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    Spanish company Ferry Group is to invest €42/US$55.2 million in a project for the production of biomass fuel pellets in Bulgaria. The 3-year project consists of establishing plantations of paulownia trees near the city of Tran. Paulownia is a fast-growing tree used for the commercial production of fuel pellets. Dnevnik - Feb. 20, 2007.

    Hungary's BHD Hõerõmû Zrt. is to build a 35 billion Forint (€138/US$182 million) commercial biomass-fired power plant with a maximum output of 49.9 MW in Szerencs (northeast Hungary). Portfolio.hu - Feb. 20, 2007.

    Tonight at 9pm, BBC Two will be showing a program on geo-engineering techniques to 'save' the planet from global warming. Five of the world's top scientists propose five radical scientific inventions which could stop climate change dead in its tracks. The ideas include: a giant sunshade in space to filter out the sun's rays and help cool us down; forests of artificial trees that would breath in carbon dioxide and stop the green house effect and a fleet futuristic yachts that will shoot salt water into the clouds thickening them and cooling the planet. BBC News - Feb. 19, 2007.

    Archer Daniels Midland, the largest U.S. ethanol producer, is planning to open a biodiesel plant in Indonesia with Wilmar International Ltd. this year and a wholly owned biodiesel plant in Brazil before July, the Wall Street Journal reported on Thursday. The Brazil plant is expected to be the nation's largest, the paper said. Worldwide, the company projects a fourfold rise in biodiesel production over the next five years. ADM was not immediately available to comment. Reuters - Feb. 16, 2007.

    Finnish engineering firm Pöyry Oyj has been awarded contracts by San Carlos Bioenergy Inc. to provide services for the first bioethanol plant in the Philippines. The aggregate contract value is EUR 10 million. The plant is to be build in the Province of San Carlos on the north-eastern tip of Negros Island. The plant is expected to deliver 120,000 liters/day of bioethanol and 4 MW of excess power to the grid. Kauppalehti Online - Feb. 15, 2007.

    In order to reduce fuel costs, a Mukono-based flower farm which exports to Europe, is building its own biodiesel plant, based on using Jatropha curcas seeds. It estimates the fuel will cut production costs by up to 20%. New Vision (Kampala, Uganda) - Feb. 12, 2007.

    The Tokyo Metropolitan Government has decided to use 10% biodiesel in its fleet of public buses. The world's largest city is served by the Toei Bus System, which is used by some 570,000 people daily. Digital World Tokyo - Feb. 12, 2007.

    Fearing lack of electricity supply in South Africa and a price tag on CO2, WSP Group SA is investing in a biomass power plant that will replace coal in the Letaba Citrus juicing plant which is located in Tzaneen. Mining Weekly - Feb. 8, 2007.

    In what it calls an important addition to its global R&D capabilities, Archer Daniels Midland (ADM) is to build a new bioenergy research center in Hamburg, Germany. World Grain - Feb. 5, 2007.

    EthaBlog's Henrique Oliveira interviews leading Brazilian biofuels consultant Marcelo Coelho who offers insights into the (foreign) investment dynamics in the sector, the history of Brazilian ethanol and the relationship between oil price trends and biofuels. EthaBlog - Feb. 2, 2007.

    The government of Taiwan has announced its renewable energy target: 12% of all energy should come from renewables by 2020. The plan is expected to revitalise Taiwan's agricultural sector and to boost its nascent biomass industry. China Post - Feb. 2, 2007.

    Production at Cantarell, the world's second biggest oil field, declined by 500,000 barrels or 25% last year. This virtual collapse is unfolding much faster than projections from Mexico's state-run oil giant Petroleos Mexicanos. Wall Street Journal - Jan. 30, 2007.

    Dubai-based and AIM listed Teejori Ltd. has entered into an agreement to invest €6 million to acquire a 16.7% interest in Bekon, which developed two proprietary technologies enabling dry-fermentation of biomass. Both technologies allow it to design, establish and operate biogas plants in a highly efficient way. Dry-Fermentation offers significant advantages to the existing widely used wet fermentation process of converting biomass to biogas. Ame Info - Jan. 22, 2007.

    Hindustan Petroleum Corporation Limited is to build a biofuel production plant in the tribal belt of Banswara, Rajasthan, India. The petroleum company has acquired 20,000 hectares of low value land in the district, which it plans to commit to growing jatropha and other biofuel crops. The company's chairman said HPCL was also looking for similar wasteland in the state of Chhattisgarh. Zee News - Jan. 15, 2007.

    The Zimbabwean national police begins planting jatropha for a pilot project that must result in a daily production of 1000 liters of biodiesel. The Herald (Harare), Via AllAfrica - Jan. 12, 2007.

    In order to meet its Kyoto obligations and to cut dependence on oil, Japan has started importing biofuels from Brazil and elsewhere. And even though the country has limited local bioenergy potential, its Agriculture Ministry will begin a search for natural resources, including farm products and their residues, that can be used to make biofuels in Japan. To this end, studies will be conducted at 900 locations nationwide over a three-year period. The Japan Times - Jan. 12, 2007.

    Chrysler's chief economist Van Jolissaint has launched an arrogant attack on "quasi-hysterical Europeans" and their attitudes to global warming, calling the Stern Review 'dubious'. The remarks illustrate the yawning gap between opinions on climate change among Europeans and Americans, but they also strengthen the view that announcements by US car makers and legislators about the development of green vehicles are nothing more than window dressing. Today, the EU announced its comprehensive energy policy for the 21st century, with climate change at the center of it. BBC News - Jan. 10, 2007.

    The new Canadian government is investing $840,000 into BioMatera Inc. a biotech company that develops industrial biopolymers (such as PHA) that have wide-scale applications in the plastics, farmaceutical and cosmetics industries. Plant-based biopolymers such as PHA are biodegradable and renewable. Government of Canada - Jan. 9, 2007.


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Tuesday, December 26, 2006

Large coconut biodiesel project in the Philippines with aim to export to Japan

Earlier we wrote a short overview of coconut power in the Pacific, showing that several countries are investing in the humble nut for the production of biofuels. Coconuts can be used as a feedstock for different fuels: its oil can be transesterified into biodiesel, whereas its woody shell makes for a solid biomass stock with a relatively high energy content that can be used to generate electricity (co-firing with coal or in dedicated biomass power plants).

Philippine company Bio-Energy NL Inc. announced [*cache] it is now planning to make a major investment of up to 15 billion pesos (€228/US$300 million) for an intensive coconut based biodiesel project in the country's Northern Luzon province. The biodiesel will be exported to Japan.

Industry sources report that Bio-Energy had requested the Japan Bank for International Cooperation (JBIC) to fund the project. In a letter to Bio-Energy president Arnold Caoili, JBIC director for policy and strategy coordination Kazuhiko Amakawa, said that the multilateral institution has approved the company’s request to fund the feasibility study for the multi-million dollar biodiesel project.

The feasibility study on the proposed biodiesel project is seen to be completed by August 2007 or after six months. If the feasibility study shows positive results, the project proponents will start planting coconut and construct a biodiesel refinery in Northern Luzon.

The coconut plantation will be established on not less than 500,000 hectares of idle land with the refinery expected to have a capacity of 300 million liters of biodiesel per year (roughly 1.9 million barrels of oil equivalent). It would take three years to construct the integrated coconut crushing and refinery plant. The new coconut plantation is expected to yield its first fruits within 4 years:
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According to sources, Bio-Energy has considered Northern Luzon as a potential site for the project since it is here that the best chances are found to integrate the project in a pro-poor program that will strengthen the livelihoods of the coconut farmers.

"This will be a new product for the province since the tobacco industry is dwindling. They will plant new coconut trees so that it would not compete with the local coconut producers. One of the requirements of the Ministry of Environment of Japan is for the plant owners not to get [fruits] from existing trees but plant new ones," the sources said.

The biodiesel is said be aimed for exports to Japan. "The capacity of the new plant will serve a little over 10 percent of the five percent biodiesel demand of Japan (2.5 billion liters)," the sources said. The five percent annual demand for biodiesel for Tokyo metropolitan alone is estimated to reach 300 million to 400 million liters.

Consistent with the World Trade Organization (WTO) rules, the Japanese government mandates for the use of a five percent blend of biodiesel by March 2007. This biodiesel blend is seen to increase to 20 percent in 2020.

Japan has limited potential for biofuel production of its own. This is why it is actively investing abroad. Earlier this year, Brazil started delivering ethanol to the country, under an agreement that will see Brazil satisfy 10% of all of Japan's biofuels by 2010.

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The year in review: Asia

The unstoppable economic growth of China and India are key to debates about long-term energy security. The Asian region as a whole will be responsible for not less than 75% of the increase in the entire world's energy demand by 2030. No wonder then that the Asian superpowers-in-the-making are venturing into some of the more unstable regions of this planet, looking for the last pockets of easily extractable oil and gas. China is shopping for petroleum in Sudan, Angola, Nigeria, Venezuela and Central Asia. Even though it does so in a more discrete fashion, India is equally active abroad as well.

Notwithstanding the shifts in geopolitical relations caused by this race to find oil, the real danger is to be found in India and China's reliance on the most climate destructive of all fossil fuels: coal. If both countries keep using the resource at their current pace, the amount of carbon dioxide they will pump into the atmosphere is certain to lead to a climate catastrophe. It is therefor in the interest of all other economies to help India and China find workable alternatives.

China's biofuel ambitions
A recent report by the Asian development shows scenarios in which CO2 emissions from the transport sector in Asia are set to triple by 2025 (earlier post), whereas a Australia's top science body released a depressing study showing how climate change can devastate Asian economies (earlier post). In 2006, most Asian governments have begun to take the issue seriously and have created biofuel plans that must ensure the creation of a less carbon-intensive energy portfolio. When it comes to transport fuels, China hopes to substitute 15% of its total consumption with biofuels by 2020 (earlier post). The 12 million tons of green fuels will be made from local biomass resources, even though the Chinese government is worried about the use of food grains for ethanol and biodiesel. It has therefor started to restrict the use of these grains, and is working on plans that stimulate the production of alternative energy crops, such as cassava and sweet sorghum (earlier post). A one million ton cassava ethanol project has already kicked off (earlier post). But China sees the shift towards cellulosic ethanol as the top priority, because it allows for the use of a much wider range of biomass feedstocks (earlier post).

To ensure that investments in the sector are not destroyed by a sudden collapse of the the oil price, China has amended its bioenergy policy with a security rule: if the oil price falls markedly and stays low, the government will subsidise the biofuel sector (earlier post). Investments in the sector in China are driven by large state-owned firms, such as the China National Petroleum Corporation (earlier post) or the China National Cereals, Oils and Foodstuffs Corporation, which announced that it will be investing over €1 billion over the coming years (earlier post). Despite rumours, the Chinese government is focusing on ethanol as a gasoline substitute, not so much on methanol (earlier post), and even less on coal-to-liquids, which is seen as an "irresponsible" production path, because the process is energy intensive and polluting (earlier post). Despite a late start, China is now increasing its production of biodiesel as well, with an expected output of 2 million tons per year by 2010 (earlier post).

But China's bioenergy program goes beyond liquid biofuels. One official claimed that the bioenergy sector as a whole will bring jobs and incomes to "hundreds of millions of farmers" (earlier post), which is why the green programme is part of a broader social policy aimed at reducing the mass migrations from the country-side to the emerging mega-cities. This trend has been identified as potentially dangerous to the social stability of China:
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Besides the production of carbon-neutral transport fuels, the bioenergy program aims to substitute coal with biomass for the production of electricity. China's first 25MW biomass plant went into operation this year, saving the equivalent of around 400,000 tons of coal each year (earlier post). Some 50 more plants are on the drawing board, and if China were to use its current stock of biomass waste generated in agriculture alone (rice straw, corn cobs, seed hulls...), it could save up to 100 million tons of coal. A first pilot biomass plant capable of generating 132 million KWh, entirely fuelled by rice straw has come online to demonstrate the feasibility of this fuel (earlier post). An alternative path is co-firing biomass with coal. This way, existing power plants could be used and made greener. The EU has launched a project with China to study and implement such biomass co-firing projects (earlier post). Even though China ratified the Kyoto Protocol, it is not bound by it to reduce its GHG emissions. But countries that are, can invest in greening China, and reap carbon credits in the process. Several European companies are doing exactly that: power giant Electricité de France announced that it was going to buy up to 150 million tons of GHG emission credits by investing in Chinese biomass firms (earlier post), whereas Carbon Positive has launched large reforestation, and agro-forestry programs, both aimed at producing biomass feedstocks for energy (earlier post).

But China itself is going abroad too. This year, it started a first ethanol production project in Nigeria (earlier post) and one in the Philippines (earlier post). The logic behind these projects is similar: kickstart the creation of a local biofuel market, with the longterm aim of exporting fuel to China in a later phase.

Alternatively, China is creating relations with countries that are already producing vast quantities of biofuel feedstocks, most notably Malaysia and Indonesia, the world's largest palm oil producers. These countries see China as their prime export market. In september, China signed a bilateral agreement on bioenergy R&D with Malaysia (earlier post). In a multilateral agreement, China, Malaysia and the Indian Ocean states of Madagascar, Réunion and Mauritius pledged to cooperate on biofuel research and production as well (earlier post).

Greening India
Like China, Asia's second fastest growing economy has been very active in the green energy sector this year. India has been working on a comprehensive bioenergy policy for quite a while (earlier post), but so far this work has only resulted in a mandate to blend ethanol with gasoline (it should have come into force in November, but the deadline has been pushed forward to early next year).

India is the world's largest consumer of sugar, and the second largest producer. The country's sugar producers are upbeat on biofuels because of favorable government regulations protecting their sector (an export ban and a floor price). No wonder then that they are the first to make large investments in ethanol production. But as we know, the production of the sweet substance from sugarcane yields a large amount of waste biomass (bagasse) that can be used for the generation of power. Taking the Brazilian experience as guideline, India's sugar producers are therefor putting money in bagasse power as well, which offers new revenues (earlier post).

India has come into the spotlight most often because of its activities with Jatropha curcas. This drought-tolerant shrub is being seen as the hope for small farmers, who can use low value, degraded lands to cultivate the plant the seeds of which yield an oil suitable for the production of biodiesel. Several Indian states have launched large planting campaigns, with Chhattisgarh's Biofuel Development Authority claiming to have set a world record by planting at least three million saplings of Jatropha and Karanj (Pongamia pinnata) on wastelands in one single day (earlier post). Even though this kind of campaigns is mainly aimed at raising attention, the jatropha effort is part of an official strategy. The Indian Railways, owned by the federal government and operated by the states, has vowed to become the country's first and largest consumer of jatropha biodiesel. The state-run company is actively engaged in planting the crop on its own lands, while running a program to involve small farmers as well. They will get guaranteed supply contracts (earlier post).

In India, a myriad of other biomass feedstocks are used for the production of electricity, through co-generation, or for liquid fuels: rice straw in the Punjab (where "farmer-to-farmer" systems are being implemented) (earlier post) and where biomass waste streams from agriculture could potentially deliver 1000MW of power (earlier post); bamboo in Mizoram, the cultivation of which is expected to bring jobs and incomes to thousands of farmers (earlier post), and sweet sorghum for ethanol in Andhra Pradesh.

This last project, run by the Hyderabad-based International Crops Research Institute for the Semi-Arid Tropics (ICRISAT) is a world premiere; newly bred sweet sorghum variants are drought tolerant but still yield copious amounts of sugar that can be used for ethanol (earlier post). As an expert institute, ICRISAT knows that biofuels production can be a boost to populations living in drylands, from the Sahel, to the Indian semi-deserts, where fuel costs are often very high, and incomes from agriculture remain low. ICRISAT sees the biofuels opportunity and is actively researching and promoting it (earlier post).

India's business environment is often associated with bureaucracy and red tape, but in the bioenergy sector, several initiatives are underway to stimulate entrepreneurial activities. Besides creating incentives for private ventures, the government does stimulate cooperative approaches in the sector, especially when it comes to small-scale, decentralised bioenergy production. Contrary to perceptions held in the West, many state governments in India urge farmers and poor people to "teach each other and invest in each other". This kind of "bottom-up", "do-it-yourself" approach to development effectively cuts off a big chunk government intervention and reduces the risk of corruption. It remains to be seen whether such a system is workable: can farmers groups indeed teach themselves to become energy investors and operate their own power plants in an efficient manner?

Even more than China, India has been looking abroad for biofuel opportunities. It wants to exchange expertise with other developing countries, especially when it comes to jatropha biodiesel production. The country showed its committment by pledging a US$ 250 million contribution to West-Africa's regional Biofuel Fund (earlier post). We assume that India is developing a strategy similar to that of Brazil: create a genuine commodity market for a particular kind of fuel (in India's case jatropha biodiesel) by developing markets in other countries, so that you can benefit from this market in the long run.

In a prototypical example of South-South cooperation, Indian entrepreneurs went to invest in Senegal's biofuel industry this year, making use of Brazilian expertise (earlier post). This kind of cooperation was reiterated at the eve of the first India-Brazil-SouthAfrica Summit, when PM Manmohan Singh and President Lula Da Silva signed bilateral agreements and memoranda of understanding on trade, direct foreign investment, science & technology and other fields. Bioenergy and biofuels were central to a separate energy agreement, which resulted in Brazil allowing India to invest in its ethanol sector, including opportunities to invest in land resouces (earlier post). The IBSA summit itself was a sign of the countries' growing ambitions to create a South South order that aims to establish a more just world trade regime.

Besides these activities abroad, India made the headlines because of some peculiar initiatives in the biofuels sector. Bangladesh-based Grameen Phone (a project run by the Nobel Peace Prize award winning Grameen Bank) announced it was going to use biofuels to power mobile phone infrastructures in the country-side, with Indian mobile phone networks joining this bright idea (earlier post). On another front, the country's ambitions to use biogas as a fuel for cars is particularly interesting because such an initiative requires considerable investments in the lastest technologies (earlier post). The potential to use the green gas is certainly there, but it remains to be seen how fast India can create the infrastructure (which requires compressed biogas fuel stations (similar to CNG) and a fleet of CNG-compatible cars). Europe is already a step ahead on this front, even though India is looking into mixing biogas into the natural gas grid - a prerequisite to getting it used as a transport fuel (earlier post).
Finally, India has a native auto industry, with manufacturers such as Maruti Udyog and Tata Motors, which would in principle allow it to start producing cars adapted to the Indian market and its biofuels future. Just like flex-fuel vehicles were developed in Brazil in order to revive the ethanol industr, India could invent its own technologies to enter an era of self-defined, green mobility. There are some signs that Indian manufacturers might begin to work on biofuel hybrids (earlier post). If such very efficient, high-tech, low-cost biofuel powered cars were to be manufactured in India, this would mean a boost to the green mobility paradigm so many are hoping to create in the developing world. Maruti, for example, is creating export markets for its cars in Angola, Benin, Djibouti, Ethiopia, Europe, Kenya, Morocco, Sri Lanka, Uganda, Chile, Guatemala, Costa Rica and El Salvador. A green car produced in an emerging economy and used by biofuel producing countries in the South... that would be an ideal step towards a more sustainable form of mobility.

Regional integration and international cooperation
During 2006, several new initiatives aimed at regionally integrating energy markets and biofuels initiatives in Asia came to the fore. The Greater Mekong Delta was the focus of an international seminar ("Investment Opportunities in Bio-Fuel in the Greater Mekong Sub-region") organised by two major international cooperation banks - the Export-Import Bank of Thailand (EXIM) and Japan's Bank for International Cooperation (JBIC) - who will actively finance biodiesel and ethanol production in the region.

During the recently held 12th Summit of the Association of South Eas Asian Nations, 10 member countries pledged to work closely to limit dependence on "conventional fuels through intensified energy efficiency programs, expansion of renewable energy systems and biofuel production and utilization." ASEAN energy ministers earlier this year called for greater cooperation to boost renewable energy so as to minimise the impact of soaring oil prices which cast a shadow over one of the world's most dynamic regions. The Summit also called for a greater effort to minimise greenhouse gas emissions from the region, and to "harmonize standards for biofuels" (earlier post).

At another regional meeting held recently in Vietnam (the Asia-Pacific Economic Cooperation summit) which was attended by President Bush, South-East and East Asian countries agreed to create a Biofuels Taskforce aimed at studying and implementing bioenergy projects across Asia (earlier post).

But most the most tangible initiative came during the 6th ASEM meeting, organised by Findland, which held the EU presidency. There, leaders of 25 European and 13 Asian nations agreed to share low-carbon and energy-efficient technologies with developing ASEM countries. The pledged to invest not less than US$6 trillion over the coming decades into clean energy. The joint statement issued at the summit recognises that energy security and climate change are closely linked, and that countries can improve their energy efficiency by diversifying energy sources and investing in renewables. It also notes that developing countries have "legitimate priority needs" — to achieve sustainable economic development and eradicate poverty.

Palm oil: euphoria and suspicion
2006 was the year of palm oil, in many different ways. The market for the commodity boomed, mainly driven by Malaysian and Indonesian initiatives to use the fuel for the production of biodiesel. Both countries have huge plans with the oil, and are thinking of creating a "cartel" of sorts to control prices and trades (earlier post). This cartel sees Europe as one of its main export markets.

But precisely in Europe, criticism against the South East Asian palm oil industry is growing. Members of the EU Parliament called biodiesel made from palm oil "deforestation diesel", and are pleading for the creation of stringent sustainability criteria for biofuels (earlier post). In the Netherlands, NGOs succeeded in convincing the government that a power company that uses palm waste for the production of electricity is not as "green" as it wants its consumers to believe. The informal commission on advertisements which handled the case, sided with the NGO (earlier post). In short, in Europe, palm oil is being perceived as a problematic biofuel crop. Not without reasons: 2006 was the year when Singapore and cities in Malaysia and Indonesia themselves once again suffered, for weeks on end, under smoke pollution generated by deforestion activities in Borneo and Sumatra (where rainforests are being razed to make way for palm plantations). The citizens in these countries know very well that the palm industry is extremely destructive, no matter what their respective palm oil industry associations want the world to believe.

The only question is: can the logic of the market (palm is very profitable) be steered in such a way that sustainability instead of destruction is rewarded? The different calls made this year to create a carbon market for rainforests may be a first step in this direction. Both the World Bank (earlier post) and the Stern Review on the Economics of Climate Change (earlier post) called for the creation of such an instrument. One thing is certain: those who think it will be easy to bridge the gap between profit and sustainability should travel to Indonesia and Malaysia to get a second opinion.


As 2006 comes to an end, it will be interesting to see how Asian countries continue developing biofuels policies and markets next year. Will China be able to develop technologies that can convert non-grain crops and biomass into liquid fuels? This year, the country felt that using grains (such as corn) for ethanol, is a dead end. Will China's statements about its bioenergy program bringing incomes and jobs to "hundreds of millions of farmers" begin to materialise? Or is this a utopia? And what about India's biofuel policy? Policy makers experienced many difficulties last year because of the great number of lobbies all pulling in different directions. The result was a temporary program, and an ethanol mandate. Will 2007 end in a clear set of targets and goals for other bioenergy sectors?

It will be particularly interesting to see how Malaysia's hyped palm oil industry evolves next year. A few months after the country announced the investment rules for the sector, it already had to halt new applications from investors - after 54 palm oil biofuel plants had been approved. Will Europe allow "deforestation diesel" to enter its market? Or will politicians, civil society organisations and consumers demand a more sustainable production first? The Malaysian case - with its clear focus on exports - will set a precedent for other biofuel producers in the Global South.

Tomorrow, we look at what 2006 brought to Africa.

Biopact Team
Wishes you an exciting 2007

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