Biofuel production and its international implications

Popp, József

Keywords: biofuel, transportation, environment, energy supply, food production

Increasing oil prices have made the replacement of fossil fuel with environmental-friendly biofuel a hot topic. The limit of available oil resources and rising oil prices has drawn more and more attention to policy makers and investors. The production of feedstock for biofuel production in oil importing countries may reduce the cost of oil imports and greenhouse gas emissions and increase the income level of agricultural producers. At the same time, biofuel production may reduce the burden on fossil fuel production with overused capacities, which has led to increasing oil prices.
Without government support, technological innovation is the only way biofuels can be made economically competitive with fossil fuels. By increasing biofuel production without careful consideration we run the risk of generating a dependence on biofuels or food in the place of the current dependence on oil. During the many discussions that have been held about the protection of the environment and the security of energy supply in terms of biofuels, the growing role of agricultural policy has become clear. Since animal compound feed production has been unable to keep pace with population growth during the last decade, reliance on alternative protein resources and/or maximising the use of DDGS, rape-meal and sunflower-meal in the production of animal feed will become a key issue in the medium-term. The motivation for cellulosic ethanol production is the geographical expansion of ethanol production, since ethanol will become cheaper if the distance between production and consumption is reduced, which will also improve the profitability of agriculture in the rural areas concerned.
While there are significant differences in studies on the quantity of greenhouse gas emissions saved by the use of biofuels, on the whole biofuels are considered to have a positive impact on the environment. The same is true in terms of the net energy balance of biofuel production. Calculations of the production cost of biofuel indicate that the use of biofuel cannot control the price evolution of oil, because biofuels will remain supplemental rather than competitive products, to be blended into traditional fuels. The world’s two largest biofuel markets are the US and Brazil, while Brazil and Europe are the main beneficiaries of international investments. While the dependency of the EU on imported oil gives rise to serious concerns, transportation accounts for 70 per cent of oil consumption in the EU. The agricultural policy of the EU does not have a clear-cut strategy for adaptation to climate change. Member states are required to increase the biofuel share in fossil fuels to at least 10 per cent by 2020. This 10 per cent share will require 19 per cent of the annual cereal consumption and the full rapeseed production. In order to fully substitute fossil fuels, the EU would require at least twice the current output of cereals and 25 times the current rapeseed and sunflower-seed production.
Similarly to some other EU member states, Hungary has required a certain percentage of the fuels marketed on the national market to be biofuels in order to qualify for a preferential excise duty (differentiation in excise duty). The mandatory 10 per cent target for 2020 requires a maize area of 110-120 thousand hectares and approximately 300-350 thousand hectares of rapeseed and sunflower-seed. Once bioethanol and biodiesel are produced in high quantities, the supply of feedstock will become a top priority. The future of the Hungarian bioethanol industry raises questions concerning the potential sources and prices of feedstock.

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