S. Hayashi