Tuesday's Talking Points
Global Biofuel Alliance – A G20 Initiative for a Sustainable Future!
India’s G20 presidency was held under the theme of “One Earth, One Family, One Future”, where important challenges such as food security, climate and energy, development, health and digitalization were discussed. One of the key initiatives under this theme was the launch of the Global Biofuel Alliance (GBA), which will help the world in working towards reaching its climate goals in time. On September 09, 2023, Prime Minister Shri Narendra Modi along with the leaders of Singapore, Bangladesh, Italy, USA, Brazil, Argentina, Mauritius and UAE, launched this Alliance on the side-lines of the G20 Summit.
What is the Objective of the GBA?
The GBA intends to expedite the global uptake of biofuels through facilitating technology advancements, intensifying utilization of sustainable biofuels, shaping robust standard setting and certification through the participation of a wide spectrum of stakeholders.
Biofuels, derived from renewable sources such as biomass and agricultural waste, offer a greener alternative to conventional fossil fuels, with lower carbon emissions. Keeping the positive implications in mind, GBA aims to serve as a catalytic platform, fostering global collaboration for the advancement and widespread adoption of biofuels.
Why is this Alliance important at a Global Level?
According to a report “Renewable Energy Market Update June 2023” published by International Energy Agency, in 2022, biofuels helped avoid consumption of 2 million barrels of oil equivalent per day (mboe/d) globally, which accounts for 4% of global transport sector oil demand. Most of these fuels were produced domestically, allowing countries to save on import costs. As a result, countries avoided oil import costs of USD 90 billion in 2022, up 70% from 2021 levels. Domestic production of biofuels in emerging markets alone (mainly Brazil, India and Indonesia) avoided USD 38 billion of import costs.
The potential impact of biofuels will be even larger, if these estimates incorporate the relative prices of biofuels and fossil fuels in each of these countries, and the benefits of increased employment generation.
What does the Alliance mean for India?
- Substitution of Imports of Crude Oil
While it is well known that biofuels reduce the harmful effects of greenhouse gases, more recently, the Russia-Ukraine conflict had caused a severe disruption in supplies of crude oil. All these factors prompted global economies to search for alternatives. Amongst the alternatives to fossil fuels, Ethanol has been considered to be one of most suitable alternatives for blending, due to its better fuel quality (ethanol has a higher-octane number) and environmental benefits.
Currently, in India, the prices of ethanol produced in India are higher in comparison to global players, owing to the elevated cost of raw materials like sugarcane and food grains fixed by the government to support the farmers. Despite that, its long-term benefits have prompted India to launch the Ethanol Blended Programme (EBP). This was launched with the vision to enhance India’s energy security, reduce import dependency on fuel, save foreign exchange, address environmental issues and give a boost to domestic agriculture sector.
In 2018, the ‘National Policy on Biofuels’ notified by the Government envisaged an indicative target of 20% ethanol blending in petrol by year 2030. However, considering the encouraging performance, due to various interventions made by the Government since 2014, the target of 20% ethanol blending was advanced from 2030 to 2025-26.
Source: Petroleum Planning and Analysis Cell (PPAC)
- Better Fiscal Prudence, Employment Opportunities and Income Generation
A large portion of the Indian budget goes towards making fertilizers and gas accessible to the economically weaker section in the form of subsidies. Significant movements in oil prices also percolate to household expenditures in terms of rising prices. With the increased production of biofuels with the help of technology transfer from alliance members of GBA, India will be able to maintain fiscal prudence and lower inflation.
Further to that, the increased investments in the biofuel sector will create employment opportunities in the private sector, resulting in the enrichment of the ‘demographic dividend’.
Increased use of biofuel has supported farmers, especially those cultivating sugarcane, with payments worth approximately INR 76,000 crore over the past 9 years. With GBA, it is expected that farmer’s financial burden would ease out, and make their income grow multi-fold.
Conclusion
As per Observer Research Foundation, a 5% blending rate food-grain-based biofuel will result in a 2% reduction in GHG emissions. While the production and adoption of biofuels can face multiple headwinds, the long-term benefits are worth considering a long-term approach to make this alliance a global success.
In achieving that success, India will play a leading role. While India’s global share is just 3%, nearly 85% of the total biofuels are produced by the founding members of the GBA – Brazil, United Sates of America and India. Further to that, it is expected that India will catch-up fast considering the fact that it has the potential to address one of the biggest challenges globally – availability of feedstock to produce biofuel.
Sources: G20 Press Release, IEA, PIB, PPAC, ORF, and other publicly available information
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