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Potholes on the road toward sustainable fuels

IDBAmérica: Until we saw you pull away from IDB headquarters in that 1981 Volkswagen pickup, I didn’t really believe that a car could run on kitchen grease. How does that work, and is it true that the exhaust smells like French fries?

Hunt: It’s important to clarify that any modern diesel-powered car can run on biodiesel fuel right off the lot. What most people don’t realize is diesel cars will also run on a variety of vegetable and animal oils—including worn-out cooking grease—so long as you filter the oils and make some modifications to the diesel engine. The cost of these modifications can vary depending on the age of the engine you are working with, but in most cases it can be done for a few hundred dollars (here in the United States). And yes, it’s true that the exhaust can smell like fried food if you use kitchen grease, but only in older cars that aren’t equipped with a catalytic converter.

IDBAmérica: What sort of message were you trying to send by taking part in the Greaseball Challenge?

Suzanne Hunt driving a biodiesel-powered 1981 Volkswagen pickup sponsored the IDB.

Hunt: The main message is that biofuels are some not futuristic, high-tech concept that can only benefit rich countries. In fact, biodiesel can be a low-tech, low-cost solution that is very appropriate for developing countries—even in poor rural settings. We used kitchen grease to emphasize the fact that some biofuels are readily available, without the complications and the chemicals of industrial-scale biofuel production.

On a personal level, I also saw the trip as an opportunity to see what is happening in biofuels and to understand how this industry is evolving. I was especially interested in visiting biofuel producers in Central America to learn about their experience so far and what they will need going forward.

IDBAmérica: Here in Washington people often talk about the “potential” for biofuels in Latin America. But during your trip you visited several biofuel producers that are already up and running. How many enterprises did you visit, and how long have they been in business?

Hunt: Prior to the trip we put together a list of around 40 biofuel producers in the United States, Mexico and Central America, but in the end we were only able to visit around 10 of them due to time constraints. Most of them have been making biodiesel for just two or three years. I was surprised by the sheer variety of projects. We met palm oil producers who were using their low-quality oil to make biodiesel and using it to power their trucks, large fish farmers who were using fish waste for the same purpose, and even a small farmers’ cooperative that has figured out how to use grease from restaurants to run an electricity generator.

IDBAmérica: What motivated these producers to get into biofuels? Are they trying to lower their own energy costs, or do they want to supply a commercial market?

Hunt: At this point they are all producing biodiesel for their own needs, usually as part of an agricultural production process. A few large companies are using biodiesel to fuel their own vehicle fleets. Aquafinca, the biggest fish farm in Honduras, uses fish waste to produce 30,000 gallons of biodiesel per month—enough to power all their trucks and machinery and to sell inexpensive fuel to their employees. Several farmers we spoke to said that they plan to use biodiesel to power small generators for “micro grids” that would provide electricity to local communities. As far as commercial sales go, most of the countries we visited are still in the process of drafting legislation that will regulate biofuels, so there really isn’t a domestic market yet.

IDBAmérica: What are the main technical or financial obstacles facing these producers?

Hunt: The technology and know-how required to make biodiesel are fairly simple. Most of the producers we visited have used a do-it-yourself approach: they make their own equipment and then experiment till they get the best results. Financing also doesn’t seem to be a problem yet, because these operations are on a very small scale and the companies have been able to cover their own start-up costs.

Access to processing equipment could become an obstacle in larger scale operations, because today most of that equipment would have to be imported. But this could also be an opportunity for domestic manufacturers.

I think feedstock may also become a challenge down the road, because nearly all the producers we visited are using waste products as a feedstock. There is a limit to how much waste material you they can produce, and since feedstock is by far the largest cost item for biofuels, companies that want to expand production will need to find new, cost-effective feedstocks that are appropriate for local soil and climate conditions. This will require a lot of research and development.

IDBAmérica: Are these enterprises getting some support from their governments, or are they basically on their own?

Hunt: I can’t think of any specific support that governments were offering in the countries that we visited. In almost all of them, though, the executive and legislative branches are drafting biofuel legislation and debating issues like mandates, subsidies, and market development. Some of these laws are expected to be approved in the short term. And several countries are also encouraging local universities to conduct applied research in areas such as feedstock varieties that are suitable for local cultivation.

IDBAmérica: In addition to laws and research, what should governments be doing to encourage the growth of these enterprises?

Hunt: I think governments can help to create a market for biofuels in the short term by requiring vehicles in the public sector to start using renewable fuels. In some of these countries the government owns large fleets of buses, trucks and other vehicles. Running them on biofuels—even in modest biofuel/fossil fuel blend—could give producers the confidence to offer long-term contracts to the farmers who will supply feedstocks. This kind of pilot program can also help to identify potential problems, and it can familiarize mechanics with biofuels.

Governments also have a key role to play in sponsoring public awareness campaigns, capacity-building activities such as conferences and exchanges among biofuel producers, and technology transfer programs with other countries.

Above all I think governments need to tie sustainability standards into any kind of support they provide for biofuels. The goal shouldn’t be “biofuels at all costs,” but rather biofuels only if they’re doing right.

IDBAmérica: Based on what you saw, what are the most promising biofuel feedstocks in Central America?

The IDB-sponsored Volkswagen Rabbit parked in front of a fence ofJatropha trees.

Hunt: Altough we focused on biodiesel, sugar cane is clearly an efficient feedstock for ethanol in countries like Guatemala and El Salvador that have a long tradition of sugar production. For biodiesel, African oil palm is probably the most promising source for large-scale production, also because significant plantations are already in place.

Even though sugar cane and palm are by far the most productive feedstocks per hectare at this point, they may not be the most socially and environmentally sustainable ones, particularly in the form of large-scale monoculture plantations. There may be less productive feedstocks that can be mixed with existing food crops in a manner that is more appropriate for small farmers. There is a lot of interest in developing inedible oilseed crops like jathropa curcans, for example [jathropa is native to Central America and known by a variety of local names]. We saw a fair amount of jatropha “especially in mixed plantings where it is used as a hedge” but for now there isn’t much of track record in the region for using it as biodiesel.

IDBAmérica: In the industrialized world there is a lot of anxiety about “food versus fuel,” particularly because of the run-up in corn prices due to corn-based ethanol. What did you hear about this issue from people in Mexico and Central America?

Hunt: Frankly, very few of the people I spoke to were even aware of this debate. Biofuel production simply hasn’t reached the scale where you would have to make trade-offs between food and fuel production. And most of the farmers I spoke to are still worried about making a living with their traditional crops. Biofuels are a pretty abstract concept at this point.

IDBAmérica: What do you think the IDB’s role should be in this sector?

Hunt: The Bank has a crucial role to play in ensuring that biofuels projects are sustainable from a social, environmental and financial perspective. There are all kinds of questions that need to be answered before governments and the private sector place big bets on biofuels. Each country needs to carefully examine how suitable particular feedstocks are for its soil and climate conditions, for example. The impact on rural employment and land use needs to be determined. You need systems to ensure worker safety and to properly handle chemicals used in biofuel production.

The IDB can finance feasibility studies and provide objective analysis for governments and investors, in addition to funding technology transfer and actual production projects. It think the Bank should also help to develop sustainability standards for biofuels-something that the Brazilian government is now starting to do. There are real risks in the large-scale production of biofuels, and unless we start working on a set of realistic international standards, we could end up promoting the wrong solutions.

More than anything I think the Bank should work on ensuring that the development potential of biofuels is realized. Today the trend in this industry is toward consolidation, large investments and increasing mechanization. In this context, the development impact of biofuels could be modest or even negative. There is a real need to integrate poverty alleviation into any biofuels strategy, and I think the IDB can do this through the projects it finances.

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