Argentina's huge production of soybeans is at the core of the biodiesel business Credit: Greenpeace Argentina

Report
Argentina's Agrofuels Start Their Engines
By Marcela Valente

With biodiesel from soybeans playing the leading role, Argentina is beginning to require plant-based fuel blends for all vehicles.

BUENOS AIRES, Feb 15 (Tierramérica).- Delayed by supply problems, this year Argentina is beginning the required mixing of gasoline with ethanol, and diesel oil with biodiesel, at a proportion of five percent, and possibly reaching 20 percent in 2015.

Consumers won't notice the difference. Traditional gasoline and diesel, made from petroleum, come mixed with ethanol, or carburant alcohol, and biodiesel, respectively, in the proportion required by law. Although the government and biofuel companies alike admit that it will be a year before the measure can be fully implemented.

The main advantage of these fuels is that they produce less carbon dioxide and other greenhouse-effect gases when they are burned.

In Argentina, ethanol is made from sugarcane. To meet the obligatory demand created by the law, 282,000 cubic meters of ethanol are needed, but currently there are just 202,000 cubic meters available.

Osvaldo Bakovich, biofuels coordinator at the Secretariat (ministry) of Energy, explained to Tierramérica that there are production plants that are not yet in operation. They should soon be online, and it is predicted that ethanol production will be in full swing by the end of the year.

Claudio Molina, executive director of the Argentine Biofuels and Hydrogen Association, confirmed that information, and noted that "the program for cutting gasoline with ethanol began partially on Jan 1."

"Depending on availability and logistics, there will be places in the country with proportions of five or 10 percent, and others without any. But by 2011 the program will be standard throughout the country," he said.

Molina also cited projects for obtaining ethanol from several types of plants, such as maize or cassava, "but for now the government has granted permission only for producers of sugarcane ethanol, who have production under way in the (northern) provinces of Jujuy, Tucumán and Salta."

But the true star among agrofuels in Argentina is not ethanol, as it is in Brazil and the United States, but biodiesel instead.

Since the Biofuels Law (26.093) was enacted in 2006, there have been heavy investments in the sector, but production has been aimed only at foreign markets where fuel-mix policies were already in force as a means to limit vehicle emissions from fossil fuels.

In Argentina, the new law created in internal market that will expand in the next few years. In Bakovich's view, it will no longer be necessary to import diesel fuel. Currently, about one billion dollars a year is spent to meet transport's diesel demands. Diesel fuel is the most widely used fuel in Argentina, with 12 million cubic meters consumed annually. According to the Argentine think-tank CESPA, 66 percent of cars, trucks and farm machinery run on this fuel. The rest are fueled by gasoline (17 percent) and compressed natural gas (17 percent).

To meet the requirements for the initial proportion of the fuel blend, 860,000 tons of biodiesel are needed. The supply is based on Argentina's vast production of soybeans, which are also the country's leading export. In addition to providing the world with soybeans and soy flour, Argentina is the leading exporter of soybean oil.

This largely explains why other biodiesel plans based on other, more efficient crops have not been successful. These include the physic nut (Jatropha curcas) and castor oil plant (Ricinus communis), which yield three times more oil than soybeans do, and can grow in poorer soils. "We are taking off with biodiesel from soy until other sources are developed," said Bakovich.

With the existing infrastructure, the big vegetable oil producers have thrown themselves into the biodiesel business. At first they sold the new fuel on the international market, but since the national law took effect, a portion of those exports has been needed to meet the domestic quota.

Under the law, the agrofuel suppliers are supposed to be small or medium companies, linked to rural producers or with a portion of public capital. But when the fuel blend requirements began, the producers that met the law's profile couldn't satisfy the overall demand.

In recent weeks, the government reached an agreement to purchase all the biodiesel produced by the small companies - some 300,000 tons - and agreed to distribute the remaining 560,000 tons needed among the big exporters, in order to reach the total needed.

"For the big producers, operation in the domestic market is marginal. The bulk of it is exported," said Molina. The principal markets are the European Union and United States, where fuel blends are also used, with rising proportions and requirements.

Another factor that justifies the leading role of soy in the fuel sector is that Argentina's soybean oil exports are taxed at 32 percent, while soy transformed into biodiesel pays just a five percent tax, and half of that is recovered through tax incentives.

By 2015, the domestic market is predicted to operate with a mix of 20 percent biodiesel, according to the Secretariat of Energy. By then, the installed production capacity will be 6 million tons - several times more than the domestic consumption forecast for that year, said Molina.

The lower percentage of greenhouse gas emissions of biofuels depends on the efficiency of the crop and the rest of the productive and logistical chain. Soy-based agrofuel, "in the most optimistic calculations, means an emissions reduction of 31 percent on average," Carlos Villalonga, director of Greenpeace Argentina, told Tierramérica. The figure varies a great deal, depending on the yield of the harvest, he pointed out.

Bakovich was even more cautious, citing an emissions reduction of 20 percent.

"For there to be a true impact, reduction should be 50 percent," said Villalonga, warning that if a so-called "green fuel" is produced using excessive transport, irrigation and energy at the fuel production plants, the disadvantages could outweigh the benefits.

According to Villalonga, the possible competition between fuel and food production for farmland has been mitigated by the new Forests Law (26.331), which puts the brakes on the expansion of the farming frontier for monoculture like soybeans.

"I don't think there is extra pressure on the land because there are idle areas that can be used to produce biofuels. But these fuels are not miracle workers. If Argentina wants its transportation sector to emit less, it would do much better by improving railroad transport - replaced in recent years by trucking - because it utilizes 100 percent biofuels," he said.

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