Review of the Philippines’ Biofuels Act of 2006 (RA 9367)

Pollution Control Policy Evaluation Report

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 Table of Contents
I. Introduction…………………………………………………………………………………..3
II. Criteria…………………………………………………………………………………………..3
a. Efficiency………………………………………………………………………………….3
b. Effectiveness…………………………………………………………………………….4
c. Social Needs……………………………………………………………………………..4
III. Methodology………………………………………………………………………………….4
a. Efficiency………………………………………………………………………………….4
b. Effectiveness…………………………………………………………………………….6
c. Social Needs……………………………………………………………………………..7
IV. Integration/Results…………………………………………………………………………8
V. References……………………………………………………………………………………..10

List of Tables
Table 1. Ethanol target blends in pump gasoline in the Philippines Ethanol
target blends in pump gasoline in the
Philippines………………………………………………………………………………………………...4
Table 2. Philippines local retail price for gasoline and ethanol from June 2016
to April 2017………………………………………………………………………………………………5
Table 3. Social cost of CO2, 2015-2050 in 2007 dollars per metric ton CO2…6
Table 4. Market penetration ethanol blend rate………………………………………..7
Table 5. Achievement of biofuel blending targets………………………………………7

List of Figures
Figure 1. Philippine exposure map on climate change……………………………….8

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I. Introduction

With the purpose of achieving energy self-sufficiency and mitigation of

greenhouse gas emissions, Philippines enacted the Biofuels Act of 2006, also
known as the Republic Act No. 9367, which was signed into law in January 2007. It
mandates the blending of bioethanol to gasoline and biodiesel to petroleum diesel
(BOI, 2011).

The Act has the following specific objectives (IEA, 2014):

 To develop and utilize indigenous, renewable, and sustainably-sourced
clean energy sources to reduce dependence on imported oil;
 To mitigate toxic and greenhouse gas (GHG) emissions;
 To increase rural employment and income; and
 To ensure the availability of alternative and renewable clean energy
without any detriment to the natural ecosystem, biodiversity, and food
reserves of the country.

Blending for gasoline was initially introduced at 5% in 2009 (called E5), and it was
increased to 10% (E10) in 2011. It is planned to be increased to 20% by 2020 (DOE,
n.d.). The Act has imposed fiscal incentives that encouraged investments from the
local players. In 2015, there were eight distilleries producing bioethanol from
locally available materials, and another two distilleries became operational in 2016
(Corpuz, 2017).

Philippines contributes to about 0.31% in the total global GHG emission (SEPO,
2013). Nevertheless, the country ratified the Paris Agreement in 2017. The Paris
Agreement aims to strengthen the global response to the threat of climate change
by limiting the global average temperature to within 1.5°C above pre-industrial era
(UNFCCC, 2018). Through the Philippines’ Climate Change Commission (CCC), the
country submitted its initial Intended Nationally Determined Contributions, where
it commits to reduce emissions by 70% below its business-as-usual scenario by
2030 (Chen, 2017).

This policy evaluation will focus on the Act’s attainment of its objective concerning
the mitigation of toxic and greenhouse gas (GHG) emissions.

II. Criteria
a. Efficiency
The efficiency of the policy will be identified if the benefits of introducing such
policy is actually greater than the cost. An economic valuation of the cost-
benefit analysis of a policy is imperative to weigh out if it will be wise to expend
resources on the policy for a better return. This criteria should quantify how
much people are paying for the amount of carbon they save by consuming the
“cleaner” fuel versus the social cost of carbon, which represents the monetary
benefit per emission reduction. More formally, it is defined as a

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 comprehensive estimate of climate change damages to net agricultural
productivity, human health, property damages from increased flood risk, and
changes in energy system costs. It can also (US EPA, 2017).

b. Effectiveness
The effectiveness of the policy should be looked at to measure its performance
in achieving the policy’s objectives. As this paper focuses on the policy in the
context of it being a climate change policy, GHG emission comparison of the
use of biofuels will be compared to the use of fossil-based fuels to verify
mitigation of greenhouse gas emissions.

Moreover, attainment of this goal is a direct measure to the determined

commitment to reduce GHG emissions, as a party to the Paris Agreement.
Effectiveness can be measured if target blending is achieved as follows (Table
1).

Table 1. Ethanol target blends in pump gasoline in the Philippines (DOE, n.d.).
Year Blend, %
2009 5
2011 10
2015 10
2020 20
2025 20/85*
2030 20/85*
*aspirational & voluntary goal

c. Social Needs
This aspect will be looked at in a way if the society needs such a policy, in terms
of the effect of climate change in the socio-economic condition in the
Philippines. This should be based on factual data reported in several global
climate risk studies.

III. Methodology
a. Efficiency
To measure the efficiency of the policy, a cost-benefit analysis could be
conducted. In terms of climate change, a simple CBA should include the
amount of GHG reduction attained by implementing the policy, which can be
monetized by using an acceptable social cost of carbon, and the amount it
costed the people to achieve such reduction.

A simple CBA could be computed by:

𝐶𝑜𝑠𝑡𝑠 = 𝑃𝑢𝑚𝑝 𝑝𝑟𝑖𝑐𝑒 𝑜𝑓 𝑏𝑙𝑒𝑛𝑑𝑒𝑑 𝑓𝑢𝑒𝑙 − 𝑃𝑢𝑚𝑝 𝑝𝑟𝑖𝑐𝑒 𝑜𝑓 𝑔𝑎𝑠𝑜𝑙𝑖𝑛𝑒

Where:
The pump price is expressed in $/L

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and

𝐵𝑒𝑛𝑒𝑓𝑖𝑡𝑠 = (𝐺𝐻𝐺 𝑒𝑚𝑖𝑠𝑠𝑖𝑜𝑛 𝑜𝑓 𝑔𝑎𝑠𝑜𝑙𝑖𝑛𝑒

− 𝐺𝐻𝐺 𝑒𝑚𝑖𝑠𝑠𝑖𝑜𝑛 𝑜𝑓 𝑏𝑙𝑒𝑛𝑑𝑒𝑑 𝑓𝑢𝑒𝑙) ∗ 𝑆𝐶𝐶

Where:
The GHG emission is expressed in T/L
The SCC, or the social cost of carbon, is expressed in $/T

Data Needed:

Using the data provided by Corpuz (2017), the average local retail price of
ethanol versus gasoline is presented in Table 2.

Table 2. Philippines local retail price for gasoline and ethanol from June 2016
to April 2017.

Gasoline Ethanol Blended Fuel

Month-Year
Php/L Php/L Php/L
Jun-16 41.14 59.62 42.99
Jul-16 39.86 59.14 41.79
Aug-16 37.68 60.52 39.96
Sep-16 38.65 59.61 40.75
Oct-16 42.46 58.45 44.06
Nov-16 42.67 58.09 44.21
Dec-16 44.77 56.49 45.94
Jan-17 46.69 56.01 47.62
Feb-17 47.53 54.70 48.25
Mar-17 45.74 51.61 46.33
Apr-17 44.25 48.69 44.69
AVERAGE, Php/L 42.86 56.63 44.24
AVERAGE, US $/L 0.90 1.19 0.93

Using the average Philippine peso per US dollar rate in 2016 of Php 47.50 = $1
(BSP, 2018), the price of gasoline and blended fuel is equivalent to $0.90/L and
$0.93/L, respectively.

For the GHG emissions data, Wang et al. (2012) from the Argonne National
Laboratory summarized from several studies that sugarcane ethanol’s GHG-
emissions were between 40-62% less than the baseline gasoline. Looking at
the emissions data from Argonne National Laboratory’s Greenhouse gases,
Regulated Emissions, and Energy use in Transportation (GREET) 2018 Model,
gasoline’s life-cycle emission amounts to 0.54 kg CO2e/L. This translates to
0.324 kg CO2e/L for ethanol and 0.5184 kg CO2e/L for blended fuel, if we use
the conservative value of 40% reduction in emission.

The social cost of carbon was presented by US EPA (2017) as follows (Table 3).

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 Table 3. Social cost of CO2, 2015-2050 in 2007 dollars per metric ton CO2.
High Impact
Year (95th pct at 3%),
$/T
2015 $105
2020 $123
2025 $138
2030 $152
2035 $168
2040 $183
2045 $197

We can get the value from 2015 at $105, and adjust the value to 2016, same
reference year we used for the fuel pump prices. Using an average annual
inflation rate of 1.64%, the SCC is equivalent to $121.54 in 2016 dollar (Official
Data Foundation, 2018).

Computing the CBA, we get:

$0.93 $0.90 $0.03
𝐶𝑜𝑠𝑡𝑠 = − =
𝐿 𝐿 𝐿

$0.03
𝐶𝑜𝑠𝑡𝑠 =
𝐿

Using ethanol imposes an additional $0.03 per liter of fuel for the consumers.
On the other hand, the benefits is as follows:

𝑘𝑔𝐶𝑂2 𝑘𝑔𝐶𝑂2 $121.54 1𝑇𝐶𝑂2

𝐵𝑒𝑛𝑒𝑓𝑖𝑡𝑠 = (0.54 − 0.5184 )∗ ∗
𝐿 𝐿 𝑇𝐶𝑂2 1000𝑘𝑔𝐶𝑂2

$ 0.002625
𝐵𝑒𝑛𝑒𝑓𝑖𝑡𝑠 =
𝐿

Cost-Benefit Analysis:

The cost to the people for consuming one liter of blended fuel is greater by 11
times than the social benefit of reducing emission using this simple CBA
analysis.

b. Effectiveness
Effectiveness can be measured by observing the achievement of goals of the
policy. To see if the introduction of biofuels actually mitigates greenhouse
gases, we should look at the carbon dioxide equivalent (CO2e) emission of the
products. Several studies have quantified the amount of carbon dioxide
equivalent of the products (gasoline and bioethanol) by conducting a life cycle
analysis.

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 𝑁𝑒𝑡 𝐺𝐻𝐺 𝑒𝑚𝑖𝑠𝑠𝑖𝑜𝑛𝑠
= 𝐺𝐻𝐺 𝑒𝑚𝑖𝑠𝑠𝑖𝑜𝑛 𝑜𝑓 𝑔𝑎𝑠𝑜𝑙𝑖𝑛𝑒
− 𝐺𝐻𝐺 𝑒𝑚𝑖𝑠𝑠𝑖𝑜𝑛 𝑜𝑓 𝑏𝑙𝑒𝑛𝑑𝑒𝑑 𝑓𝑢𝑒𝑙𝑠

The data needed to compute this parameter is given above, as discussed in

efficiency.

𝑘𝑔 𝐶𝑂2 𝑘𝑔 𝐶𝑂2
𝑁𝑒𝑡 𝐺𝐻𝐺 𝑒𝑚𝑖𝑠𝑠𝑖𝑜𝑛𝑠 = 0.54 − 0.5184
𝐿 𝐿
𝑘𝑔
𝑁𝑒𝑡 𝐺𝐻𝐺 𝑒𝑚𝑖𝑠𝑠𝑖𝑜𝑛𝑠 = 0.0216
𝐿

Truly, the use of blended fuels reduces the GHG emission by about 4%.

We can also look at the blending target if it is being achieved from

implementation and through the years, which directly impacts the
computation of the total GHG emission reduction target of the Philippines
(Table 4).

Table 4. Market penetration ethanol blend rate (Corpuz, 2017).

Year 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Fuel
Ethanol,
87 150 219 283 369 454 479 490 574 605
Million
Liters
Gasoline,
Million 3,784 3,918 3,882 4,114 4,365 4,547 5,211 5,741 6,028 6,329
Liters
Blend
2.30 3.83 5.64 6.88 8.45 9.98 9.19 8.54 9.52 9.56
rate (%)

The actual blend rate can be contrasted with the target blending (Table 5).

Table 5. Achievement of biofuel blending targets.

Year Target Blend, % Actual Blend, %
2009 5 2.30
2011 10 5.64
2015 10 9.19
2020 20 n.d.
2025 20/85* n.d.
2030 20/85* n.d.

c. Social Needs
To realize the social need for such policy, we can look at the impact of climate
change to the Philippines.
Philippines is a country in the Pacific area and it is greatly affected by typhoons
that are strengthened by the worsening climate conditions. In 2013, it was hit by
typhoon Haiyan, which is considered to be the most powerful storm to make
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 landfall ever in global history. The typhoon was responsible for more than 6,300
lives lost, over 4 million displaced residents, and $2-billion worth of damages. The
Global Climate Risk Index 2015 listed the Philippines as the number one most
affected country by climate change. Figure 1 shows the Philippines exposure to
the threats of climate change (The Climate Reality Project, 2016).

Figure 1. Philippine exposure map on climate change.

Scientifically, GHG emission causes rise in global temperature that is proven to
effect weather conditions. Qualitatively, we can look at the vulnerability of the
Philippines to climate change by judging the exposure map (Figure 1).

IV. Integration/Results
Policy Evaluation with Respect to Each Criterion

a. Efficiency
Basing on the CBA conducted, the policy is not efficient in spending resources
to impose consumption of the “cleaner” fuel. The result of the CBA shows that
the people are actually paying more to reduce emission compared to the

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 valuation of the reduced risk from climate change resulting from such decrease
in emission.
The simple cost-benefit analysis made herewith may not accommodate all the
necessary assumptions to deduce a more comprehensive CBA, but for this
quick evaluation, the policy can be rated as non-efficient.
However, updated data on the assumptions may affect the result. For instance,
if the production cost of ethanol could be made competitive with the price of
gasoline, then GHG reduction would not entail any costs, thus could result to
positive benefits. Moreover, reassessment of the social cost of carbon for the
local setting could affect the result of the CBA.
b. Effectiveness

It is evident that bioethanol emits less GHG compared to gasoline and thus
results to reduced GHG emission. However, the target set was not met in the
years that passed, but the evident increase in blending shows that local players
are actively participating, and the Philippine’s bioethanol industry is trying to
keep track. In terms of effectiveness, the policy can be rated as well right
effective because of the active participation of key players.

c. Social needs

Evidently, people in the Philippines need to participate in global movement to

curb GHG emissions that greatly affect the weather conditions. The effect of
the extreme weather conditions to the livelihood of the people is catastrophic,
especially that the country mostly rely on agriculture. The efforts that the
country does in terms of renewable energy, even if its contribution to the
global scale is insignificant, is a step towards sustainability, which the people
need to ignite to create a greater impact. A 10/10 rate is given to this criteria
because of the apparent need of the country to reduce risks from climate
change-related catastrophes.

Overall, the Biofuels Act in the Philippines, in the context of it being a climate
change policy is providing the nation a solution to meet its intended nationally
determined contributions to the reduction of GHG emission. The policy
became a driver to the nation’s achievement of this goal.

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 V. References
Board of Investments [BOI]. 2011. Philippine Biofuels. Industry Studies Department, Board of
Investments, Philippines. Retrieved on November 15, 2018 from
http://www.philexport.ph/c/document_library/get_file?uuid=af62ccde-a504-48b5-8042-
518141b59201&groupId=127524
Chen, H. 2017. Philippines Joins the Paris Agreement on Climate Change. Natural Resources
Defense Council 2018. Retrieved on November 15, 2018 from
https://www.nrdc.org/experts/han-chen/philippines-joins-paris-agreement-climate-change
Corpuz, P. 2017. Philippines Biofuels Situation and Outlook. USDA FAS Global Agricultural
Information Network Report RP1713. Retrieved on November 15, 2018 from
https://gain.fas.usda.gov/Recent%20GAIN%20Publications/Biofuels%20Annual_Manila_Phil
ippines_10-18-2017.pdf
Department of Energy [DOE]. n.d. Philippine Energy Plan 2012-2030. Philippines Department
of Energy. Retrieved on November 15, 2018 from
https://www.doe.gov.ph/sites/default/files/pdf/pep/2012-2030_pep.pdf
Greenhouse gases, Regulated Emissions, and Energy use in Transportation [GREET]. 2018.
Gasoline blendstock from crude oil for use in US refineries. Argonne National Laboratory.
Retrieved on November 15, 2018 from https://greet.es.anl.gov/
International Energy Agency [IEA]. 2014. Republic Act No. 9367. Retrieved on November 15,
2018 from
https://www.iea.org/media/pams/philippines/PAMS_Philippines_biofuelsact2007.pdf
Official Data Foundation. 2018. Inflation calculator. Retrieved on November 15, 2018 from
http://www.in2013dollars.com/2007-dollars-in-2016?amount=105
Senate Economic Planning Office [SEPO]. 2013. GHG emissions at a glance. Senate of the
Philippines. Retrieved on November 15, 2018 from
https://www.senate.gov.ph/publications/AAG%202013-03%20GHG%20emission.pdf
The Climate Reality Project. 2016. How is climate change affecting the Philippines? Retrieved
on November 15, 2018 from https://www.climaterealityproject.org/blog/how-climate-
change-affecting-philippines
United Nations Framework Convention on Climate Change [UNFCCC]. 2018. The Paris
Agreement. United Nations Climate Change. Retrieved on November 15, 2018 from
https://unfccc.int/process-and-meetings/the-paris-agreement/the-paris-agreement
United States Environmental Protection Agency [US EPA]. 2017. The Social Cost of Carbon –
Estimating the Benefits of Reducing Greenhouse Gas Emissions. Retrieved on November 15,
2018 from https://19january2017snapshot.epa.gov/climatechange/social-cost-carbon_.html
Wang M., Han J., Dunn J.B., Cai H., and Elgowainy A. 2012. Well-to-wheels energy use and
greenhouse gas emissions of ethanol from corn, sugarcane and cellulosic biomass for US use.
Environmental Research Letters 7(2012) 045905 (13pp), IOP Publishing. doi: 10.1088/1748-
9326/7/4/045905

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