REPUBLIC ACT NO.

9367

“BIOFUELS ACT OF 2006”

The Biofuels Act or Republic Act (RA) 9367 was signed in January 2007 making

the Philippines the first country in Southeast Asia to have biofuels legislation in place.1 The use of

biofuels for transport is a major thrust of the Philippines to reduce the country's dependence on

imported fossil fuels and to mitigate greenhouse gas emissions. To pursue this objective, the

Congress enacted Republic Act. No 9367 otherwise known as the Biofuels Act of 2006. In

accordance to the mandate of the said law, the government is presently implementing the National

Biofuels Program (NBP) to promote investments in biofuel productions and encourage the

utilization of this product. Other activities that coincide with this program are the establishment of

support mechanisms to ensure adequate supply of feedstocks and the adoption of appropriate

technology for vehicles/engines to be able to use alternative fuels. 2

PURPOSE and OBJECTIVE

The Biofuels Act was legislated to develop and utilize renewable energy, to

mitigate toxic and greenhouse gas effects, to decrease the country’s dependence on imported fuel

and to increase rural employment and income. It mandated the incorporation of 1% biodiesel in

diesel and 5% bioethanol in gasoline by 2009.3 This Act provides for the phasing out of the use of

1
2016 USDA Foreign Agricultural Service GAIN Report
2
Biofuels. (n.d.). Retrieved October 16, 2017, from http://investphilippines.gov.ph/industries/agri-
business/biofuels/
3
OBACH, R. A. (n.d.). Philippine Mandates Renewable Fuel. Retrieved from
http://www.chemrez.com/petroleum/178-philippines-mandates-renewable-biofuel
harmful gasoline additives and specifies locally sourced biofuel components which shall be

contained in all liquid fuels. The text further provides for the establishment of the National Biofuel

Board and for its powers and functions. 4

OVERVIEW OF THE BIOFUELS ACT OF 2006

It is the declared policy of the State to reduce dependence on imported fuels with

due regard to the protection of public health, the environment, and the natural ecosystems

consistent with the country's sustainable economic growth that would expand opportunities for

livelihood by mandating the use of biofuels as a measure to: (a) Develop and utilize indigenous

renewable and sustainable-sources clean energy sources to reduce dependence on imported oil; (b)

Mitigate toxic and greenhouse gas (GSG) emissions; (c) increase rural employment and income;

and (d) Ensure the availability of alternative and renewable clean energy without any detriment to

the natural ecosystem, biodiversity and food reserves of the country. 5

Biofuels, like fossil fuels, come in a number of forms and meet a number of different energy

needs.6 The Biofuels Act of 2006 provides for the following definition of terms:

Bioethanol fuel - shall refer to ethanol (C2H30H) produce from feedback and other biomass.

Biodiesel - shall refer to Fatty Acid Methyl Ester (FAME) or mono-alkyl ester delivered from

vegetable oil, or animal fats and other biomass-derived oils that shall be technically proven and

4
F., F., & E. (n.d.). Biofuels Act of 2006 (Republic Act No. 9367). Retrieved from
https://www.informea.org/en/legislation/biofuels-act-2006-republic-act-no-9367
5
Section 2, Biofuels Act of 2006
6
Types of Biofuel. (n.d.). Retrieved from http://biofuel.org.uk/types-of-biofuels.html
approved by the DOE for use in diesel engines, with quality specifications in accordance with the

Philippine National Standards (PNS)

Bioethanol fuels - shall refer to the hydrous and anhydrous bioethanol suitably denatured for use

as motor fuel with quality specifications in accordance with the PNS;

Biofuel - shall refer to the bioethanol and biodiesel and other fuels made from biomass and primary

used for motive, thermal power generation, with quality specifications in accordance with PNS. 7

SALIENT PROVISIONS OF THE BIOFUELS ACT of 2006

A. Phasing Out of the Use of Harmful Gasoline Additives and/or Oxygenates

Within six months from affectivity of this Act, the DOE, according to duly accepted

international standards, shall gradually phase out the use of harmful gasoline additives such

as, but not limited to MTBE (Methyl Tertiary Butyl Ether). 8

B. Mandatory Use of Biofuels

The law also provides that all liquid fuels for motors and engines sold in the Philippines

must contain locally-sourced biofuels components as follows:

i. On Biodiesel - within three months from the law’s effectivity, a minimum of 1%

biodiesel blend in all diesel engine fuels sold in the country; within two years from

the law’s effectivity, a minimum of 2% biodiesel blend, upon the recommendation

of the National Biofuels Board (NBB)

7
Section 2, Biofuels Act of 2006
8
Section 4, Biofuels Acts of 2006
 ii. On Bioethanol- within two years from the law’s effectivity, a minimum of 5%

bioethanol blend in all gasoline fuel sold and distributed by every oil company;

within four years from the law’s effectivity, a minimum of 10% bioethanol blend

in all gasoline fuel sold and distributed in the country, upon the recommendation

of the NBB. 9

C. Acts Prohibited by the Republic Act 9367

• Diversion of biofuels, whether locally-produced or imported, to purposes other than

those envisioned in this Act

• Sale of biofuel-blended gasoline or diesel that fails to comply with the legally-mandated

minimum biofuel blend by volume

• Distribution, sale and use of automotive fuel containing harmful additives

• Non-compliance with established guidelines of the PNS and DOE adopted for the

implementation of RA 9367

• False labeling of gasoline, diesel, biofuels and biofuel-blended gasoline and diesel. 10

D. Penal Provisions

The DOE may impose administrative fines, suspend the operation of businesses and

confiscate and dispose any amount of products prohibited under RA 9367 and its

implementing issuances. Violators of RA 9367 are likewise penalized with one year to

five years of imprisonment and a fine ranging from a minimum of one million pesos (P1

million) to five million pesos (P5 million). 11

E. Government Agencies Charged with the Administration and Implementation

9
Biofuels Act of 2006 RA 9367. (n.d.). Retrieved from http://www.pnoc-afc.com.ph/faq.php
10
Biofuels Act of 2006 RA 9367. (n.d.). Retrieved from http://www.pnoc-afc.com.ph/faq.php
11
Biofuels Act of 2006 RA 9367. (n.d.). Retrieved from http://www.pnoc-afc.com.ph/faq.php
 The lead agency responsible for the Philippine Biofuels Program is the DOE. The country’s

biofuels strategy is expressed in the National Biofuels Plan (NBP) which is based on the

Philippine Energy Plan (PEP). The PEP reflects the Philippine government’s (GPH)

mission to ensure the delivery of secure, sustainable, sufficient, affordable and

environment-friendly energy to all economic sectors. The NBP, on the other hand, is a

preliminary assessment of the previous year’s NBP, and outlines the short-, medium- and

long-term plans of the National Biofuels Board (NBB). 12

i. Department of Energy (DOE)- The DOE is mandated to take appropriate and

necessary actions to implement the provisions of this Act

ii. National Biofuel Board (NBB)- The National Biofuel Board is hereby created. It

shall be composed of the Secretary of the DOE as chairman and the Secretaries of

the DTI, DOST, DA, DOF, DOLE, and the Administrators of the PCA, and the

SRA, as members. 13 The NBB shall have the following powers and functions:

a) Monitor the implementation of, and evaluate for further expansion, the National

Biofuel Program (NBP) prepared by the DOE

b) Monitor the supply and utilization of biofuels and biofuel-blends and recommend

appropriate measures in cases of shortage of feedstock supply for approval of the

Secretary of DOE.

c) Review and recommend to DOE the adjustment in the minimum mandated

biofuel blends subject to the availability of locally–sourced biofuels: Provided,

That the minimum blend may be decreased only within the first four years from the

12
2015 USDA Foreign Agricultural Service GAIN Report
13
Section 8, Biofuels Act of 2006
 effectivity of this Act. Thereafter, the minimum blends of the five percent (5%) and

two percent (2%) for bioethanol and biodiesel respectively, shall not be decreased;

d) Recommend to DOE a program that will ensure the availability of alternative

fuel technology for vehicles, engine and parts in consonance with the mandated

minimum biofuel-blends, and to maximize the utilization of biofuels including

other biofuels;

e) Recommend to DOE the use of biofuel–blends in air transport taking into account

safety and technical viability; and

f) Recommend specific actions to be executed by the DOE and other appropriate

government agencies concerning the implementation of the NBP, including its

economic, technical, environment, and social impact. 14

ECONOMIC AND ENVIRONMENTAL EFFECTS OF THE USE AND PRODUCTION OF

BIOFUELS

Efforts have been made in many countries, like Brazil, India and US, to search for

suitable alternative fuels. Likewise, several researches had long been conducted in the Philippines

in order to resolve pollution and the depletion of oil reserves. In 2006, the Biofuel Act was

implemented as part of the President’s energy independence program. However, the success of

utilizing indigenous and renewable fuels can be hindered with regard to its reliability, which arises

mainly from the issue as to what extent of improvement, must be undertaken and what cost-

effective technologies must be used in both biodiesel and bioethanol applications. 15

14
Section 9, Biofuels Act of 2006
15
Convento, D., Abacan, J. P., & Acio, F. M. (n.d.). Biofuels: A Review of Philippine Studies.
 A. Advantages

i. Incentives for Biofuel Producing firms

To encourage investments, fiscal incentives are provided by RA 9367. Entities

engaged in the plantation of biofuels feedstock are entitled to duty-free importation

and value added tax (VAT) exemption on all types of agricultural inputs and

machinery. Priority is also given to potential biofuels investors by government

financing agencies. Section 5.2 of the Biofuels Act allows ethanol importation

only up to four years after the 2009 blend implementation or 2013. RA 9367 does

not provide for biodiesel importation. In 2008, RA 9367 was strengthened with the

passing of the Renewable Energy Act or Republic Act 9513 (RA 9513). When the

Renewable Energy Act was signed, the country was already world’s second largest

producer of geothermal energy (next to the U.S.) and was also the first country in

Southeast Asia to establish a commercial wind farm as well as the first grid-

connected solar photovoltaic power plant. The GPH has set a goal to triple

renewable energy capacity by 2030. 16

ii. Engine Efficiency and Energy Independence

The reducement of hycrocarbon emissions enhances engine function. This

advantage is obvious and has no immediate drawbacks. If a country has the land

resources to grow biofuel feedstock, then it can produce its own energy. This ends

any dependence on fossil fuel resources, which are geographically limited to only

a few places in the world. Given the amount of conflict that occurs over fuel

supplies and prices, energy independence should have a net positive effect.17

16
2016 USDA Foreign Agricultural Service GAIN Report
17
Advantages of Biofuels. (n.d.). Retrieved from http://biofuel.org.uk/advantages-of-biofuels.html
 iii. Economic Security

Not every country has large reserves of crude oil. For them, having to import the

oil puts a huge dent in the economy. If more people start shifting towards biofuels,

a country can reduce its dependance on fossil fuels. More jobs will be created with

a growing biofuel industry, which will keep our economy secure. 18

For the transport sector: better vehicle performance, increased engine power, and

higher mileage; for the environment: cleaner emissions that meet clean air

standards; and for the agriculture sector: additional 3.5M jobs for coconut farmers

and 87,000 jobs for sugar planters and manufacturers.

iv. Lower levels of Pollution

Since biofuels can be made from renewable resources, they cause less pollution to

the planet. However, that is not the only reason why the use of biofuels is being

encouraged. They release lower levels of carbon dioxide and other emissions when

burnt. Although the production of biofuels creates carbon dioxide as a byproduct,

it is frequently used to grow the plants that will be converted into the fuel. This

allows it to become something close to a self-sustaining system. 19

v. Renewable

Most of the fossil fuels will expire and end up in smoke one day. Since most of the

sources like manure, corn, switchgrass, soyabeans, waste from crops and plants are

renewable and are not likely to run out any time soon, making the use of biofuels

efficient in nature. These crops can be replanted again and again. 20

18
Advantages of Biofuels. (n.d.). Retrieved from http://biofuel.org.uk/advantages-of-biofuels.html
19
Advantages of Biofuels. (n.d.). Retrieved from http://biofuel.org.uk/advantages-of-biofuels.html
20
Advantages of Biofuels. (n.d.). Retrieved from http://biofuel.org.uk/advantages-of-biofuels.html
B. Disadvantages

Pursuant to R.A. 9367, all liquid fuels for motors and engines sold in the Philippines shall

contain locally sourced biofuels components. 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. As specified in the Philippine Energy Plan (PEP)

of 2013-2030, the biodiesel blend mandate was expected to increase gradually throughout the

period to 5% by 2015; 10% by 2020; and 20% by 2025. 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%.

A more complete estimation of the economic welfare effects of raising the mandated biodiesel

blend should take into consideration the effects on other related markets and the existing

distortions and externalities in these other markets. For example, the increase in the pump price

of diesel will increase the demand for gasoline, a close substitute. To the extent that the EPDP

POLICY BRIEF 2016 – 06 ENERGY POLICY AND DEVELOPMENT PROGRAM (EPDP)

UPecon Foundation Biofuels Act of 2006 also mandates an ethanol blend for gasoline (10%

ethanol since 2012), it is highly likely that the marginal social cost of the blended gasoline is

above its market price.

i. Environmental and Health Impacts

We can also analyze the effect of the proposed increase in terms of its environmental

and health impacts. The potential environmental benefits result from the reduction in

greenhouse gas (GHG) emissions based on life cycle analysis, while the health benefits
 include savings in treatment cost and increased productivity and working life due to

the expected reduction in morbidity and mortality with the reduction in respiratory

illnesses with cleaner air.21

The recent increase in liquid biofuel production has stemmed from a desire to reduce

dependence on foreign oil, mitigate rising energy prices, promote rural economic

development, and reduce greenhouse gas emissions. The growth of this industry has

important implications for biodiversity, the effects of which depend largely on which

biofuel feedstocks are being grown and the spatial extent and landscape pattern of land

requirements for growing these feedstocks.

Current biofuel production occurs largely on croplands that have long been in

agricultural production. The additional land area required for future biofuels production

can be met in part by reclaiming reserve or abandoned croplands and by extending

cropping into lands formerly deemed marginal for agriculture. 22 Biofuel mandates may

increase global carbon emissions because deforestation goes up due to higher

agricultural and land prices. 23

ii. Monoculture

Monoculture refers to practice of producing same crops year after year, rather than

producing various crops through a farmer’s fields over time. While, this might be

economically attractive for farmers but growing same crop every year may deprive the

soil of nutrients that are put back into the soil through crop rotation.24

21
Alonzo, R. P. (n.d.). Welfare Effects of Higher-Blended Biodiesel on the Philippine Economy.
22
Wiens, J., Fargione, J., & Hill, J. (n.d.). Biofuels and Biodiversity.
23
Alonzo, R. (n.d.). Economic and Environmental Analysis of the Impact of Higher-Blended Biodiesel on the PH
Coconut Industry.
24
Advantages of Biofuels. (n.d.). Retrieved from http://biofuel.org.uk/advantages-of-biofuels.html
 iii. Shortage of Food

Biofuels are extracted from plants and crops that have high levels of sugar in them.

However, most of these crops are also used as food crops. Even though waste material

from plants can be used as raw material, the requirement for such food crops will still

exist. It will take up agricultural space from other crops, which can create a number of

problems. Even if it does not cause an acute shortage of food, it will definitely put

pressure on the current growth of crops. One major worry being faced by people is that

the growing use of biofuels may just mean a rise in food prices as well. 25

iv. Industrial Pollution

The carbon footprint of biofuels is less than the traditional forms of fuel when burnt.

However, the process with which they are produced makes up for that. Production is

largely dependent on lots of water and oil. Large scale industries meant for churning

out biofuel are known to emit large amounts of emissions and cause small scale water

pollution as well. Unless more efficient means of production are put into place, the

overall carbon emission does not get a very big dent in it. 26

v. Water Use

Large quantities of water are required to irrigate the biofuel crops and it may impose

strain on local and regional water resources, if not managed wisely. In order to produce

corn based ethanol to meet local demand for biofuels, massive quantities of water are

used that could put unsustainable pressure on local water resources.

vi. Use of Fertilizers

25
Advantages of Biofuels. (n.d.). Retrieved from http://biofuel.org.uk/advantages-of-biofuels.html
26
Advantages of Biofuels. (n.d.). Retrieved from http://biofuel.org.uk/advantages-of-biofuels.html
 Biofuels are produced from crops and these crops need fertilizers to grow better. The

downside of using fertilizers is that they can have harmful effects on surrounding

environment and may cause water pollution. Fertilizers contain nitrogen and

phosphorus. They can be washed away from soil to nearby lake, river or pond.27

IMPLEMENTATION OF THE LAW THROUGH THE YEARS

Despite declining fuel prices in recent years, Philippine consumers are not likely

experiencing the full benefit as a result of increasing ethanol and biodiesel prices. Already there

have been critics of the biofuels program claiming it has effectively raised pump prices. The new

Philippine government (GPH) under recently elected President Rodrigo Roa Duterte has indicated

its intention to review the country’s existing energy policy.

The Biofuels Act mandated that at least five percent ethanol comprise the annual

total volume of gasoline distributed by oil companies in the country by February 2009, increasing

to a 10 percent blend by 2011. The aspirational goal is to raise the ethanol mandate to E20 by 2020

and to E85 by 2025, according to the National Renewable Energy Program. Mainly due to

declining oil prices, in June 9, 2015, the DOE issued Department Circular No. 2015-06-0005

which temporarily waived the ethanol blend requirement for premium plus grade gasoline (with

min RON 97). The NBB reported that locally produced ethanol could not meet the country's

requirement. 28

27
Advantages of Biofuels. (n.d.). Retrieved from http://biofuel.org.uk/advantages-of-biofuels.html
28
2016 USDA Foreign Agricultural Service GAIN Report
COMMENDATIONS

As a promising alternative energy source, biofuel imparts a remarkable role for the

sustainability and security in energy sector. Strategies, including policy recommendations have

been set to put forward the development and implementation of biofuel by different countries.

Recent exploitation of Asian biofuels policy is one step towards destination. These types of activity

behind the biofuels would be the catalyst for the productiveness of policy set by individual territory

like Malaysia, Thailand, Vietnam, etc. This is the high time to standardize, policy recommendation

and implementation of biofuels taking into consideration on the feedstock, geographical location,

and availability. Pertinent comparison with well-established ASTM and European standards are

highly recommended. Sector wise (viz. transportation, industrial) bio fuel policy is now crucial as

well. Factors, which would be taking into account, prior to recommend a policy includes feed-

stocks available, biofuel infrastructure of the country, compatibility with present automotive

materials and performance and emission behaviour. 29

The recent increase in liquid biofuel production has stemmed from a desire to

reduce dependence on foreign oil, mitigate rising energy prices, promote rural economic

development, and reduce greenhouse gas emissions. The growth of this industry has important

implications for biodiversity, the effects of which depend largely on which biofuel feedstocks are

being grown and the spatial extent and landscape pattern of land requirements for growing these

feedstocks.

29
Masjuki, H., Kalam, M., Mojifur, M., & Shahabuddin, M. (n.d.). Biofuel: Policy, Standardization and
Recommendation for Sustainable Future Energy Supply. Retrieved from
http://www.sciencedirect.com/science/article/pii/S187661021301761X
 Current biofuel production occurs largely on croplands that have long been in

agricultural production. The additional land area required for future biofuels production can be

met in part by reclaiming reserve or abandoned croplands and by extending cropping into lands

formerly deemed marginal for agriculture. In the United States, many such marginal lands have

been enrolled in the Conservation Reserve Program (CRP), providing important habitat for

grassland species. The demand for corn ethanol has changed agricultural commodity economics

dramatically, already contributing to loss of CRP lands as contracts expire and lands are returned

to agricultural production.

Nevertheless, there are ways in which biofuels can be developed to enhance their

coexistence with biodiversity. Landscape heterogeneity can be improved by interspersion of land

uses, which is easier around facilities with smaller or more varied feedstock demands. The

development of biofuel feedstocks that yield high net energy returns with minimal carbon debts or

that do not require additional land for production, such as residues and wastes, should be

encouraged. Competing land uses, including both biofuel production and biodiversity protection,

should be subjected to comprehensive cost–benefit analysis, so that incentives can be directed

where they will do the most good.30

In the medium to long term, a review of the Biofuels Act of 2006 is in order, as

several economic studies (such as de Gorter and Just, 2009) point to the distortive effects of

mandates and subsidies in addressing climate change issues. Applied welfare economics suggests

that the best approach to correcting a distortion is to impose taxes or subsidies so that marginal

30
Wiens, J., Fargione, J., & Hill, J. (n.d.). Biofuels and Biodiversity.
private cost is made to align with marginal social cost. In the case of GHG emissions, the

appropriate action is to impose an environmental tax on the fuels that cause the emissions. The

proposal of imposing excise taxes on fuels (particularly diesel) being floated by the Department of

Finance is a move in the right direction. Meanwhile, the equity objective of uplifting the economic

well-being of coconut farmers is best met by agricultural policies that raise their productivity. 31

31
Alonzo, R. P. (n.d.). Welfare Effects of Higher-Blended Biodiesel on the Philippine Economy.