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ENERGY-CHILE: Home-Grown Biofuels – Big-Time?

Daniela Estrada

SANTIAGO, Feb 5 2007 (IPS) - The government of President Michelle Bachelet seems determined to develop the biofuels industry in order to diversify Chile’s energy sources, in spite of doubts that have arisen about their desirability.

In July 2006, the Chilean government announced plans to boost national biofuels production to increase the country’s energy independence. At present Chile imports 72 percent of its fuel as oil, gas and coal.

With such heavy dependence on foreign energy, Argentina’s decision to implement cuts in its natural gas exports to Chile, starting in 2004, and to raise the price of the fuel, was a decisive factor in seeking alternative energy sources.

With a view to developing a policy on biofuels, which are derived from plant crops and are renewable sources of energy and less polluting than fossil fuels, the Bachelet administration last year set up an interministerial commission and a mixed public-private advisory commission made up of representatives of public agencies and business, academics, farmers and environmentalists.

On Jan. 19, the advisory commission released a report containing a large number of recommendations, including two basic requirements for the viability of the industry: exemption of biofuels from specific taxes, and making their use obligatory to ensure demand.

For many countries, especially those with temperate climates (like Chile), it may be more cost-effective to continue to use fossil fuels, or to import biofuels from countries that are able to produce them more competitively, the document said.

But voices of dissent have already been raised. Jorge Rodríguez Grossi, former economy and energy minister in the Ricardo Lagos administration (2000-2006), criticised the proposal to enforce consumption of biodiesel and ethanol.

Grossi told the on-line newspaper El Mostrador that he was against any coercion, as a matter of principle, and was not in favour of including biofuels in the energy base on that condition. He would only be in favour if it became economical to do so, he said.

Biofuels, including biodiesel and ethanol, are produced from agricultural or forestry raw materials such as sugarcane, beetroot, maize, herbaceous plants, oil-bearing seeds (like rape), agricultural waste, lumber residue and dung.

According to the government’s preliminary estimates, there are 170,000 hectares in Chile that could be farmed to produce the raw materials for biodiesel and ethanol.

The non-governmental Sustainable Societies Foundation (FSS) and the United Peasant and Ethnic People’s Movement of Chile (MUCECH), both members of the advisory commission, believe that the programme will start with rapeseed biodiesel, and in the medium term will switch to lignocellulose materials (such as agricultural waste and wood).

“All the participants on the public-private commission agreed with biofuel development,” but with their respective caveats, FSS head María Isabel Manzur told IPS. She was categorical in stating that the FSS would only support national biodiesel or ethanol production if it were carried out sustainably.

“We believe biofuels should not threaten food production in this country. We are also concerned about plantation forestry and crops replacing native forest, and about excessive concentration of land ownership and displacement of rural workers. In addition, overuse of water resources must be prevented, and it is essential that biofuel production be for domestic consumption and not for export,” the environmental activist said.

Environmentalists fear that farmers will give up growing food and turn their fields into monoculture plantations for the biofuels industry, which is why they insist that ethanol and biodiesel production should be solely for national consumption and not for export.

According to Manzur, large companies must be prevented from buying up excessively large tracts of land to jump on the biofuel bandwagon, in order to protect small farmers. The availability of water for new areas to be cultivated must also be examined, FSS said.

The government had carried out several feasibility studies on producing ethanol from wheat, oats, maize, potato and beetroot, and biodiesel from native oil-producing plants like sunflower and rapeseed, and animal fats. It has also considered using native wood, which is underutilised, for bioenergy purposes.

Another of FSS’s concerns involves the technological aspects associated with biofuels. It is particularly worried about the pressure some producer sectors are exerting to introduce transgenic species, modified by the introduction of genes from other plant or animal species, as raw materials.

However, the report clearly stated that given that Chile does not have national guidelines authorising the use of transgenic crops for domestic commercial purposes, it would be inappropriate to create them for the special case of biofuels. Transgenics should be treated as a separate issue, by other experts, it said.

The national director of MUCECH, Omar Jofré, told IPS he was “hopeful” about the prospects for small rural producers who join the biofuel industry. Jofré pointed out that 85 percent of the country’s farms are small family farms. A total of 278,000 families – 1.2 million people – make a living in the small farming sector, he said.

“If we take part in this business, we believe that small farmers’ incomes will increase, our quality of life will improve, we will have access to technology, and there will be more development in the regions,” Jofré said.

But this is contingent on “guaranteeing inclusive participation of all those involved: producers, processers, sales agents and consumers,” he said.

The report reflects the view of MUCECH and other groups that incentives and subsidies are essential to producing biofuels in Chile, as has been the case in countries like Brazil.

The report said that, with present levels of taxation and costs of raw materials, biodiesel would be competitive with diesel if the price of crude were about 72 dollars a barrel, assuming that biodiesel were not subject to specific taxes.

In spite of the optimistic outlook, FSS’s Manzur was surprised that the government should have decided to pursue this energy source before having received a clear account of all the relevant information.

In regard to pollution, for example, the government’s National Commission on the Environment (CONAMA) is still working on a study investigating whether biofuels will effectively alleviate the serious problem of air pollution in the capital.

The advisory commission’s report is being studied by President Bachelet, who will decide the next step, according to Agriculture Minister Álvaro Rojas.

But Rojas did announce that by 2010, vehicles will most probably be using biofuels to some extent. His aim was to develop the capacity for bioenergy to supply five percent of Chile’s total energy consumption by then. The market itself would decide whether biodiesel or ethanol was best, he added.

The report recommends that diesel of fossil origin be mixed initially with two percent biodiesel, which could then be increased by increments of 1.5 percent. According to estimates by the government’s National Energy Council, consumption of petrol and diesel in 2010 will stand at 3.3 and 7.6 million cubic metres, respectively.

Meanwhile, the public-private commission sowed doubts about the future of this energy source by posing a key question for formulating a national biofuel policy: how much is society willing to pay for the perceived benefits of biofuels?