Biofuels in Africa

DIRECTIONS IN DEVEL OPMENT
Countries and Regions
Biofuels in Africa
Opportunities, Prospects,
and Challenges
Donald MitchellBiofuels in AfricaBiofuels in Africa
Opportunities, Prospects, and Challenges
Donald Mitchell© 2011 The International Bank for Reconstruction and Development / The World Bank
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ISBN: 978-0-8213-8516-6
eISBN: 978-0-8213-8517-3
DOI: 10.1596/978-0-8213-8516-6
Cover image: “Baobab, Guineafowl, and Beadwork,” oil on canvas, by Andry Kashivi, South
Africa, 2000, courtesy of World Bank Art Program.
Cover design: Naylor Design, Inc.
Library of Congress Cataloging-in-Publication Data
Mitchell, Donald, 1947 Nov. 29-
Biofuels in Africa : opportunities, prospects, and challenges / Donald Mitchell.
p. cm.
Includes bibliographical references and index.
ISBN 978-0-8213-8516-6 — ISBN 978-0-8213-8517-3 (electronic)
1. Biomass energy—Africa. 2. Power resources—Government policy—Africa. I. Title.
HD9502.5.B543M58 2010
333.95'39096—dc22
2010044318Contents
Foreword xi
Acknowledgments xiii
About the Author xv
Abbreviations xvii
Executive Summary xix
Chapter 1 Introduction 1
Chapter 2 Understanding Biofuels in Africa 5
Production 6
Consumption 20
Prices 27
Trade 30
Biofuel Standards 31
Greenhouse Gas Emissions, Carbon Credits,
and Biofuels 32
Summary and Conclusions 37
Notes 40
References 41
vvi Contents
Chapter 3 Biofuel Production Costs 47
Straight Vegetable Oil Production Costs
and Prices 49
Jatropha Plantation Production Model 52
Producing Biodiesel from Jatropha Oil 60
Ethanol Production Costs 61
Summary of Biofuel Production Cost Estimates 71
Volatility of Production Costs and Managing
Price Risk 72
Summary and Conclusions 74
Notes 76
References 77
Chapter 4 Global and Regional Demand for Biofuels 79
Energy Prices 80
Mandates and Subsidies 82
Biofuel Demand in the African Region 85
Global Demand for Biofuel Imports 98
Summary and Conclusions 108
Annex 112
Notes 113
References 113
Chapter 5 Case Studies 117
D1 Oils Plc 118
Diligent Tanzania Ltd. 125
SEKAB BioEnergy Tanzania Ltd. 130
Lessons Learned 133
Notes 135
References 136
Chapter 6 Policies for Biofuels in Africa 137
Policies for Biofuel Feedstock Production 139
Policies for the Manufacture of Biofuels 146
Policies for the Domestic Sale of Biofuels 146
Investment Incentives for Biofuels 147
A Biofuel Development Strategy 147
Development of the Policy Framework 150
The Role of Donors, Multilateral Institutions,
Foreign Investors, and the Development
Community 152Contents vii
Summary and Conclusions 152
References 153
Appendix A The Brazilian Experience 155
Historical Developments 155
Environmental Effects of Producing Sugarcane 157
Lessons from the Brazilian Experience 161
Note 162
References 162
Appendix B Selected Data for African Countries 163
Index 173
Boxes
2.1 Clean Development Mechanism 36
3.1 Comparison of Wages for Harvesting Jatropha and Tea 57
3.2 Ethanol versus Biodiesel: Production Costs in Iowa 62
3.3 Ethanol Producer VeraSun Bankrupt after Failed Hedge 73
4.1 Econometric Model of Transport Fuel Demand 92
6.1 Mozambique’s Biofuel Policy and Strategy 138
6.2 Malawi and Zambia: Neighboring Countries, Different
Biofuel Policies 140
6.3 Tea Research Institute of Tanzania 145
Figures
2.1 Consumption Mandates for Biofuels 23
2.2 The Impact of Biofuel Mandates on Food Crop Prices 25
2.3 Monthly U.S. Ethanol and Gasoline Prices, 2000–10 28
2.4 Monthly Brazilian Ethanol and Gasolina
Prices, 2001–10 29
2.5 Import Tariff on Biofuels 30
3.1 Elasticities of Jatropha Oil Production Costs to
Critical Variables 58
3.2 Monthly Minimum Wages in African Countries 60
3.3 Elasticities of Ethanol Production Costs to
Critical Variables 68
4.1 Real Primary Commodity Prices, 1900–2009 81
4.2 Retail Fuel Prices in Africa, 2008 85
4.3 Fuel Consumption versus GDP in Low- and
Middle-Income Countries, 2005 88viii Contents
4.4 Fuel Consumption versus Price in Low- and
Middle-Income Countries, 2006 89
4.5 Fuel Consumption versus Urbanization in Low- and , 2005 90
4.6 EU Ethanol Prices, July 2006–July 2010 101
4.7 EU Greenhouse Gas Savings from Biofuels 103
5.1 Jatropha Labor Requirements 121
5.2 Jatropha Crop Calendar, Zambia 123
5.3 Diligent Tanzania Ltd. Production Cost Shares, Year 10 128
Tables
ES.1 Estimated Biofuel Production Costs in
Sub-Saharan Africa xxvii
2.1 Biofuel Yields of Major Feedstocks 17
2.2 Oil Content of Oilseeds Used for Biodiesel 20
2.3 Carbon Dioxide Emissions from Transport Fuels and
Electricity 35
3.1 Prices of Major Vegetable Oils Used for Biodiesel,
Northern Europe, 2003–09 50
3.2 Smallholder Jatropha Oil Production Costs for Local Use 51
3.3 Jatropha Plantation Oil Production Costs,
Alternative Cases 53
3.4 Prices and Feedstock Costs of Major Ethanol
Feedstocks, 2008 61
3.5 Ethanol Production Costs from Sugarcane,
Alternative Cases 65
3.6 Estimated Biofuel Production Costs in
Sub-Saharan Africa 71
4.1 Biofuel Mandates and Targets, Production Incentives,
and Trade Policy for Major Consumers and Selected
African Countries 83
4.2 Gasoline Prices in Malawi, 2009 86
4.3 Recent Trends in Urbanization, Economic Growth,
and Population, 2000–07 91
4.4 Estimated Elasticities for Factors Determining
Transport Fuel Demand 94
4.5 African Transport Fuel Consumption: Actual 2005
and Forecast 2020 96
4.6 Transport Fuel Net Import Costs as a Share of GDP:
Actual 2005 and Forecast 2020 97