Inter-American Institute for Cooperation on Agriculture (IICA) Strategy For The Development Of An Agro-Energy Program For The Caribbean Region

Transcription

1 Inter-American Institute for Cooperation on Agriculture (IICA) Strategy For The Development Of An Agro-Energy Program For The Caribbean Region Prepared by: Al Binger, PhD July

2 Acknowledgements Abbreviations and Acronyms Tables & Figures Executive Summary TABLE OF CONTENTS 1.0 BACKGROUND: ICCA & ITS MISSION IN THE 21 ST CENTURY 1.1 IICA - Innovator & Promoter of New Thoughts in Agriculture & Rural Development 1.2 IICA s Unique Strengths and Assets 1.3 IICA s Challenges and Opportunities 1.4 IICA s Vision 1.5 Objectives of the Strategy Document 1.6 Methodology 2.0 THE CHANGING CONTEXT OF DEVELOPMENT IN THE CARIBBEAN 2.1 Emerging Issues & Challenges Facing the Caribbean 2.2 Caribbean Agriculture Sector - Overview & Outlook Positioning Agriculture as a Source of Energy for Sustainable Development Land Use and Crops Production in the Caribbean 2.3 Global Energy Sector Overview and Outlook 2.4 Caribbean Energy Sector Overview and Outlook Energy Use and Production in the Caribbean Overview National Energy Situations Transportation Electricity Generation and Use Renewable Energy Energy Resources Fossil Fuel Resources 2.5 The Energy for Sustainable Development Challenges 3.0 RATIONALE FOR AGRO-ENERGY PROGRAMME IN THE CARIBBEAN 3.1 The Agro-Energy Option for Economic Renewable Energy 3.2 Biomass as a Feedstock for Energy for the Caribbean 3.3 Cost Benefits of Agro/Bio-Energy Costs and Benefits of Biofuels Industries 3.4 Global Lessons Learned in the Production and Use of Biofuels Brazil Ethanol Biodiesel India Ethanol Biodiesel Philippines Ethanol Biodiesel Straight Coconut Oil Pacific Island Countries Fiji Vanuatu Australia U.S.A Ethanol Biodiesel 2

3 3.4.7 Cuba Cogeneration from Sugarcane Biomass Ethanol Denmark 3.5 Challenges and Opportunities to Developing an Agro-Energy Industry Institutional Relationships National and Local Ownership Raw Material Production and Transportation Developing Capacity Policy and Legislation Decision Making 4.0 IICA s STRATEGY FOR DEVELOPMENT OF BIOFUELS INDUSTRIES IN THE CARIBBEAN REGION 4.1 Program Rationale 4.2 Program Outlines Capacity Development Biofuels for Transportation Ethanol Production Biodiesel Production Biofuels for Electricity Generation Development of Small and Medium Size Biofuels Enterprises 4.3 Development of the Caribbean Biofuels Industry Liquid Biofuels Industries Solid Biofuels Industries 4.4 Requirements for Implementation The Challenges Production Utilization 4.5 The Benefits of Biofuels Industries for the Region Socio-economic Benefits Environmental Benefits 4.6 Public Outreach/Communication 4.7 Partnerships 5.0 STRATEGIES & PROGRAMMES 5.1 Strategic Element 1: Become the Leading Strategic Institution on Agro-energy in the Caribbean: Goal 1: Introduce program to strengthen linkages between agriculture and energy sectors in order to increase opportunities for agro-energy in the Caribbean Goal 2: Stage series of Regional and National Consultations and Dialogue with Caribbean sugar cane and electric utility representatives about the potential of Biofuels Goal 3: Introduce program for development of emerging technologies, practices and business opportunities in the agro-energy industry Goal 4: Goal 5: Introduce Bi-Annual Caribbean Region Agro-Energy Conference Introduce Public Awareness & Education Program Biomass as a source of Energy for the Caribbean 5.2 Strategic Element 2: Promote Agro-energy in the Caribbean as an economically viable source of energy by introducing liquid and Solid Biofuels Industries in sugar cane growing countries to produce liquid fuels and heat and/or power through combustion: Liquid Biofuels Industry: Goal 1: Ethanol Production to Achieve 10 percent Blend in Gasoline (20 Million Barrels) by

4 Goal 2: Ethanol Production to Achieve 25 percent Blend in Gasoline (550 Million liters) by 2015 Goal 3: Production of 30 Percent of Regional Transportation Fuels Need by Solid Biofuels Industries: Goal 1: Development of 50 percent of the Viable Electricity Potential from the Sugarcane by 2012 Goal 2: Development of Small and Medium Size Solid Biofuels Enterprises Goal 3: Development of 100 percent of the Viable Electricity Potential from Sugarcane by Strategic Element 3: Build the sustainability of IICA to support agro-energy entrepreneurial activities of the economically disadvantaged that lead to sustainable livelihoods and a healthy environment Goal 1: Development of Small and Medium Size Liquid Biofuels Enterprises 5.4 Strategic Element 4: Build IICA s organizational capacity to accomplish its mission The Role of IICA Goal 1: To provide IICA with the tools necessary to effect proactive, sustainable, agro-energy management and for IICA to formalize efforts to train project officers in professional skills in energy planning and policy, and engineering. 6.0 FUNDING THE STRATGEY AND ESTIMATED BUDGET 6.1 Potential Funding Sources 6.2 Estimated Program Budget 6.3 Investment Costs 7.0 CONCLUSION 7.1 Recommended Next Steps by IICA REFERENCES APPENDIX Technical, Social & Economic Aspects of Agro-Energy: Annex A Technical Issues in the Production and Use of Liquid Biofuels Annex B Technical Aspects of Agro-energy Annex C Ethanol A Major Biofuel Annex D Biofuels Production Potential for Caribbean Countries 4

5 ACKNOWLEDGEMENTS 5

6 ABBREVIATIONS AND ACRONYMS ACP ADB AIDS/HIV ALP ARTI ASEAN AVF Bbls bcm BECOL BIG-GT BIG-GTCC BIG-STIG BIG-ISTIG BOD BoE BOI IPP BOO BOLT BPOA BTU CABA CARDI CAREC CARICOM CARIFORUM CARILEC CBI CCS CDB CDM CECADI CEHI CEST CFE CHG CHP CI CIDA CIG CITMA CME CMO CNO CO 2 CO 4 COD COTED CREDP CRNM CSME CWA DFID African, Caribbean & Pacific Asian Development Bank Acquired Immunodeficiency Syndrome/ Human Immunodeficiency Virus Alternative Livelihoods Project Appropriate Rural Technology Institute Association of Southeast Asian Nations Barrels Billion cubic meters Belize Electric Company Limited Biomass Integrated Gasifier - Gas Turbine Biomass Integrated Gasifier - Gas Turbine Combined Cycle Biomass Integrated Gasifier - Steam Injected Gas Turbine Biomass Integrated Gasifier - Intercooled Steam Injected Gas Turbine Biological Oxygen Demand Barrels of Oil Equivalent Build Own Operate Build Own Lease Transfer Barbados Program of Action British Thermal Units Caribbean Agribusiness Association Caribbean Agricultural Research and Development Institute Central American Renewable Energy Cleaner Production Facility Caribbean Community The Caribbean Forum of the African, Caribbean and Pacific (ACP) States Caribbean Electric Utility Services Corporation Caribbean Basin Initiative CARICOM Secretariat Caribbean Development Bank Clean Development Mechanism Centro de Capacitación a Distancia Caribbean Environmental Health Institute Condensing-Extraction Steam Turbogenerator Comisión Federal de Electricidad CARICOM Heads of Government Combined Heat and Power Compression ignition Coconut Industry Development Authority Coal Integrated Gasifiers Ministry of Science, Technology and Environment (Cuba) Coconut Methyl Ester Common Organization of the Market Coconut Oil Carbon Dioxide Methane Chemical Oxygen Demand Council for Trade and Economic Development Caribbean Renewable Energy Development Program Caribbean Regional Negotiating Machinery Caribbean Single Market and Economy Caribbean Week of Agriculture UK Department for International Development 6

7 DME d/na DIY E5 E10 E25 E85 EBA EC ECLAC EDF EGS EGSB EIA EJ EPA EPA EPACT EPCC ESCOS EU EUR FAO FAOSTAT FEA FFA FFV FOB FSJ FTAA Gtons G2G GCNA GDP GHG GJ/ha GJ/ton GWh Ha HFO HOID HRSG IABA IC IDB IEA IICA IMF IMTF IPPC KOH Kwh LDCs LPG M 3 Direct Micro Expelling Data not available Do-it-yourself 5 Per cent Ethanol Blend 10 Per cent Ethanol Blend Minimum 25 per cent Ethanol Blend 86 Per cent Anhydrous Ethanol and 15 per cent Gasoline Everything But Arms European Commission United Nations Economic Commission for Latin America and the Caribbean European Development Fund Environmental Goods And Services Expanded Granular Sludge Bed Energy Information Administration (US) Exajoules Economic Partnership Agreement Environmental Protection Agency Environmental Protection Act Ethanol Program Consultative Committee Energy Service Companies European Union Euros Food and Agriculture Organization Food and Agriculture Organization Database Fiji Electricity Authority Free Fatty Acid Flex-Fuel Vehicle Free on Board Fiji Sugar Corporation Free Trade Areas of the Americas Giga tons Government-to-Government Grenada Cooperative Nutmeg Association Gross Domestic Product Greenhouse Gas Gigajoules per hectare Gigajoules per tons Gigawatts per hour Hectares Heavy Fuel Oil Hot Oil Immersion Drying Heat Recovery Steam Generator Inter-American Board of Agriculture Internal Combustion Engines Inter-American Development Bank International Energy Agency Inter-American Institute for Cooperation on Agriculture International Monetary Fund Inter-Ministerial Task Force Intergovernmental Panel on Climate Change Potassium hydroxide Kilowatts per hour Least Developed Countries Liquid Petroleum Gas Cubic Meters 7

8 MACC MDGs MFI Mha MIF MJ/kg ML MRET MSW MTBE MW NaOh NCIPP NGO Nm 3 NRI OAS OECD OECS OEM OLADE OPEC PAHO PAHs PCA PCA-DA PJ/year PPA PPO PRODAR PV RECs RFS RFS RPM Rs SI SIDALC SIDS SIDSNET SMEs SO 2 SRC STM SVO TTF TWG UASB UK UN UNDESA UNDP UNEP UNESCO UNFCCC Mainstreaming Adaptation to Climate Change Millennium Development Goals Micro-Finance Institutions Million hectares Multilateral Investment Fund Megajoules per kilogram Million liters Mandatory Renewable Energy Target Municipal Solid Waste Methyl Tertiary-Butyl Ether Megawatt Sodium hydroxide Nationwide Coconut Industry Promotions Program Non-Governmental Organization Cubic Nanometers Natural Resources Institute Organization of American States Organization for Economic Co-operation and Development Organization of Eastern Caribbean States Original Equipment Manufacturer Latin American Organization Organization of the Petroleum Exporting Countries Pan-American Health Organization Poly Acrylic Hydrocarbons Philippine Coconut Authority (Philippines) Petajoules per year Power Purchase Agreements Pure Plant Oil Rural Agro-Industry Development Program for Latin America and the Caribbean Photovoltaic Renewable Energy Certificates Renewable Fuel Standard Rural Financial Services Revolutions per Minute Indian Rupee (currency) Spark ignition Engine Sistema de Informacion y Documentacion Agropecuario de las AMericas Small Island Developing States Small Island Developing States Network Small and Medium Enterprises sulphur dioxide Scientific Research Council Sugar Technology Mission (Indian) Straight Vegetable Oil Energy and Environment Thematic Trust Fund Technical Working Group Up-flow Anaerobic Sludge Blanket United Kingdom United Nations United Nations Department of Economic and Social Affairs United Nations Development Programme United Nations Environment Programme United Nations Educational, Scientific and Cultural Organization United Nations Framework Convention on Climate Change 8

9 UNCCD UNCCBD US VAT VPN WEO World Bank WTO United Nations Convention on Combating Desertification United Nations Convention for the Conservation of Biological Diversity United States of America Value Added Tax Virtual Private Network World Energy Outlook International Bank for Reconstruction and Development World Trade Organization 9

10 TABLES & FIGURES List of Tables Table 2.2.1: Land Use and Agriculture in the Caribbean: Total area, arable land and land under permanent crops Table 2.2.2: Crop Production in the Caribbean Table 2.4.1: Liquid Petroleum Products Imports (000 s Bbls) Table 2.4.2: Electricity Prices For Select Caribbean Countries: Household and Industry Table 2.4.3: Quantities of Fuels for transportation 1985 thru 2004 Table 2.4.4: Selected Indicators of the Electricity Sector in Select Caribbean Countries (2003) Table 2.4.5: Proven Reserves and Production of Oil and Natural Gas in the Caribbean Table 3.1.2: Value of 2004 sugarcane crop as a mix of sugar, ethanol and electricity Table 3.2.1: Land Resources available for production of Feedstock (000 s hectares) (select Caribbean countries) Table 3.3.1: Biofuels: Current Costs and 2020 Projections (US cents/liter) Table 3.5.1: Potential Biofuels Feedstock Substitutes for Petroleum Fuels Table 4.0.1: Potential of Caribbean Countries as Biofuels Producers and Crop(s) Table 4.1.1: Regional Fuel Imports (000 bbl) (US$ 000 ) Table 4.2.1: Regional Gasoline Consumption (000 s Barrels) Table 4.2.2: Regional Diesel Consumption (000 s Barrels) Table 4.2.3: Fuel Consumption by Electric Utilities up to 5% per annum growth (million barrels) Table 4.2.4: Electricity from the Sugarcane Sector Table 4.2.5: Projected Production of plant oil from Jatropha Carcus Table 4.2.6: Value of Oil seed as substitute for Diesel Import based on 2004 Quantity Table 4.3.1: Estimated Cost of Ethanol Plants and operating costs Table 4.3.2: Biodiesel processing plant costs Table 4.3.4: Cost details of a 70,000 tons/yr Biodiesel Plant Table 4.5.1: Greenhouse gas mitigation by ethanol blends Table 5.2.1: Sugarcane yields, production and area cultivated (2005) Table 5.2.2: Sugarcane Production -- Five-Year Average and Percent Change Table 5.2.3: Quantity of Ethanol and Area producing Feedstock to substitute for Gasoline and Diesel in 2020 Table 5.2.4: Potential for electricity exports from bagasse based cogeneration Table 5.2.5: The Electricity Sector in Caribbean Countries (2003) Table 5.2.6: Potential of Electricity Generation from sugarcane and energy cane Table 5.2.7: Average Annual Wood Production and Derived Wood Products Table 5.2.8: Estimated Maximum Potential Power Generation from Sugar Cane Residues Table 5.4.4: Total Population, Agricultural Population and Rural Population Table 6.2.1: Estimated Budget List of Figures Figure 2.2.1: Dependence on Agricultural Export Earnings from a Single Commodity 1997/99 Figure 2.2.2: Recent Trends in Sugar World Prices Figure 2.2.3: Agricultural Commodity Prices Figure 2.2.4: Average Annual Rate of Growth of Total Caribbean Agricultural Production ( ) Figure 2.4.1: Percentage of export to pay for Fuel Import Figure 2.4.2: Mean Growth Rate of Installed Capacity and Net Generation ( ) Figure 3.1.1: Sugar Prices versus Oil Prices: Figure 3.2.1: Energy Input output ratio for Different Feedstock 10

11 EXECUTIVE SUMMARY 1. The Energy for Sustainable Development Challenge in the Context of Sustainable Agricultural Development, Food Security and Prosperity in Rural Communities The Caribbean region faces huge challenges arising from modern globalization, declining competitiveness, trade liberalization and eroding preferences, the rising cost of imported fuel, the revolution in information technology, and, very high vulnerability to natural disasters. Additionally, very high debt has placed 7 Caribbean countries amongst the 10 most indebted countries in the world, and 14 among the top The region is also heavily dependent on fossil fuel combustion, with petroleum products accounting for an estimated 93 per cent of commercial energy consumption. The islands of the Caribbean are predominantly net energy importers, with the exception of Trinidad and Tobago. Agriculture and natural resource extraction activities continue to constitute the basis of Caribbean economies, though the tourism and service sectors are growing. Meeting energy demand in 2004 required the importation of more than 163 million barrels of petroleum fuels raising concerns that continued high global oil prices with adversely affect efforts at economic expansion. The consumption of fuels to meet the region s energy needs in 2004 cost in excess of US$6.5 billion. This represents the largest expenditure on imports by the region. In response, some countries have been pursuing ways to better integrate their energy sector, with the sugar industry in an effort to capitalize on an outstanding opportunity for development of versatile indigenous renewable energy resources. Despite ongoing difficulties the sugar industry continues to be the largest and most significant component in the Caribbean region s agricultural sector. Sugarcane has been cultivated in the Caribbean for over three centuries, mainly for its commercial value as a sweetener. However, the experience from other countries indicates that sugarcane must now be viewed as a bioenergy resource that might be as valuable as sugar. The Caribbean region today derives less than 10 per cent of their Gross Domestic Product (GDP) from the agriculture sector but similar to most Small Island Developing States (SIDS), that sector accounts for approximately 31 per cent of employment. Agriculture GDP in fiscal 2005 fell slightly to US$803 million (from US$807.7 the previous year). Although the agricultural sector is one of the largest employers of labor and generator of foreign exchange from the exports of commodities to the United States (US) and the European Union (EU) under special agreements, the highest level of poverty is among workers in the agricultural sector. Dominated by traditional agricultural commodities such as sugar, coffee and bananas sold to historical markets, which are based on the region s colonial history, the agriculture sector is now in dire economic conditions in just about every country. It is worthwhile noting that the terms of trade for the region s historical commodities have changed significantly. For example, compared to the early 1970s, when the region could sell a ton of sugar for approximately US$400, and purchase approximately 100 barrels of oil, today, 10 barrels of oil for one ton of sugar is not unexpected. While these terms of trade are unfavorable, they are consistent with the historical trends and show the difficulty of governments to develop effective responses. As agriculture declined, so too did the situation in rural areas. 1 World Bank Report, A Time To Choose: Caribbean Development In The 21st Century 11

12 Table 1: Total Population, Agricultural Population and Rural Population (Select Caribbean Countries) Country Total Population (millions) 2 Agricultural Population Relative to Total (%) 3 Rural Population Relative to Total (%) 4 Antigua and Barbuda Barbados Belize Cuba Dominican Republic Guyana Haiti 2.9 dna 63 Jamaica Saint Kitts & Nevis St. Lucia St. Vincent and The Grenadines Suriname Trinidad & Tobago In order to continue to ensure that the Inter-American Institute for Corporation on Agriculture (IICA) plays a strategic role in assisting the Member States in their search for progress and prosperity through modernization of the agricultural and rural sectors, IICA will, among other activities, promote the incorporation of new technologies to support and improve the profitability of energy production in the agricultural sector. IICA recognizes that increasing energy prices poses a threat to rural development by reducing access to energy services that are a prerequisite for improving household income. Secondly, it takes increasing amounts of capital out of rural areas. The prevailing high prices of petroleum products in the world will result in increased interest in the production of agro-energy from agricultural products including sugar cane, fast growing trees, and oil seeds. Agro-energy, based on the global experience creates new job opportunities and has a positive impact on the environment In pursuant of the development of Agro-energy the IABA, at its Thirteenth Regular Meeting, held in Guayaquil, Ecuador, on August 30-31, 2005, agreed to the development of an hemispheric Programme on Agro-energy, as set out in RESOLUTION No. 410, which mandated the: Establishment of a platform for hemispheric cooperation at IICA to Promote Bioenergy Convene a meeting to discuss the importance of agro-energy and bio-fuels and their potentially favorable impact on agricultural development in and the economies of the Member States; Task force comprising experts from the Member States appointed by the Ministers of Agriculture, IICA personnel and strategic partners, and task them with drawing up a hemispheric program on bio-energy and bio-fuels, A proposal to the Executive Committee, at its Twenty-sixth Regular Meeting, on the resources required to support activities to be carried out under the aforementioned Program. 2 Human Development Report 2005 (data for 2003) 3 Food and Agriculture Organization of the United Nations (FAO), FAOSTAT on-line statistical service. Rome: FAO. Electronic Database available at: 4 FAO, Food and Agriculture Indicators 2003 Prepared by ESSA, October

13 In responding to the mandate given by the IABA, IICA undertook an evaluation of agro-energy as a viable option for renewable energy, and established a clear direction for the future with the formulation of a strategic plan for the development of an agro-energy program for the Caribbean region. This Strategy Document, in addition to addressing the technical, economic and social aspects of agro-energy, with recommendations for the development of liquid and solid biofuels industries, also helps to promote and sustain IICA s image as an innovator and promoter of new thought, and the leading Institute for agriculture and rural development in the hemisphere. 2. Objectives of the Strategy The rationale for advocating greater investment in agro-energy is that this approach builds the economic resilience of countries during a period where the international energy supply outlook forecasts continued high and rising cost of petroleum fuels in the future. In addition, is represents a potentially sustainable source of employment for workers with limited skills. The chief objective of the Strategy Document is to guide IICA in its efforts to help the Caribbean establish an agroenergy program toward the development of biofuels to meet national energy needs, whilst at the same time helping to modernize and diversify agriculture and rural sectors in the region, in order to increase competitiveness. The Strategy Document, based on the technical, social and economic aspects of agro-energy in the hemisphere and beyond, for the development of an agro-energy industry in the Caribbean, falls within one of the six thematic areas in IICA s Technical Agenda for Cooperation in the Caribbean, aimed at helping to reposition agriculture and rural life by developing sustainable industries and viable rural enterprises. The strategy targets countries of the Caribbean region that are members of the Small Island Developing States (SIDS), and are considered by the United Nations Committee for Sustainable Development as being very vulnerable and includes: Antigua and Barbuda, Bahamas, Barbados, Cuba, Dominican Republic, Dominica, Grenada, Guyana, Haiti, Jamaica, St. Lucia, St. Kitts and Nevis, St. Vincent and the Grenadines, Suriname, and Trinidad and Tobago {with the exception of Cuba and the Dominican Republic}, which constitute the Caribbean Community (CARICOM). The Strategy Document provides a living document for action over the next three to six years, to ensure progress in fulfilling IICA s mission, and fits within CARICOM s initiatives to formulate a comprehensive policy on agriculture within the framework of the Jagdeo Initiative for the strategic re-positioning of the region s vital agriculture sector - an Initiative for giving important effect to the Regional Transformation Programme for Agriculture which was approved by Caribbean Heads of Government at their Sixteenth Inter-Sessional Meeting in Suriname, in The agro-energy strategy focuses on the identification and consolidation of a set of complementary activities that take advantage of ICCA s current capacity and its experience in agriculture and rural development, while taking its limitations into consideration. The strategy includes a number of programs to support the development of biofuels industries across the region, particularly the sugarcane producing countries. Core strategies identified that would lead to the establishment of a successful and sustainable regional agro-energy program include: 1. IICA becoming the leading strategic Institution on Agro-energy in the Caribbean. 2. Promote Agro-energy in the Caribbean as an economically viable source of energy by introducing Liquid and Solid Biofuels Industries in sugarcane growing countries to produce liquid fuels and heat and/or power through combustion. 3. Build the sustainability of IICA to support agro-energy entrepreneurial activities of the economically disadvantaged that lead to sustainable livelihoods and a healthy environment. 4. Build IICA s organizational capacity to accomplish its mission the role of IICA. The Strategy Document includes a program aimed at positioning ICCA to help strengthen linkages between the agriculture and energy sectors in order to increase opportunities for energy 13

14 services in the Caribbean. IICA will assist countries in drafting integrated agro-energy policies to provide a framework for meeting growing energy needs in an economically, socially and environmentally sustainable manner. This would lead to identification of capacity needed for planning and implementation of Agro-energy/Biofuels policy. IICA would also implement a program to facilitate dialogue with the sugar industry leadership and electric utility representatives about the potential of Agro-energy, as well as other stakeholders and civil society in order to provide scientifically sound and politically unbiased analyses and conclusions needed for strategic decisions related to research or policy issues. Another program would be to provide countries with comprehensive information to assist with the development and deployment of biofuels industries by providing information on the development of emerging technologies, industry best practices and business opportunities in the agro-energy industry. Development of small and medium size liquid and solid biofuels enterprises provides an excellent opportunity for generating employment and revitalizing rural economies, as well as improving diffusion of technologies. The development of small- and medium-scale size liquid and solid biofuels enterprises would involve the provision of training to existing and prospective entrepreneurs in starting and managing business activities relating to biomass-based energy conversion, supply and maintenance services; providing training to other end-users in various uses of biomass energy; interfacing with research and development institutions engaged in biomass technology development, to provide ready access to relevant technological information, and; interfacing between local governing bodies/representatives, suppliers of biomass-based technologies, local financing institutions, entrepreneurs, and other end-users. A program to educate consumers about the benefits of Agro-energy/Biofuels industries is intended to help them make wise energy choices and to contribute to the effort as a whole. The public education and awareness program proposed would educate key public officials and the general public about biofuels and would also build regional and national coalitions that would form the nuclei of support groups that would promote and eventually lead to biofuels production and use nationally. Additionally, staging of a bi-annual regional conference would provide the mechanism for the exchange new ideas, analyze strategies, and allow agriculture, environment and energy professionals and other stakeholders within the Caribbean region to meet with each other. To achieve successful implementation of Agro-energy programmes at the national and local levels will require IICA to ensure that it is proactive, and that it increases its capacity in agroenergy management by training its professionals located in the Institute s member states. Given the limited institutional capacity that exists in the energy sector in the majority of the countries across the region, development of Agro-energy industries will require the provision of systematic long-term technical assistance. This support function is critical and one that IICA, as discussed earlier based on its institutional character is uniquely positioned to play. For IICA to play this supportive role it will need to undertake institutional strengthening, adding professional skills in energy planning and policy and strengthening information support capacity that allows IICA to effectively support Member states program. 3. Methodology The methodology to achieve the above outputs included: (a) laying out a clear framework for development of an Agro-energy program for the Caribbean Region; (b) discussions and consultations with experienced professional in Brazil, Cuba, India and US; (c) review of country experiences (Brazil, India, Philippines, Pacific Island Countries, Australia, United States, Cuba and Denmark), and; (d) desk review of national and international reports, particularly in sustainable development, energy, environment, and agriculture. The first phase in developing the strategy consisted of an assessment of the technical, social and economic aspects of Agro-energy/Biofuels. The assessment was based on the following information: 14

15 1. Country experiences developed and developing - on lessons learned in developing and implementing biofuels programs. 2. Analysis of Petroleum Energy Statistics in the Caribbean (16 Caribbean countries) PETSTATS CD-ROM Series No.1, Caribbean Energy Information System 2004 ; 3. Assessment of Caribbean countries Agro-energy/Biofuels production potential. 4. Assessment of the needs and priorities of the countries for meeting energy for sustainable development objectives. 5. Interviews and other consultations to complete the information generated from the desk reviews and country studies. The output of this initial phase was the production of a Technical Report titled, Technical, Social and Economic Aspects of Agro-Energy. In phase two, the Technical Report provided the basis for developing the Strategy Document and action plans and programs to address Agro-energy/Biofuels industries development needs of the countries. The Strategy Document, Strategy for the Development of an Agro-Energy Program for the Caribbean Region contains background on the IICA Agro-energy program, how it fits within the institution s established programs and how it would enable the Institute to become the leading strategic Institution on Agro-energy in the region. The document lays out the background to the IICA initiative and the rationale that: Helps explain why agro-energy is considered to be a sustainable option to help address rural development and energy security; Provides information on the current status of Agro-energy development in the region and beyond, to provide a proven basis for consideration by stakeholders in the countries that are interested in exploring the potential. Identifies and analyzes challenges and opportunities for Agro-energy development in the region especially those countries that have bananas and sugar as their major agricultural commodities or countries with adequate land space, and; Recommends the proposed approach to the development of agro-energy industries in the Caribbean region. 4. Caribbean Agriculture and Potential of Agro-energy/Biofuels Industries Agriculture, in general, and sugar in particular, is important in the economies in the region. Based on the proportion of the population in agriculture, Haiti is the most agrarian with 62 per cent. The least agrarian populations are found in Barbados (4 per cent) and Trinidad and Tobago (9 per cent). Countries with intermediate agricultural populations are Cuba (16 per cent), Dominican Republic (17 per cent), Jamaica (20 per cent) and St. Kitts and Nevis (24 per cent). The contribution of the agricultural sector to GDP is largest in Haiti (29 per cent), the Dominican Republic (11 per cent), roughly 6 per cent (in Barbados, Cuba, and Jamaica), and only 1 per cent in Trinidad and Tobago 5. Agricultural commodity prices generally remain close to historically depressed levels and their longer-term decline relative to the prices of manufactured goods continues. Caribbean countries say they will lose US$100 million dollars annually, as a result of the EU s decision to go ahead with cuts in the price of sugar exported to Europe by African, Caribbean and Pacific (ACP) states. Under proposals for the new sugar regime, the EU is proposing a 37 per cent price reduction for sugar exports from CARICOM and other countries of the ACP group, over a three-year period commencing in This assumes even greater importance because the EU sugar reforms will jeopardize 68,300 jobs in six main sugar producing countries in the Caribbean: Jamaica, Trinidad & Tobago, Guyana, Belize, Barbados and St. Kitts & Nevis. 6 LMC International predicts that in a 5 IICA 6 The Impact of the Reform of the EU Sugar Regime on ACP Sugar Industries. Final Report. LMC International January

16 worst-case scenario the sugar industry will collapse in all but one of these six countries. This represents a major survival challenge for many rural communities through the region In relation to energy services, increasing oil prices are having a dramatic effect on Caribbean economies. In September 2005, crude oil prices broke above $70 a barrel, approaching levels not seen in real terms since 1980, the year after the Iranian revolution. At the end of January 2006, the price per barrel of oil was $ In April 2006, crude oil traded in the UK, hit a record high of $74.22 a barrel which it set a new price peak, and in the US, oil prices leapt above $72 a barrel also settling at a record high. According to the U.S. Energy Information Administration (EIA), world crude oil prices are expected to stay high through 2007 because of strong petroleum demand, limited surplus oil production and refining capacity and concerns about supply disruptions due to geopolitical risks in countries like Iran 8. The region s consumption of petroleum fuel has increased from slightly over 116 million barrels in 1985, costing the region US$530 million, to over 160 million barrels in 2004, costing more than twelve times the 1985 costs (more than US$6.5 billion). The increase in consumption is driven by the expansion in population and economic growth. Clearly, a key goal of any sustainable development strategy has to be reduction of the present high cost of energy services, relative to the value of Caribbean exports of goods and services so that the countries can compete in the global economy. Based on successes in other developing countries, where energy cost are much lower than in the Caribbean, the potential for meaningful production of electricity from biofuels points to the possibility of viable biofuels industries across the entire region. One of the most promising ways to add value to sugarcane is to produce energy either as the principal or co-product in the processing system. This approach is currently viewed as attractive because of high energy prices, but the global experience shows that in many countries this approach was viable even without recent increases in energy prices because of the combined economic, social and environmental benefits. Sugarcane produces very large volumes of biomass (60-80 tons per hectare) and that biomass can be used as a clean burning fuel. Biomass provides an efficient and cost-effective way to collect and store solar energy in a solid form. It can be burned to release the stored energy as heat, or it can be thermally, chemically or biochemically processed to convert it into liquid and gaseous fuels, or into other solid fuels. Bagasse the fibrous residue remaining after juice has been extracted from the sugarcane stalk has been used to power the sugar factories for decades, but it can also be used to produce large quantities of electricity to meet a portion of the national demand. This is being done in some countries (such as India and Mauritius), but not extensively in the Caribbean sugar-producing countries (Belize and Guyana are reported to be considering such activities and Cuba has been doing research). Biofuels can help provide long-term term energy security through the use of locally produced feedstock at relatively constant cost that is in many cases is already cheaper than the fossil fuels they would substitute for. Moreover, because biofuels are locally produced by indigenous agroindustries, most of the money spent is retained within the national economy instead of going to foreign multi-national oil companies. Import substitution will have direct and indirect effects on GDP and the trade balance. The risks arising out of fluctuating crude oil prices adversely affecting the costs of production and transport of goods in the country can be minimized if indigenous agro-energy resources are used. 7 Energy Economics Newsletter, Crude Oil Futures Prices, NYMEX, January 31, 2006, 8 High global oil prices seen through 2007, Reuters, 16

17 Figure 1: Sugar Prices versus Oil Prices: Several studies by international institutions indicate that bioenergy will play a much larger role in energy supplies during the 21 st century. The contribution from biomass in the long-term given in these studies vary from 100 to 300 exajoules (EJ) 10 per year towards the total world energy consumption, which is projected to rise to nearly 500 EJ per year in 2025, and 700 EJ per year by Interest in biomass is intensified by the fact that bioenergy is essentially carbon-neutral and, unlike fossil fuels, it does not add to global warming. This is because the carbon dioxide released while burning biomass is equivalent to that absorbed from the atmosphere when it grows. Under the LESS constructions (Low CO 2 Emitting Energy Supply Systems), the Inter- Government Panel on Climate Change (IPCC) explored five possible energy supply scenarios to limit cumulative carbon dioxide emissions from 1990 to 2100, to 500 Gtons carbon. Biomass forms an important part of all five scenarios. In the most biomass intensive scenario, biomass supplies contribute 180 EJ/yr in 2050, which is nearly three times its present contribution and will form one-third of the total global energy. Two-thirds of this biomass will come from energy plantations and the other one-third will come from agricultural and agro-industrial residues. In this scenario, the developing countries will get half their energy supply from biomass. Advanced co-generation technologies like the Biomass Integrated Gasifier - Gas Turbine Combined Cycle plants (BIG-GT CC) will make it possible to more than double the electricity output from combustible biomass residues at a lower unit capital cost. In a United Nations Development Program (UNDP) study on Modernized Biomass Energy for Sustainable Development, Kartha and Larson (2000) estimate that residues from sugarcane (bagasse, leaves and tops) have the potential to generate more than half the electricity consumption in the Caribbean by Based on the historical relationship between sugar and oil prices which is 9 UNCTAD Secretariat 10 One Exajoule is equivalent to the energy content of 177,000 barrels of crude oil 11 (Johansson, 1993; Greenpeace, 1993; Shell, 1994; WEC, 1994; IPCC,

18 shown in Figure 1 above, the sugar industry transformed into an energy industry would have a much brighter economic future, exerting positive influence on the economy. Analysis of the 16 countries 2004 sugar production figures reveal that if the entire sugarcane crop were converted to ethanol, the quantity of ethanol produced would be around 3,000 million liters, which can substitute around 2,300 million liters of gasoline. The quantity of gasoline imported in 2004, was about 4,000 million liters, and the quantity of diesel 5,400 million liters. In addition to sugarcane and coconut crops which are expected to be principal sources of raw material for biofuels, given that these crops are already widely grown across the region, and have successfully been used, there are other potential crops that could be grown for the production of biofuels; these crops are listed in Table In addition to these crops, there is also a range of agricultural residue that is suited to the production of Agro-energy. Based on the analysis of fuel imports and use, the Caribbean has potentially viable biofuels industries in a number of countries, although with a different mix of products based on land resource endowment and national policy. The principal physical determinant of the potential of biofuels in any country is availably of land resources, labor force, and climatic conditions. The principal economic determinant of feasibility is the technological package (from production to processing), and the principal determinant of economic viability is government s policy. The potential Agro-energy industries that can be developed within the region were identified based on the existing markets for petroleum products, which can be effectively and viably substituted with biofuels. The identification of potential Agro-energy industries also includes the assessment of the raw material potentially available; the cost and reliability of the technologies that convert the biomass feedstock into intermediate form or final use form, and how these technologies impact the viability of biofuels production and use; and the institutional capacity at the national level. Further the potential industries identified for the Caribbean draws heavily on the success and lessons from the: Brazilian ethanol/sugar program started in the early 1980s, and which is the largest in the world; however, the US program is increasing rapidly and could equal or surpass Brazil in the next couple of years. Mauritius sugar industry co-production of electricity for export to the national grid. Substitution of plant oils in compression ignition vehicles in a number of the Pacific Islands, including Vanuatu, Samoa, Cook Islands, and the Marshall Islands. Production of solid biofuels from fast growing tree plantations in the Philippines and India. Swedish experience with public transportation using ethanol in compression ignition engines and the development of ethanol turbines for power generation The potential Agro-energy industries for the Caribbean are in two areas: liquid fuels for transportation and, solid fuels for electricity generation. The availability of sugarcane and the potential to produce even greater amount of biomass and the significantly amount of electricity that could be generated is shown in Table 2 and provides the basis for the solid fuels. 18

19 Table 2: Potential of Electricity Generation from sugarcane and energy cane 12 Island State Installed Power Capacity Quantity of Power Generation in 2004 Electricity generation from Biofuels Potential (sugarcane) * Electricity generation from Biofuels Potential (energy cane) ** MW GWh GWh GWh Bahamas Barbados Belize Cuba 3,957 15,909 4,800 9,600 Dominica Dominican Republic 3,290 13,489 1,109 2,219 Grenada Guyana ,200 dna Haiti Jamaica 767 2, Saint Kitts & Nevis St. Vincent and the Grenadines Suriname Trinidad & Tobago 1,417 6, TOTAL 10,891 41,343 7,643 15,286 Liquid Biofuels industries will consist of ethanol for replacement of gasoline in spark ignition engines and diesel in compression ignition engines, and biodiesel to supplement or replace diesel fuels in transportation and electricity generation. The sugarcane growing countries have the best potential to establish viable industries within the next three to five years. Preliminary assessment shows that an even greater number of countries can produce biodiesel and biogas. The three major goals of the Liquid Biofuels Industries Program are: 1. Ethanol Production to Achieve 10% Blend in Gasoline (550 Million Liters or 3.4 Million Barrels) by Ethanol production to achieve 25 per cent blend in gasoline (1,500 million liters or 8.5 million barrels by Production of 30 per cent of regional transportation fuels (7,000 million liters or 43.5 million barrels) by * Based on the 2004 crop yield and 100kwh/ton of cane milled ** Based on the use of energy cane rather than sugarcane on the same area of land. 19

20 Solid Biofuels industries most attractive market is for combined heat and power applications such as industrial zones, institutions like hospitals and hotels, as well as in the production of sugar and ethanol. Some countries, due to limited sugarcane production, may have to get supplemental biofuels to have viable heat and power generation industries. The three major goals of the Solid Biofuels Industries Program are: 1. Development of 50 per cent of the viable electricity potential from sugarcane by Development of small- and medium-size biofuels enterprises by Development of 100 per cent of the viable electricity potential from sugarcane by Potential Agro-energy industries include: 1. Ethanol production from sugarcane for gasoline substitution for use in two types of engines: Spark ignition (SI) engines that generally use gasoline/petrol as fuel - these engines are used in automobiles, small boats, aircraft and small electricity generating sets, and; Compression ignition (CI) engines that generally use diesel as fuel - these engines are used in medium- and heavy-duty trucks and buses, boats and ships, and diesel power plants; in the case of fuels for compression combustion engines, the use of ethanol in diesel engines used for public transportation. 2. Production of plant oils/biodiesel for substitution of diesel oil in compression ignition engines. 3. Electricity from different cogeneration technologies in sugar and sugar-ethanol plants for export to national grid or for private use -- based on the use of advanced cogeneration technology like the Condensing Extraction Steam Turbine (CEST) or the Biomass Integrated Gasifier-Gas Turbine Combined Cycle (BIG-GTCC). Plasma Gasification which would allow the use of waste derived fuel to supplement baggase and trash 4. Small- and Medium-Scale Liquid Biofuels Enterprises the liquid fuels produced would displace the use of petroleum liquid fuels for the production of heat, and/or the generation of electricity in small and medium businesses and institutions. This industry would provide alternate fuel and technology to help energy users replace diesel fuel in small package boilers to provide steam, and as a drying medium in kiln drying, generating off grid electricity for cooling and refrigeration, or metal fabrication. Institutions such as hospitals and schools and penal facilities use energy for a range of purposes including laundry, cooking, operation of equipment and appliances. They can obtain biodiesel from energy entrepreneurs producing it from various oil seeds (coconuts, castor, jatropha,), or from waste edible oils. The use of anaerobic fermentation for the production of low calorie but easily upgradeable biogas is also feasible. 5. Small- and Medium-Scale Solid Biofuels Enterprises a variation on the liquid fuels enterprises in which solid biomass in the form of wood, bagasse, other agricultural residues would be the feedstock. The small and medium scale industries would be convert these feedstock into either producer gas or biogas, which in addition to being a substitute for diesel fuel or heavy fuel oil, would also substitute for LPG and kerosene in food preparation, and for electricity in providing lighting and operating water pumping systems. Primary candidates would be small-and medium-size enterprises (SMEs), institutions, and businesses that generate waste biomass such as furniture producers, saw mills, and coconut processors. Even though in certain circumstances biofuels may at present be more expensive than its fossil fuel alternative, it still may make very good local and national sense to promote its production and use because of its multiple socio-economic and environmental benefits. The development of an Agro-energy/Biofuels industry can go a long way towards helping to meet basic developmental needs of all segments of the population. For example there is significantly higher economic value for sugarcane as an energy feedstock than as a sweetener. This is a result of the high energy content of the cane stalk, and the availability of technology to convert the sugarcane into fuels that displaces petroleum fuels, which are increasingly costly and volatile in price. The Technical Paper, Appendix 1, presented in significant detail, the socio-economic benefits of Agroenergy/Biofuels industries based on the international experiences. These include: 20

21 Improved wages for agricultural workers Sustainable employment generation Improved outlook for the agriculture sector Diversification of the national and regional economy Enhanced energy security There are three main challenges to the development of Agro-energy industry for the production of biofuels to replace imported petroleum fuel in the region. They are: the development of the institutional relationships between a number of state, private and community actors; ownership at the national and local levels; sustainable production of feedstock/raw material and its effective transportation; institutional capacity; supportive policies and legislation, and; decision making process. Despite these challenges, research from the Technical Paper shows that Agro-energy industries increases income generation opportunities at all stages of feedstock production, transportation and plant operation. Marginal and degraded lands could become more viable for sustained agricultural production through the production of feedstock that would be sold as feedstock for additional income. Other socio-economic benefits include support of traditional industries, rural economic diversification and the economic development of rural communities. In some cases, the increased use of biofuels can revive cultural traditions that were eclipsed by the fossil fuel era of the 20 th century. Environmental benefits of using biofuels include 13 : (a) Reduced soil erosion and improved conservation of biodiversity. (b) Conservation of natural resources by reducing pressure on finite resources and introduction of more sustainable agricultural systems. (c) Protection of fresh water supplies and reduced saline intrusion into ground water. (d) Increased terrestrial carbon sinks and reservoirs. (e) (f) Reduced GHG emissions due to fossil fuel substitution. Improvement in coastal ecosystem due to reduced deposition of sediments on reefs, mangroves, and seagrass beds. Biofuels therefore contributes to all the important elements of national and regional sustainable development including reduction in the production of greenhouse gases. For example, the blending of ethanol with gasoline and diesel for use in transportation, using 2004 as the baseline year, would reduce carbon dioxide emissions by 3.9 to 11.8 million tons, as the ethanol blend ratio rises from 10 per cent to 30 per cent. Some indicators of socio-economic sustainability of Agro-energy/Biofuels/Bioenergy programs are given in the Table 3 below Table 3: Selected indicators of sustainability of bioenergy programs 14 Category Impact Quantitative indicators, based on assessment of: Basic needs Improved access to basic services Families with access to energy services (cooking fuel, basic services. pumped water, electric lighting, milling, etc.), Income generating Opportunities Creation or displacement of jobs, livelihoods quality, reliability, accessibility, cost. Volume of industry and small-scale enterprise promoted, jobs/$ invested, jobs/ha used, salaries, seasonality, accessibility to local laborers, local recycling of revenue (through wages, local expenditure, taxes), development of markets for local farm and non-farm 13 For more details on cost benefits refer to the Technical Paper (Appendix 1) 14 S. Kartha, S. Larson, ED. (2000), Bioenergy Primer: Modernised Biomass Energy for Sustainable Development, United Nations Development Program, New York 21