PROS AND CONS OF BIO-FUEL INDUSTRY: EVIDENCE FROM PAKISTAN

Asad Javed and Khalid Zaman, Int. J Eco. Res, 2010, 1(1), 10-18

PROS AND CONS OF BIO-FUEL INDUSTRY: EVIDENCE FROM PAKISTAN Asad Javed and Khalid Zaman, Department of Management Sciences COMSATS Institute of Information Technology Abbottabad. Pakistan

ABSTRACT Pakistan is an agrarian country, and the main agricultural products are cotton, wheat, rice, sugarcane, fruits, and vegetables. Fuels derived from agricultural sources offer an alternate to the rapidly increasing price of petroleum fuels and the increasing scarcity and the toxicity of such fuels. This paper seeks to examine the impact of biofuels industry on the Pakistan economy. The paper further explores the potential advantages and disadvantages which Pakistan as a developing country may have while developing the Biofuels industry in the country. The methodology adopted in this paper is qualitative with the purpose of exploring and analyzing the advantages which a developing country like Pakistan can have while concentrating more on the biofuels and less on the imported fuel. The outcome of the study is an applied and policy research, which can be applied for policy formulation and strategy designing in future. Keywords: Agriculture, Biofuel Industry, Qualitative Study, Pakistan.

1. INTRODUCTION

In developing countries, agriculture continues to be

sectors of the economy. Hence it contributes to

an important economic sector as it makes a

growth directly and indirectly by increasing its own

significant contribution to national incomes and

production and by providing raw material to

economic. Agriculture plays an important role in the

industry such as textile and garment in case of

economic

countries,

Pakistan. Despite falling share of agriculture in

particularly in Less Developed Countries (Boris et

GDP, it plays a dominating role in growth process

al, 2002). Agriculture provides livelihood support

of the country.

for 60–80% of the population in Pakistan (Hussain,

The main agricultural products of Pakistan are

2006). Agriculture constitutes the largest sector of

cotton,

its economy.

vegetables, in addition to milk, beef, mutton, and

transformation

of

many

According to Siddiqui (2007),

wheat,

rice,

sugarcane,

fruits,

and

Agriculture is main source of livelihood and 66

eggs.

percent of the country’s population depends on it, it

largest irrigation systems to support production.

accounts for almost 21 percent of the GDP.

There are 2 principal seasons. Cotton, rice, and

Agriculture sector has strong linkages with other

sugarcane are produced during the kharif season,

IJER | NOV 2010 Available [email protected]

Pakistan depends on one of the world's

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which lasts from May to November. Wheat is the

sources such as ethanol and biodiesel (Elobeid &

major Rabi crop, which extends from November to

Tokgoz, 2008). Rising global demand for oil and

April. The total irrigated area of Pakistan is 18

concerns about the costs and consequences of

million hectares. About 4 million hectares is rain

global warming are contributing fresh momentum to

fed. Owing to inadequate water availability in

viewing agriculture as a way to diversify our

winter as storage capacity is too small and at the

sources of energy for a more secure and renewable

beginning and end of summer, cropping intensity is

energy future. Global interest in farm-based

exceptionally low (Panhwar, 2004). The Agriculture

energy—in particular liquid fuels derived from

management model in Pakistan is quite similar to

crops and agricultural wastes, or biofuels—is

other developing countries. The Ministry of Food,

gaining momentum around the world. Indeed, in the

Agriculture & Livestock (MINFAL) through its

first five years of the 21st century, worldwide

provincial departments carries out most of the

production of ethanol doubled and production of

agricultural extension (Umali and Schwartz, 1994)

biodiesel quadrupled (Caldwell, 2007). Fuels

Small and medium farmers comprise approximately

derived from agricultural sources offer an alternate

93% of the farming community in Pakistan with

to the rapidly increasing price, the increasing

81% cultivating less than 12.5 acres of land

scarcity and the toxicity of petroleum fuels. The

(Government of Pakistan, 1996–7).

addition of recycled soybean-derived biofuels to the

The recent tendency to reduce the amount of petrol

distillation fraction known as middle distillate, or

used for energy production has driven the policy of

diesel fuel, has been shown to be excellent for

many countries towards the adoption of measures to

ground transportation vehicles (Mushrush et al,

support alternative mode of fuels. Biofuels are a

2000). In general, factors driving the demand for

relatively newly applied alternative fuel (Bekiaris et

biofuels, besides global warming policies include:

al, 2007). In the past few years, interest in biofuels

rising

has greatly increased and this can be attributed to

awareness of renewable energy resources and

environmental, economic, and geopolitical factors.

possibilities

Harmful emissions, high crude oil prices, and the

internationally (Msangi, et al, 2006).

growing dependency on foreign oil supplies have

Fuels derived from biomass are considered an

provided incentives for pursuing alternative fuel

alternative renewable energy source, which is


fuel

prices,

to

growing

expand

energy demand,

the

crop

market

11


claimed to have several advantages in comparison

petroleum) to E95 (95% ethanol, 05% petroleum)

to fossil energy sources. Ethanol is the most visible

are available, and E100 is an option for vehicles

of the biofuels benefiting from this recent surge in

such as the Saab Aero X which are capable of

interest. It can be produced from a variety of feed

running on 100% ethanol. Biodiesel is created from

stocks such as cereals, sugarcane, and cellulose

fats, oils or greases during transesterification - a

material (Elobeid & Tokgoz 2008). Bioethanol still

refinery process that

has the greatest significance among all biofuels on a

glycerine from its fat or oil and turns the latter into

global scale (EU Commission report, 2006).

methyl ester (biodiesel) (The role of biofuels,

Ethanol is produced by maize, sugarcane and wheat;

Benefits and limits debated , 2008). This fuel can

biodiesel is produced by soybean. Three different

be used at 100% or as a blend with petroleum

scenarios are simulated on a global scale. The

diesel. European countries, led by Germany and

results show that when the demand for biofuels is

then France, are at the forefront of biodiesel

growing very rapidly, holding crop productivity

production, having generated approximately 15

unchanged,

billion liters to date or over 80% of global supply

world

prices

for

crops

increase

separates the biomass'

substantially.

(The role of biofuels, Benefits and limits debated,

According to “The role of biofuels, Benefits and

2008). First generation crops are already creating

limits” debates (2008), First-generation biofuels

real value for rural economies in the developing

currently in commercial use - of which Bioethanol

world by producing crops which can be used for

and biodiesel are common examples - are derived

biofuels (Europa Bio-Fact Sheet, Biofuels and

from animal fats or parts of food crops such as corn,

developing countries, 2008).

sugar cane, soybeans and other oil-producing crops.

Energy crops often represent a diversification for

They are often used in cars, military vehicles and

‘cash crops’ for subsistence farmers. The UN’s

even heavy duty generators and power stations.

Report on Sustainable bioenergy cites the benefits

Bioethanol is typically created from sugar cane and

especially of second generation fuels which the UN

corn, and is produced by fermenting, distilling and

believes will “create higher-value co-products (and

drying the sugars of stored starches in the plant. It

thus greater wealth generation)”.Second-generation

can be blended with petroleum at a simple ratio of

biofuels, sometimes referred to as cellulosic

85% ethanol and 15% petroleum, also known as

ethanol, is still in the early stages of development.

E85. Ratios ranging from E10 (10% ethanol, 90%

Instead of relying solely on crops that have


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traditionally been used for food and thus creating

developing countries, 2008). There are two main

land-use competition between humans and vehicles,

environmental benefits of using biofuels in place of

the second generation is not restricted to this narrow

fossil fuels. First, because they are renewable,

range of source materials and can be produced by

biofuels offer the potential for long-term, relatively

converting agricultural, forestry, human and plant

cheap, secure energy supplies. Second, many

waste, as well as using crops that can be grown on

biofuels contribute significantly less to greenhouse

degraded lands lacking the necessary nutrients to

gas emissions in their production and use than oil or

support food. Although some of the existing

natural gas. It was considered that the biofuels

agricultural products that can be converted to

option, if well assessed, planned and sequenced,

biofuel are currently used as animal fodder or

could

grown on potentially viable land, second generation

developing countries – in terms of climate change

growth is not limited in this way. In converting

benefits, rural development, and decent work and

waste from already established processes, the entire

energy diversification – while leading to a less

biomass is turned into a gas and then liquid fuel, in

carbon-intensive economy (UNCTAD, 2007).

a process known as 'biomass to liquid'. Waste gases,

Biofuels can also be used for controlling the soil

like methane, can be converted in a similar way.

erosion in the fertile plans of Pakistan. Hoogwijk,

However, a scientific breakthrough is needed as the

(2003) argues that biomass influences the humus

process currently consumes more energy than it

content of the soil and reduces erosion, thus

produces (Biofuels and developing countries, 2008).

increased biomass production can improve soil

offer

win-win-win

opportunities

to

quality of agricultural land. Another problem in 2. DISCUSSION

which biofuels can be used is the migration from

2.1.

rural areas of Pakistan to the cities; the only way to

Advantages of Biofuels – Environmental

Perspective

stop flight to the cities is to create a successful rural

The development of biofuels holds great promise

economy. As rural jobs increase, the poor will be

for developing countries where the majority of the

less likely to migrate from rural to urban areas –

population often lives in rural areas and subsidies

urban areas in less developed countries have long

on agriculture. Global warming, as it stands today,

been synonymous with urban poverty, lowered life

could be considered more of a danger than biofuels

expectancy and increased health risks (Biofuels and

to the biodiversity in these areas (Biofuels and

developing countries, 2008).


13


Pakistan is currently facing the Power (Energy)

extent. According to Europa Bio-Fact Sheet (2008),

crisis and if Pakistan develops the biofuels industry,

the development of biofuels will bring direct

it can overcome that crisis in more effective way.

opportunities to developing countries because their

According to World Bank, (2005), Transforming

production will create many local jobs in the value

agricultural waste and manure into biogas will;

chain - from growing raw materials to their

improve the living standard of poor rural people by

manufacture. Furthermore, the local production of

providing energy for cooking and lighting, increase

biofuels in developing countries will help to

jobs and substitute the time spent collecting fire

decrease the dependency on costly fossil fuel

wood with economic activities and decrease the

imports. According to Kartha, (2006) Producing

release of greenhouse gases, mainly in rural areas

more biomass could contribute to improved

and this all can be applied to the rural areas of

environment

Pakistan also. The UN reported that “As biofuels

protecting watersheds and by creating new habitats.

absorb crop surpluses in developing countries,

As Pakistan is developing economy and there are no

commodity prices will rise, increasing income for

define rules for the dumping, biofuels can be used

farmers in poor countries”. This will lead to more

to control the dumping. According to Europa Bio-

economically sustainable agriculture and prices in

Fact Sheet (2008), “As production surpluses are

most developing countries, encouraging local

reduced in OECD countries there will be less

production and allowing farmers to live from

‘dumping’ of cheap agricultural commodities in

production

2007).

developing countries”. The UN report describe it as

According to the Europa Bio-Fact Sheet (2008),

“As biofuels absorb crop surpluses in developing

“Non food crops for biofuels can contribute to

countries, commodity prices will rise, increasing

diversifying farmers’ production with ‘cash-crops’

income for farmers in poor countries”. This will

and provide them with an income, even on a very

lead to more economically sustainable agriculture

small scale, in a similar way that crops grown for

and

fibers have done in the past”.

encouraging local production and allowing farmers

Another advantage that Pakistan can have while

to live from production (Europa Bio Fact Sheet,

developing the Biofuels industry is that it will create

2008).

lot of jobs and unemployment which is a major

2.2.

problem for Pakistan can be controlled to some

Perspective

(Sustainable


bioenergy,

prices

by

in

cultivating

most

Disadvantages

barren

developing

of

Biofuels

land,

by

countries,

–

Cost

14


Beside the advantages of biofuels, there are some

disadvantage

disadvantages also in developing the biofuels

comparison to petrol and diesel) is their high

industry. Pakistan is a free economy and prices of

production cost that results in higher prices at the

commodities are set by the demand and supply

pump.

factors. Government plays very little role in setting

agricultural products and the cost of production

the prices of all the products in general and

rises significantly for that reason. This has kept a

agriculture products in particular A major criticism

fair amount of stakeholders from getting involved

often leveled against biomass, particularly against

with the production of biofuels.

large-scale fuel production, is that it could divert

In developing economy of Pakistan where the total

agricultural production away from food crops,

forest area is 4.2 million hectares, which makes

especially in developing countries and current high

about 4.8 percent of total land area of its total land

prices of agriculture products can be make the daily

(Hassan, 2008). Deforestation in the Pakistan is a

used commodities of Agriculture out of reach of

long standing problem. Forest cover was 5% in

poor people by the introduction of biofuels. Due to

1996 compared to 20-25% in 1850 (Sungi, 1996)

use of Agriculture products as biofuels, the demand

and they have gradually decreased. The developing

will become high and supply will remain the same,

of biofuels industry in Pakistan will also foster the

this will increase the price of the commodities.

speed of deforestation in the country. Population in

There is the inevitable tension therefore that whilst

Pakistan is increasing very fast and the forest and

using them for biofuels may have environmental

agriculture land is getting lesser and lesser.

benefits;

Pollution is also increasing with decrease in forest

there

consequences.

In

are the

social short

and

economic

Biofuels

biofuels

are

blends

mostly

(always

produced

in

from

main

and other green resources and due to rapid increase

consequence is likely to be higher food prices; but

in population. Developing of biofuels industry in

in the longer term there is the possibility that using

the country will also increase the pollution. There

them as fuels may contribute to food shortages

are few general conclusions to be drawn about

(Biofuels and developing countries, 2008).

bioenergy and its effect on the environment (Kartha,

Pakistan is a developing economy and the financial

2006). Crutzen et al (2008) show that emissions of

conditions of Pakistan are not so sound. To develop

nitrous oxide, which is a byproduct in the

a biofuels industry; it need a huge sum of money.

production of biofuels from oilseeds or corn, can

Bekiaris et al, (2007) argues that the major

completely wipe out the potential cooling brought


term the

of

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about by the utilization of the biofuels instead of

technical support from Brazil and EU countries etc.,

fuel from fossil sources. Kartha (2006) argues that

where

producing more biomass could also contribute to a

Developing the biofuel industry will diversify our

poorer environment by exhausting the soil from

domestic energy production and will provide low

nutrients, worsening erosion, drawing on the water

cost fuel which will be better for the environment,

resources,

with

creating jobs, stop migration from rural areas to

deteriorating biodiversity as a consequence. There

cities, increase the investment in the country as new

is a serious danger that biofuels are being produced

investors from all over the world will invest in the

at the cost of rainforests, which not only absorb

project, and will bring ‘‘energy security”. This

carbon dioxide from the atmosphere but are also

means that a nation's dependence on oil is reduced,

home to a unique range of biodiversity (Biofuels

and substituted with use of locally available

and

sources, such as coal, gas, or renewable sources.

and

pushing

developing

habitats

countries,

aside

2008).

biofuels

industry

is

well

developed.

3. SUMMARY & CONCLUSION

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