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Global Status of Biofuels | Homework Help Online

Transport sector remains elemental in the global economy and climatic change mitigation schemes. According to Purohit and Dhar (2018), it accounts for about 28 percent of all energy production and consumption and 23 percent of worldwide carbon IV oxide emissions. Rapid economic growths have bolstered further fuel demands to power the global motorised mobility, which has consequently resulted in air pollution due to increased production of greenhouse gases (GHG). Many governments have embraced the production of biofuels in pursuit of minimizing or zeroing GHG emissions by adopting enhanced vehicle efficiency, public transport use, and adoption of biofuels. According to UNCTAD (2014), in the early 2000s, Brazil ranked as the lead exporter of biofuels. However, with the adoption of better policies and expansion of arable lands dedicated to biofuel production, the U.S assumed the mantle as the leading biofuel exporter in 2011. However, there exists the need to assess how the country has managed to integrate its biofuel policies with the constant need to conserve the environment. Thus, since the adoption of biofuels sought to mitigate the environmental problems associated with fossil fuels, the research focuses on answering the question: what are the implications of policies development in relation to U.S. past, current, and future biofuel production in the quest to upholding its position as the worldwide lead exporter while remaining conscious of environmental conservation?

Literature Review

Biofuels have caught the global attention as the best alternative to fossil fuels. Although the efforts geared towards production of biofuels started many decades ago, successful efforts to embrace and produce biofuels started in 2000 with Brazil taking the lead. The inherent advantages of biofuels, including reduced GHG emissions alongside promotion of rural development nurtured the fast adoption. Currently, only a small fraction of the global biofuels produced enters the international market since domestic markets consumes the largest volumes. According to Lamers et al. (2014), besides Brazil, only a few countries, such as the United States, the European Union, China, India, and Argentina, among others, have successfully managed to embrace large scale production, consumption, and trading of biofuels. Initially, Brazil dominated the biofuel market, with the changing political and environmental landscape in other countries, the U.S. managed to rake the top rank as largest producer and exporter of biofuels as detailed below:

Political Perspective

The U.S government has supported the use of biofuels for several decades. Over the years, both Democratic and Republican administrations alongside the congresses have passed various policies that boost the production and consumption of biofuels both domestically and internationally. For instance, following an oil crisis in the 1970s, the Congress used the Energy Tax Act of 1978 to pass an ethanol tax credit (Guan and Oh, 2018). The policies implemented in the U.S relating to energy have a strong correlation but with distinct objectives. Each government levels seek to boost domestic biofuel production, energy independence, and improved environmental conditions through reduced use of fossil fuels (Nesheim et al., 2015). Biofuels, particularly biodiesel and ethanol, have been perceived by the Congress as fulfilling these objectives.

The enactment of the Renewable Fuel Standard (RFS) in 2005 sought to stimulate production of biofuels with the hope that the global fossil fuel consumption would significantly reduce, and in effect, reduce GHG emissions. The implementation of RFS required the establishment of a minimum volume of biofuels produced and sold across the U.S. Initially, RFS primary goal was to incorporate 15.1 billion litres of biofuels by 2006 and 28.4 billion litres by 2012, accounting for about 3 and 5 percent respectively. Guan and Oh (2018) inform that the legal constraints put in place by the RFS are based on biofuels production, trading, and application of trading certificates, and the use of Renewable Identification Numbers (RINs). A supplier should acquire an RIN whenever they produce or import a gallon of biofuel on American soil. Thus, the policies put in place in the U.S have been instrumental in shaping the rise of U.S as a global leader in biofuel production. According to the Energy Outlook (2014), the successful implementation of RFS between 2005 and 2012 saw the U.S triple its production, saving the country over a billion of barrels.

Alongside the legislative efforts to improve consumption of fossil fuels across the U.S, market forces also played an indispensable role in shaping the use of biofuels. As Guan and Oh (2018) enlighten, government support and market factors facilitated the rise in biofuel production, and in 2012, the U.S managed to produce 13.3 billion gallons of ethanol becoming the global lead producer. That growth contributed toward U.S GDP and household income by $43.4 and $29.9 billion respectively. Since then, the U.S has been consistently on the lead. According to Biofuel International (2017), a 2016 USDA trade report showed that the U.S biofuels net exports were 838 million gallons, recording as the second largest biofuel trade ever. Thus, despite the challenges attributed to the U.S biofuel policies, they have proved elemental in facilitating U.S incremental biofuel production and export levels growth.

Environmental perspective

Biofuel production has been elemental in impacting the environment both positively and negatively, whether directly or indirectly. Since the RFS expansion of mandates for blending gasoline with biofuels in 2007, a multitude of studies have been conducted to assess the range of environmental effects resulting from biofuel production. Nesheim et al. indicate that further land has been put into maize production, which has been characterized by less crop rotation and higher pesticide inputs (2015). Moreover, the production of biofuels, such as ethanol places further risk on soil fertility and groundwater, such as the higher nitrate levels observed in the Mississippi River (Nesheim et al., 2015). Ethanol production from maize results in a co-product known as distillers dry grains and solubles (DDGS). The DDGS, usually fed to livestock results in higher nitrogen excretion, which pose a threat to the environment. However, they are also known to offset the production of GHG during the biofuel’s lifecycle (Nesheim et al., 2015).

Irrespective of the examination of a multitude of environmental aspects related to biofuel policies, little has been done regarding the full range potential of biofuel impact on elimination or reduction of fossil fuel subsidies. However, a review of studies that have explored the environmental impacts in fossil fuel subsidies reformation reveal that carbon IV oxide and GHGs emissions remain the most frequently modelled impacts. As Teter et al. (2018) enlighten, use of biofuels is estimated to reduce carbon IV oxide emission at a 10 percent rate by 2050. Hence, the positive environmental outlook facilitates the global adoption of biofuels, which catalyses further investments and increased exports for key players, such as the U.S.

Research Data

Figure 1 Biofuel production key ranking. Source: OECD/FAO (2019)

Research data examines three perspectives: biofuel policies, volumetric mandate scenarios that set target quantities for certain biofuels, and prices effects on biofuels exportability. Partly, it will incorporate Keeney and Hertel model which proposes incorporation of product yield and trade responses in expansion of biofuels. The product response to prices is critical in gaining a complete perspective of biofuel trades. It depends on various factors including capital, labour, and government policies among other factors. In their model, Keeney and Hertel make an assumption that ethanol exports increase proportionally from the U.S to other countries, such as Brazil and the European Union. The data in Figure 1 and Figure 2 below provides an overview of biofuel production based on global ranking.

Figure 2: World’s leading biodiesel producers in 2018 (in billion litres). Source: Statistica (2018)

Today, bioethanol production mainly relies on corn and sugarcane, which account for 60 and 25 percent respectively. In contrast, biodiesel relies on vegetable oil and waste cooking oil where each account for 77 and 22 percent respectively. With relevant technologies, biofuel producers also manage to generate biofuels from cellulosic feedstocks. As depicted in Figure 1 and

Figure 3: U.S ethanol exports in CY 2018. Source: U.S Grains Council

2 above, the U.S dominates biofuel productions.

The trend portrayed in Figure 3 above shows a growing trend in U.S volume of biofuel exports. Since it assumed the global biofuel lead exporter position in 2011, the country has remained consistent in production and export of biofuel, even though it has experienced slight fluctuations. As the U.S Grains Council indicates, the U.S ethanol exports were over 6.1 billion litres, which was valued at $2.7 billion. U.S ethanol exports were mainly to Brazil and India among other countries as shown in Figure 4 below.

Figure 4: U.S Ethanol Exports. Source: Gro Intelligence (2018)

In contrast, Brazil ranks as the second largest producer and exporter of biofuels. The persistent low prices of sugarcane have encouraged high production of sugarcane-based ethanol inn Brazil. As one of the largest biofuel consumer, much of Brazil’s biofuels are consumed domestically while the remaining is exported to the U.S, South Korea, Netherlands, and Nigeria, among other countries. Besides U.S being the largest producer of corn-based ethanol, it also relies on Brazil for about 153 million gallons of sugarcane-based ethanol.

Figure 5: Brazil’s Ethanol Exports. Source: Gro Intelligence (2019)

Biofuel prices have been elemental in fueling the level of exports. Evidently, biofuel policies tend to affect fuel prices in a diverse way. Similarly, the cost of feedstocks have a substantial effect on biofuel production. According to Figure 6 below, biofuel prices are consistent with the changing feedstock prices. These eventually impact the level of production and the volume of exports a country can make. Notably, many countries have to meet their domestic needs before exporting to other countries. These coincides with Figure 1, 4 and 5 above, which shows U.S and Brazil’s productivity and their level of ethanol exports.

Critical Analysis

Internationally, the U.S has traded favourably and their level of exports have been impressive for the last couple of years. Despite the political and artificial huddles within their home, U.S ethanol has fared well in the past and it continues to outperform other global market players, including Brazil, Argentina, and China. For instance, in 2018, favourable blending economies coupled with global policies and ethanol value remained as critical values that helped the U.S to export 6.5 billion litres of ethanol (U.S Grain Council, 2019). As the report informs, ethanol exports remains the fastest growing sector in agriculture over the past five years, as evidenced in Figure 3 above. The trend indicates an 18 percent annual growth for the past five years. By value, the 2016-2017 and 2017-2018 marketing years marked an 18 percent and 14 percent volume increase due to increased investments from the U.S government into ethanol marketing.

As Flach et al. (2018) maintain, if the European Union trade flows, and the demand for biofuels remain consistent, the U.S has the ability to supply over 65 percent of their import demands in the current year. Moreover, with the removal of antidumping duties by the European Commission on U.S ethanol imports, it opened new opportunities for European nations to embrace the advantage inherent with affordable low-carbon biofuels, which in turn opens new opportunities for the U.S to increase the level of exports to the European nations.

The international prices of biofuels are expected to recover following adjustments in crude oil markets coupled with the recovery of biofuel feedstock prices. Based on OECD/FAO (2019, 208), ethanol production was expected to expand from 122 billion litres in 2019 to 143 billion litres in 2028. Among the key players, the United States should continue to dominate the export market following favourable domestic and international biofuel policies. While biodiesel production is projected to reduce by about 50 percent by 2022, the U.S will rank second after Argentina in production and export. A combined ranking still places the U.S on the lead due to unfavourable ranking for other countries. In contrast, Brazil’s fuel consumption is expected to rise considerably compared to the U.S and E.U due to the introduction of the RenovaBio law that focuses on minimizing GHG and carbon IV oxide emissions by 10 percent come 2028. As a result, the consumption of biodiesels and ethanol in Brazil should considerably increase domestically, but with minimal international trades.

With the current trend, global biofuel trade is expected to vary depending on the product. For instance, a projection of ethanol trade indicates a net decrease of 8 percent by 2028. Majorly, domestic and international policies are expected to hurt the trades. The U.S should remain the primary net exporter and importer of bioethanol. Primarily, the need for U.S to import sugarcane-based ethanol relates to domestic policies, such as the Californian Low Carbon Fuel Standard. Similar to Brazil among other countries, the U.S net corn-based ethanol exports should decrease due to increased domestic demand and weakened global demand. However, due to higher ethanol prices in Brazil and the E.U, the U.S should considerably take the lead up to the year 2028.

Uncertainties in Biofuel Trade

The uncertainties prevalent with the future of biofuel industry remain to be politically engineered. These varies from changes in biofuels tax exemptions, mandate enforcement mechanisms, mandate level changes, and investment in modern biofuel feedstocks (OECD/FAO, 2019). For the last two decades, advancements in the biofuel markets have always relied on policies that foster their production and consumption. Initially, the conception of these policies was motivated by various factors, such as the need to minimize GHG emissions and improving energy security. With the assumption that the fulfilment of political mandates remains considerably lower than 100 percent, it becomes uncertain that stronger investments and support to biofuel production can boost biofuels potential. The second uncertainty relates to the consistent and sufficient supply of feedstocks from the agricultural sector. As previously observed, investments into biofuel substantially places a strain on food production (OECD/FAO, 2015). While the agricultural sector strives to strike a balance between crops dedicated to biofuel production and human consumption, one sector may in the end suffer. For instance, biodiesel production depends on vegetable oil, which places a stiff competition with demand for food. Similarly, the cyclical production of sugarcanes substantially affects ethanol production. Though it is possible to address these challenges through feedstock diversification, the capacity to increase processing capacity remains a considerable huddle.

Another uncertainty on biofuel exports includes the sustainability criteria embraced by the EU in 2019 seeking to minimize high indirect land use change impacts (ILUC) risk biofuels by year 2024. The agreement sought to minimize the high ILUC risk biofuels to zero by 2030 (Gro Intelligence, 2019).  Mainly, biofuels rely on feed crops that require vast expansion of lands, such as peat ands, wetlands, and forests, which are high carbon stocks. It becomes uncertain how such developments may affect the biofuel trades. Finally, there has been an upsurge in the automobile industry where greater investments focus on electric cars. A positive uptake of the technology may significantly lower the amount of biofuels consumed across the world, and thus, lowering the number of exports in the future.

Conclusion

Global biofuel trades have grown exponentially over the last two decades. Though the current market remains volatile due to policy over-dependence, it demonstrates more transparency. Many countries remain on the forefront in biofuel production and consumption, with the United States, Brazil, China, and European Union remaining the key producers and consumers of biofuels. The existence of policies that strive to promote environmental conservation in home countries have stimulated the need to produce higher biofuel volumes. While most of these policies do not favour international trades, higher production levels in these countries and the need to promote bilateral trades have bolstered the number of exports and imports among producing countries. Corn-based and sugarcane-based ethanol dominate the global biofuel markets, with international and domestic policies, such as blending mandates and tax incentives, contributing to this growth. Given the former, the global industry managed to grow beyond its early 2000s role model, Brazil, to become dominated by the U.S.

Limitations

Statistical data on biofuels trade remain very scarce. With the low traceability of biofuel exports and imports in international trade nomenclature in which biodiesel and ethanol are classified under the same HS-5 category. Usually, the codes refer to either of these products irrespective of their final form, making it challenging to gain a fuller picture of international biofuel trades. Currently, ethanol falls is categorized as an agricultural product under a code HS 2207, which covers both denatured and un-denatured alcohols. Thus, such inconsistencies in the global market makes it challenging to have a full overview of the exports across various countries.

Future Work

Current biofuel production in the U.S and EU member states does not meet the Sustainable Development Scenario (SDS) demand for 2030. Mostly, consumption and export levels in these counties does not meet the target blend levels with fossil fuels. With the low road transport demand in the U.S and EU due to adoption of electric vehicles and high efficiency vehicles, a lower biofuel blend rate implies low domestic and international consumption of biofuels. While biofuel production in India and Brazil is set to expand, further research needs to be done on how to achieve higher volumes of biofuel blends and consumption. In contrast continued biofuel output in Brazil is expected to continue growing due to supportive environment set by RenovaBio policy and improved production economics. Countries, such as India, China and other Asian countries, portray a promising production growth that is sustained can help deliver the desired SDS biofuel volumes. While China has not been entirely successful in blending 15 percent of ethanol in gasoline, the current 10 percent proves admissible following the rapidly increasing demand for biofuel in the country. However, in countries such as South Africa and Mexico, biofuel industries remain at their early adoption stages. Thus, further studies need to be done to help unravel ways in which to develop biofuel markets both in developed and developing countries to leapfrog the current trade and achieve the 2030 SDS volume goals.

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Global Status of Biofuels | Homework Help Online . (2022, September 29). Essay Writing . Retrieved February 22, 2024, from https://www.essay-writing.com/samples/global-status-of-biofuels/
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Global Status of Biofuels | Homework Help Online . [online]. Available at: <https://www.essay-writing.com/samples/global-status-of-biofuels/> [Accessed 22 Feb. 2024].
Global Status of Biofuels | Homework Help Online [Internet]. Essay Writing . 2022 Sep 29 [cited 2024 Feb 22]. Available from: https://www.essay-writing.com/samples/global-status-of-biofuels/
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