An Economic and Environmental Analysis of the Impact of Higher-Blended Biodiesel on the Philippine Economy

Alonzo, Ruperto (2016): An Economic and Environmental Analysis of the Impact of Higher-Blended Biodiesel on the Philippine Economy.

Abstract

The Biofuels Act of 2006 (RA 9367) was legislated to reduce the Philippines’ dependence on imported fuels and to protect public health and the environment. Under the Act, the Department of Energy (DOE) is authorized to increase the proportion of biodiesel blend upon the recommendation of the National Biofuels Board (NBB) and upon consideration of the domestic supply and availability of the locally produced biodiesel component. Beginning at 1% blend, the mandate was raised to 2% in February 2009. In June 2013, the NBB recommended an increase in the biodiesel blend to 5%.

Results of the numerical analysis indicate that the proposed policy will lead to a rise in the price of biodiesel, inducing users to reduce consumption. The total loss to consumers due to the price increase is estimated at P3,767.47 million for 2016. This negative economic impact far outweighs the positive environmental effects in terms of reduced greenhouse gas emissions and health benefits due to reduced morbidity and mortality, with the net loss amounting to P3.26 billion for 2016 alone. These projections, along with the observed upward trend in relative world prices for coconut oil and crude oil prices plus the bleak scenario for domestic coconut production scenario, augur well for a postponement of raising the blend, at least in the short run.

• Item Type: MPRA Paper
• Language: English
• Keywords: Philippines, biodiesel, biodiesel blend
• Subjects: H - Public Economics > H5 - National Government Expenditures and Related Policies; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q4 - Energy

References

De Gorter, H. and D. Just. 2009. “The Economics of a Blend Mandate for Biofuels.” American Journal of Agricultural Economics, 91(3):738-750.

De Guzman, R. 2015. “Philippine Policy on Biodiesel for Transportation and Market Experience,” powerpoint presentation at the Workshop on Higher Blending of Biodiesel (H-Fame) for Automotive Utilization In ASEAN, Bangkok, Thailand.

Gayer, T. and K. Viscusi. 2014. “Determining the Proper Scope of Climate Change Benefits.” Vanderbilt University Law School, Law & Econ. Working Paper 14-20.

National Economic and Development Authority, Agriculture, Natural Resources, and Environment Staff (NEDA/ANRES). 2015. “Preliminary Assessment of the Impact of Biofuel Production on Food Security and the Economy.”

Ravago, M., R. Fabella, R. Alonzo, R. Danao, and D. Mapa. “Filipino 2040: Energy-Power Security and Competitiveness.” EPDP Working Paper.

Tol, R. 2013. “Targets for Global Climate Policy: An Overview.” Journal of Economic Dynamics and Control 37(5):911-928.

Vergel, K., and N. Tiglao. 2013. “Estimation of Emissions and Fuel Consumption of Sustainable Transport Measures in Metro Manila.” Philippine Engineering Journal 34(1):31–46.