No.

1 June 2012

AFD HANOI
Background Papers
Biofuel issues in Vietnam
Contents
1 2 12
Introduction The Vietnamese context International benchmark and lessons learned

1. Introduction
1.1 Definition
The term Biofuel covers a wide range of fuels, produced from living organisms or from metabolic by-products (organic or food waste products). In order to be considered as a biofuel, the fuel must contain over 80 percent of renewable materials.(1) The term biofuel covers solid biomass, liquid fuels and various biogases.(2) However the more common recognition of biofuel in Vietnam is in regard to liquid fuels, including bioethanol and biodiesel. Within the scope of this background paper, only biogas and liquid biofuels will be considered. Biogas typically refers to a gas produced by the biological breakdown of organic matter in the absence of oxygen. There are two types of biogas: one type of biogas is produced by anaerobic digestion or fermentation of biodegradable materials such as biomass, manure, sewage, municipal waste, green waste, plant material and energy crops, thus comprises primarily methane and carbon dioxide. The other main type of biogas is wood gas, which is created by gasification of wood or other biomass and comprised primarily of nitrogen, hydrogen, and carbon monoxide, with trace amounts of methane. Bioethanol is an alcohol made by fermenting the sugar

15

Recommendation and policies options for scaling-up biofuel development in Vietnam

DISCLAIMER
This background paper was prepared under a consultancy contract signed between AFD and ICE (International Consulting on Energy) and RCEE (Research Centre for Energy and Environment) regarding the implementation of the support program to respond to climate change (SPRCC). The analyses and conclusions of this background paper do not reflect the official views of AFD or of the French Government.

(1) http://www.alternative-energy-news.info/technology/biofuels/. (2) Demirbas, A. (2009). Political, economic and environmental impacts of biofuels: A review. Applied Energy 86: S108S117.

BIOFUEL ISSUES IN VIETNAM

components of plant materials and it is made mostly from sugar and starch crops. With advanced technology being developed, cellulosic biomass, such as trees and grasses, are also used as feedstock for ethanol production. Ethanol can be used as a fuel for vehicles in its pure form, but it is usually used as a gasoline additive to increase octane and improve vehicle emissions. Bioethanol is widely used in the USA and in Brazil. Biodiesel is made from vegetable oils, animal fats or recycled greases. Biodiesel can be used as a fuel for vehicles in its pure form, but it is usually used as a diesel additive to reduce levels of particulates, carbon monoxide, and hydrocarbons from diesel-powered vehicles. Biodiesel is produced from oils or fats using trans-esterification and is the most common biofuel in Europe.

1.2

Different generation of biofuel

First-generation (conventional) biofuels are biofuels made from sugar, starch, vegetable oil, or animal fats using conventional technology. The basic feedstock for the production of first generation biofuels are often seeds or grains such as wheat, which yields starch that is fermented into bioethanol, or sunflower seeds, which are pressed to yield vegetable oil that can be used in biodiesel. These feedstock could instead enter the animal or human food chain, and as the global population has risen their use in producing biofuels has been criticized for diverting food away from the human food chain, leading to food shortages and price rises. Besides, first- generation biofuels are not cost competitive with existing fossil fuels such as oil, and some of them produce only limited greenhouse gas emissions savings. Second generation biofuels are made from biomass consisting of the residual non-food parts of current crops, such as stems, leaves and husks that are left behind once the food crop has been extracted, as well as other crops that are not used for food purposes (non food crops), such as switch grass, jatropha, algae(3) and cereals that bear little grain, and also industry waste such as woodchips, skins and pulp from fruit pressing, etc.(4) Thus, it is expected that the production of second generation biofuels will be more sustainable and affordable, and without threatening food safety and biodiversity.

2.
2.1

The Vietnamese context

The Vietnam development scheme

2.1.1 Vietnamese Renewable Energy Policy

Energy is one of the most important sectors in the economy of the country and the dynamics of the process for national development. With economic growth as the sweeping social, in the
(3) Some researchers consider algae fuel as the third generation of biofuels, however both the second and third generation biofuels are based on the non-food crop and commercialability principle, thus there is no substantial difference between two categories. (4) Oliver R. Inderwildi, David A. King (2009). Quo Vadis Biofuels. Energy & Environmental Science 2: 343.

Background Paper No. 1

BIOFUEL ISSUES IN VIETNAM

development process, Vietnam has been considering energy security at top priority. With the limitation in exploitation and use of new fossil energy, renewable energy (RE) sources are considered an important alternative, with exploitable renewable energy resources amounting to about 2,200 MW for small and micro hydropower; 60-100 MW of solar; 2,200 MW of wind; 305-405 MW of biomass and 262-340 MW of geothermal energy.(5) However, despite the high potential of RE resources, so far their contribution in electricity production in Vietnam is still negligible: excluding the power generation from large hydropower plants (capacity larger than 30 MW), the total electricity generation capacity from RE was only 287 MW in 2006, accounted for approximately 2% of the total generation capacity nationwide. Renewable energy is more popular in less developed regions, especially rural off-grid areas. At the end of 2005, the energy development plans in the period from 2006 to 2015, with vision to 2025 for electricity, coal, oil and petrol-gas sectors were completed and approved by the Prime Minister in 2007 and 2008. On 27 December 2007, The Prime Minister promulgated Decision No. 1885/QD-TTg on the approval of the Strategy on National Energy Development up to 2020, with vision to 2050. According to this strategy, Vietnam is relatively endowed with multiform renewable energy (RE) resources which are distributed through-out the country. They can be exploited for production of energy to meet rapidly increasing energy demand as well as environmental protection. The Government has affirmed the policy of renewable energy as the key task during the industrialization and modernization of the country. It strives to increase the share of renewable energy in total commercial primary energy from 3% in 2010 to 5% in 2020 and 11% in 2050.

2.1.2 The governments biofuel policies

Biogas Biogas projects always receive the support from related governmental agencies due to its contribution to the implementation of the National Strategy on Environment Protection with the main orientation to halt pollution acceleration, remedy degraded areas and improve the environment quality and ensure sustainable development of the country is achieved; guarantee that all people are entitled to live in an environment with good quality of air, land and water measuring up to standards stipulated by the State; and the contribution to the implementation of the Renewable Energy Action Plan(6) of Ministry of Industry and Trade (2002) by promoting biogas development as a clean energy for rural and mountainous areas.

(5) Draft Strategy and Master Plan for Renewable Energy Development period to 2015, with outlook to 2025 (a.k.a. Renewable Energy Master Plan - REMP). (6) http://www.esmap.org/filez/pubs/vietnamesmap25216.pdf.

Background Paper No. 1

BIOFUEL ISSUES IN VIETNAM

Liquid biofuels In 2007, the Government of Vietnam issued the Decision No. 177/2007/QD-TTg on the Scheme on Development of Biofuels up to 2015 with the Vision to 2025. In accordance with the Decision, the overall objective of the Scheme is to develop biofuels as a new and renewable energy to partially replace conventional fossil fuels, so that contributing to assuring energy security and environmental protection. Within the scope of the Scheme, biofuels are defined as liquid fuels such as ethanol, methanol, and biodiesel. The Decision set out specific objectives to each development period as summarized below

To 2010
Legal framework - Formulation of legal systems to promote industrial scale production and utilization of biofuels - Raising public awareness on biofuels - Develop road map on using biofuels to partially replace fossil fuels - R & D towards mastering technologies on biofuel production from biomass, blending, and increasing conversion efficiency Ready for initial implementation

From 2010-2015

Vision to 2025

Technology

- Mastering the production of materials and additives for biofuel production - Mastering the state-of-art fermentation technology - In-depth technical staff in major areas related to biofuel production processes - General skilled technicians ready for biofuel production

Human resource

Feedstock preparation

- Planning and development of - Developing raw material raw material areas areas under planning - Mastering the production of - Large scale production of high yield plant seeding high yield plants - Pilot models on production - Popular use of biofuels to and utilization of biofuels replace fossil fuels - Annual capacity: 100 ktons E5 - Scaling up the production and 50 ktons B5 and distribution network - By 2015: output of ethanol and vegetable oil will reach 250 ktons (blendable to 5 million tons of E5 and B5) - Biofuel technology at the state-ofthe- art level in the world - Output of ethanol and vegetable oils will reach 1.8 million tons

Outputs expected

Background Paper No. 1

BIOFUEL ISSUES IN VIETNAM

To facilitate the implementation of the Biofuel Development Scheme, the Ministry of Finance and Ministry of Industry and Trade promulgated Circular 147/2009/TTLT-BTC-BCT on the management and usage of the States budget in the implementation of the Scheme. On 17 July 2009, the Ministry of Industry and Trade promulgated Decision No. 3638/Q BCT on establishing a Task force to develop standards and technical regulations on the production, storage, distribution and use of biofuels. On 30 September 2009, the Ministry of Science and Technology issued the Circular No. 20/2009/ TT-BKHCN on the promulgation of the national technical regulation on gasoline, diesel fuel oils and biofuels following QCVN 1:2009/BKHCN. On 25 March 2010, the Directorate for Standards, Metrology and Quality issued Decision No. 400/ QD-TDC on the guidelines for standard-compliance certification of gasoline, diesel and biofuels following QCVN 1:2009/BKHCN.

2.1.3 The actual Research and Development (R&D) projects

Biogas Biogas technology was introduced into Vietnam in the early 1960s. Many biogas digester models were developed and widely disseminated by various local research and development institutions such as the Institute of Energy, the Vietnam Garden Association (VACVINA), the Technology and Agro-Forestry Universities in Hanoi, Ho Chi Minh, Da Nang, and Can Tho city, the National Agricultural Extension Center, and the provincial Departments of Science and Technology (DOSTs). Liquid fuels R&D projects in Vietnam in the last 10 years focused on the conventional biofuels, including ethanol from sugar or starch (Lam Son Sugar Co., Binh Tay Alcohol Co., Saigon Petro, Chi Hung Co.), and biodiesel from catfish oil (Agifish An Giang, Minh Tu Co., VAMCO Biochemical Co., Thien An Co.). In the recent two years, R&D activities have been expanded to the second-generation biofuels, with pilot projects on producing ethanol from agricultural by-products (seeds of cotton tree, tiboca tree) and biodiesel from non-food parts of crop (jatropha curcas L. tree, seeds of rubber trees) or residuals (waste cooking oil). On 15 September 2008, the Petrochemical and Biofuels Joint-stock Company (PVB) first introduced the gasohol E5 for pilot sale at two retail gas stations in Hanoi. The E5 gasohol was blended at a ratio of 95:5 in volume between the popular gasoline types A95/A92 and ethanol imported from China, and sold to 50 four-seat and seven-seat taxis in a trial period of 6 months. After the results from the E5 trial sold were carefully studied and accepted by the Ministry of Trade and Industry, and the technical standards for E5 and B5 were officially issued in 2009, Vietnam Oil Corporation (PVOil) has conducted a pilot sale of E5 and B5 across the six major cities and provinces in Vietnam including Ho Chi Minh, Hanoi, Can Tho, Da Nang, Vung Tau, Nha Trang.

Background Paper No. 1

BIOFUEL ISSUES IN VIETNAM

Starting in 2009, the Ministry of Industry and Trade invited research institutions and enterprises to submit proposals on biofuels for review and approval under the Biofuel Development Scheme. A total state budget of 43,376 million VND was approved and granted to organizations and individuals responsible for implementing 22 R&D projects and 5 pilot production projects under the Scheme period 2009-2011. A list of projects is given in the table below.

Name of project
Research and select some sweet sorghum varieties with high productivity, good quality for ethanol production Assess the potential of seaweed in Vietnam as materials used in fuel ethanol production Study on the technology to produce micro-algae as the raw material for biodiesel production Study on application of modern technology to produce fuel ethanol from paper materials wood waste Research to create the recombinant E. coli strains carrying encoded genes PDC and ADH II from zymomonas mobilis fermentation ethanol from sugar C5 and C6 Assess the current situation and propose policies to encourage development of biofuels industry in Vietnam Research to synthesize super acid solid catalyst for biodiesel production base in the catalytic reaction scheme of fixed atmospheric pressure Research to synthesize heterogeneous catalysts for the production of biodiesel from used cooking oil and catfish fat Study on developing a process technology for producing biodiesel from waste vegetable oil Study on technologies to produce bio-fuel from waste vegetable oil of food processing industry by method of cracking with multicapillary solid catalitic acid Evaluate the potential of biofuel production from biomass sources Evaluate the commercial potential of 5% ethanol blended gasoline (E5) with trial production scale of 500,000 liters Using simulation method to design an E100 ethanol production plant using Vietnams cassava slices as feedstock Develop routines and technology to produce biodiesel based on the blend of technical ethanol 96% and diesel Study on the technology to produce ethanol from molasses using cell-fixing method in a continuous fermentation system

Category
R&D R&D R&D R&D R&D

Duration
2009-2011 2009-2011 2009-2011 2009-2011 2009-2011

R&D R&D

2009-2010 2009-2010

R&D R&D R&D

2009-2010 2009-2011 2009-2010

R&D Pilot Production R&D R&D R&D

2009-2010 2009-2010 2010-2011 2010-2011 2010-2011

Background Paper No. 1

BIOFUEL ISSUES IN VIETNAM

Study and propose mechanisms to encourage the use and consumption of clean fuels (biofuels, LPG, CNG) in transport Completion of technological routines and pilot production of the ethanol E100 using adsorption method Completion of technological routines and modernization of a technological system to produce biodiesel B100 from

R&D Pilot production Pilot production

2010-2011 2010-2011 2010-2011

Jatropha seeds
Completion of technological routines and pilot production of the additives to resist the delamination and corrosion for gasohol E5 Research technology and equipment to produce biodiesel B100 by the method of homogeneous-imitated continuous flow Research technology of waste oil esterification process to produce biodiesel and develop models for application in enterprises Research technology and equipment for production of biodiesel from agricultural by-products and residues (straw, sawdust ...) by thermal-chemical method Research technological solutions and manufacture pilot equipment system to convert small and medium-sized marine diesel engine to use a mixture of vegetable oil DO oil Research technology and equipment for converting marine boilers to use a mixture of vegetable oil DO oil Compatibility study of old generation engines in using gasohol with more than 5% of ethanol E100 Research technology to produce biofuel from rice husk using pyrolysis method with fluidized reactor Completion of technological routines for blending, producing and develop pilot distribution network for B5 biodiesel. Pilot production R&D R&D R&D 2010-2011 2011-2012 2011-2012 2011-2012

R&D

2011-2012

R&D R&D R&D Pilot production

2011-2012 2011-2012 2011-2012 2011-2012

The Ministry of Foreign Affairs in cooperation with the Ministry of Industry and Trade on behalf of the Government has signed a Protocol between the Government of Vietnam and the Government of Brazil dated 27 February 2008 on technical cooperation in the field of ethanol production and utilization. Within the framework of this Protocol, the two parties have carried out actual survey in Hanoi, Danang and HoChiMinh to seek opportunities to develop cooperation projects on ethanol. Vietnam has sent two delegations of state managers and enterprise managers to Brazil to visit sites with ongoing ethanol production, blending, storage, transport and distribution. The two sides have build up a cooperation plan on receiving high-yield sugarcane varieties and advanced farming techniques to develop material zones of Brazil. The two parties have planned to organize Vietnam-Brazil workshops to exchange technologies for ethanol production, blending, storage, transport and distribution.

Background Paper No. 1

BIOFUEL ISSUES IN VIETNAM

2.2 Implementation and supporting scheme

2.2.1 Governmental financial support
Biogas Beside the subsidies provided to households for the construction of biogas units within the Biogas Development Program, the Government of Vietnam also provides financial support to other R&D and pilot activities within biogas through the Fund for Science and Technology. Liquid fuels The total State budget for the implementation of a Biofuel Development Scheme in the period 2007-2015 is about 259.2 billion VND, equivalent to 28.8 billion VND each year(7). The budget is intended for fundamental research and disseminating applications on biofuels. Organizations and enterprises investing in biofuel research and production can obtain subsidies from the Government through the exemption of corporate income tax with biofuel product sales (in accordance to Decree No. 24/2007/ND-CP), a 20 year land use tax reduction, and import tax exemption for raw materials and equipment used for biofuel production.

2.2.2 CDM financing

The National Biogas Development Program was developed as a Program of Activities (PoA) for carbon financing and is currently in the validation phase. There are seven CDM projects registered with the EB. All are based on the utilization of biogas recovered from wastewater of starch processing facilities to replace fossil fuels. Carbon finance is also considered for the bioethanol plants of PetroVietnam in Quang Ngai (Dung Quat plant) and Binh Phuoc provinces (capacity 100 million liters/year for each plant), using cassava starch as feedstock.

2.2.3 International financing mechanisms

International financing for biofuels comes in either governmental ODA or private investment. Governmental ODA The Government of Netherlands has provided a 2.5 million Euros grant to the national BDP phase I, and has committed on a 5.4 million Euros grant to the national BDP phase II. Another 17 million USD equivalent loan will be provided by the Asian Development Bank to the national BDP phase II to finance the construction of new biogas units.
(7) Industrial Review of Vietnam interviewed Dr. Nguyen Phu Cuong Deputy DG of Department of Science and Technology of MOIT on the implementation of Biofuel Development Scheme, 22 June 2009 (http://www. tapchicongnghiep.vn/News/PrintView.aspx?ID=21860).

Background Paper No. 1

BIOFUEL ISSUES IN VIETNAM

Private investment So far there are no statistical figures on private investments by international institutions in biofuels in Vietnam. An example of such an investment is the joint venture between Petro Vietnam and the Japanese Itochu company in a bioethanol plant in Ba Ria Vung Tau province.

2.2.4 Vietnamese case studies

Program name: National Biogas Development Program, phase I(8) Date of implementation: 2003-2012 Objectives and scope of the project: - Exploiting effectively biogas technology and developing a commercially viable biogas sector in Vietnam; - Contributing to rural development and environmental protection via provision of clean and affordable energy to rural households, improvement of communitys sanitation and rural peoples health, creation of jobs for rural laborers and reduction of greenhouse gas emissions. Main outputs and lessons learned: It is estimated that the project will provide clean and cheap energy equivalent to 2.800TJ per year. This energy can replace 245.000 tons of agricultural waste/ 326.000 tons of firewood/ 36.000 tons of charcoal/ 6.593 tons of kerosene/ 39.405MWh and 4.611 tons of LPG. By the end of 2008, the project has supported construction of over 56,000 biogas plants nationwide, provided training for 500 provincial and district technicians, 700 biogas mason teams, and organized thousands of promotion workshops and trainings for biogas users. The project was awarded Energy Globe Award 2006, which is the most reputable and honored award to a project having significant contribution to reduce global warming.

Program name: ENERFISH - Integrated Renewable Energy Solutions for Seafood Processing Stations(9) Date of implementation: 2008 Objectives and scope of the project: To develop and demonstrate integrated renewable energy solutions for a fish-processing plant, based on high efficiency polygeneration using fishwaste derived biofuel, and based on environmentally safe cascade cooling/freezing using CO2. Main outputs and lessons learned: The project is ongoing. Intermediary outputs can be found from the project website.

(8) http://www.biogas.org.vn. (9) http://enerfish.eu

Background Paper No. 1

BIOFUEL ISSUES IN VIETNAM

Program name: Dong Xanh fuel ethanol plant (Quang Nam province) Date of start production: 2010 Capacity: To build up a 100,000 tons/year of ethanol. Main outputs and lessons learned: The plant starts production on September 2010 and officially in operation on 2 April 2011. This is the first successful ethanol plant in Vietnam. The plant is using cleaner production technology and following strict environmental protection requirements. This plant also received 100 billion VND State preferential loans to invest in a wastewater treatment system.

Program name: Phu Tho Bio-ethanol plant Date of start construction: 2009 Objectives and scope of the project: To build up a 100 million liters/year fuel ethanol plant, using 260,000 tons of cassava slices. Main outputs and lessons learned: This is the first fuel ethanol in Northern Vietnam. It is currently under construction. The plants products include ethanol 99.7%, bio-fertilizer, purified CO2, for food industry, and biogas, which will be distributed to the Northern Vietnamese market. Vietnam Oil Company (PV Oil, a company under Vietnam National Oil and Gas Group PetroVietnam) and SEA bank have invested in this plant. Hence it represents interest in the biofuel sector from both large companies and banks in Vietnam.

Program name: Dung Quat Bio-ethanol plant (Quang Ngai province) Date of start production: February 2012 Capacity: 100 million liters/year of ethanol. Main outputs and lessons learned: The plants products include ethanol 99.7%, feedstock, purified CO2 for food industry, biogas, and will distributed to the Central Vietnam market. Companies under PetroVietnam (PV Oil, BSR, PVFC, Petrosetco) have invested in this plant which is located near Dung Quat Oil Refinery (another unit under PetroVietnam).

Program name: Binh Phuoc fuel ethanol plant Date of start construction: 2010 Objectives and scope of the project: To build up a 100 million liters/year fuel ethanol plant, utilize 260,000 tons of cassava slices.

10

Background Paper No. 1

BIOFUEL ISSUES IN VIETNAM

Main outputs and lessons learned: The plant is under construction and expected to be completed in April 2012. The plants products include ethanol 99.7%, bio-fertilizer, purified CO2 for food industry, biogas, and will distributed to the Southern Vietnam market. A joint venture between Vietnam Oil Company (PV Oil), LICOGI 16 and ITOCHU Corporation (Japan) has invested in this plant. This is the first international cooperation project in producing biofuels, showing interest of international corporation with investment in biofuel in Vietnam. When completed and in production, the plant will utilize 260,000 tons of cassava slice from local farmers, helping them to increase income and improve living standards.

2.3 Barriers to the development of biofuel in Vietnam

Technological barrier Most ethanol production facilities are based on old or obsolete technologies, with non- synchronous equipment and low production capacity, leading to high energy consumption and low output rate. In addition, by using only conventional food crop as the feedstock, the production cost is not competitive to the conventional fossil fuels. Biodiesel production facilities usually utilize obsolete oil filtering technology with low rate of oil recovery, making the price of immediate products significantly high and not economic for blending. Mastering blending technology is also a challenge to Vietnam at the moment. Human resource barrier The lack of human resources needed for biofuel production, including skilled workers and senior technical experts in related areas also limit the capacity of R&D and production. Land availability The development of biofuels, from 1st or 2nd generation, requires dedicated land for the production of biomass. However, available land for biomass production is limited in Vietnam, due to existing agriculture and policies on maintaining a sufficient forest cover in the country. According to the General Statistics Office, the land area under agriculture and forestry already expanded rapidly from 16.4 million hectares (ha) in 1990 to 24.8 million ha in 2005 and remaining unused land is concentrated in upland areas. Competition is already tough between urbanization and agricultural development, as the country is lacking some agroalimentary products while seeking to preserve its place as exporter for others. Vietnams food safety itself might be threatened in the long term by the loss of productive agricultural land if no good land management is in place, especially as a consequence of the urban extension in the two deltas areas, worsened by the increase of population with higher living standards, combined with expected consequences of climate change in Vietnam. In addition, switching from producing low profitability food crops to producing high profitability biofuel crops may result in price increases for some essential food categories.

Background Paper No. 1

11

BIOFUEL ISSUES IN VIETNAM

Finally, the development of agriculture for biofuels on marginal land outsets the economic profitability of those biofuel technologies as the productivity of the land is necessarily limited, considering it is marginal. All of this may plead for focusing the public concern on the technologies that value agricultural by-products rather than on the development of specific new productions. Other barriers Other barriers to the development of biofuels include: limited financial resources, loose collaborations between relevant entities in R&D, limited international cooperation activities in R&D and implementation, legal framework and incentives on the investment in clean energy in general and the utilization of biofuels in particular.

3. International benchmark and lessons learned

3.1 Market development at international level
3.1.1 Local and regional experiences
In China, biofuels have been seriously considered as an alternative to fossil fuels. The government has promulgated policies on promoting the investment in clean energy and environment friendly technologies. By 2003, gasohol E10 was officially used in five large cities and was expanded to 9 more populated provinces. By the end of 2005, the largest ethanol production facility with capacity of 600,000 tons per year has come into operation. It is expected that the total production of ethanol as fuel will reach 10 billion liters by 2020. Thailand is a pioneer among Asian countries in establishing policies to promote biofuel production and use in an attempt to reduce its dependency on oil imports and to capitalize on its supplies of feedstock from its vast agricultural production. The country started a Royal R&D project on ethanol and a biodiesel effective production from palm oil in 1985. In 2001, a National Ethanol Committee led by the Minister of Industry was established to coordinate the national program on biofuel development. However, Thailands biofuel work plan and development had not materialized until petroleum oil prices began to sharply escalate in 2004. The current 15-year ethanol and biodiesel plans are based on the Alternative Energy Plan 20082022. According to the plan, the government set targets of ethanol production of 3.0 million liters/ day from 2008-2011, 6.2 million liters/day in the medium-term from 2012-2016, and 9.0 million liters/day in the long term from 2017-2022. The targets of biodiesel production (B100 biodiesel) are set at 1.35 million liters from 2008-2010, 3.02 million liters/day in 2011, 3.64 million liters/day in 2016, and 4.50 million liters/day in 2022. Ethanol production in Thailand is produced from feedstock of sugar molasses and tapioca products, while B100 biodiesel from palm oil products only. Ethanol production is estimated at 528 million liters in 2011 while consumption should be limited at 439 million liters. The outlook for ethanol

12

Background Paper No. 1

BIOFUEL ISSUES IN VIETNAM

production is on an upward trend in 2012 another 5 new ethanol plants with a capacity of 1.8-1.9 million liters/day in total will be added to the 19 existing plants. B100 biodiesel production in 2011 is estimated to grow by 3 percent or 680 million liters, the lowest in the past few years which grew 8 percent in 2010 and 36 percent in 2009. B100 production is totally absorbed by domestic consumption and as a result Thailand does not export or import biodiesel. Although it is too early to estimate B100 production due to yield vulnerability on the fresh palm harvest which will be determined by the weather conditions up to early 2012, Post believes that B100 production should further increase to 800-820 million liters in 2012. Thailand also promotes biomass energy for heat and power generation in recent years through the granting of licenses to approved private companies in order to sell electricity to the Electricity Generating Authority of Thailand (EGAT). Feedstock used for these projects is mainly agricultural The neighboring country, Malaysia, expects to have five plants producing biodiesel from palm oil by 2015, with a total capacity of up to 1 million tons for domestic demand and export to EU. Another country, Indonesia, plans to popularize biodiesel B5 in the entire country, with feedstock from traditional palm oil farms and from10 million jatropha curcas planting.

3.1.2 Worldwide development

About 50 countries all over the world produce and utilize biofuels at different level.(10) The total production in the world reached 90 billion liters of ethanol in 2011, and 22 million tons of biodiesel (B100) in 2010.

Brazil was the first country to use ethanol as a fuel at industrial scale in 1970. Gasohol E25 is the most commonly used fuel in the country and fully replaces the conventional gasoline. More than 3 million cars in the country utilize 100% ethanol as fuel. Such a success in biofuel development is a result from the governments Proalcool program which commenced in 1975. Brazil produced about 30 billion liters of ethanol in 2010. The United States is the largest ethanol producer in the world. In 2010, the country produced more than 50 billion liters of ethanol and about 6 billion liters of biodiesel. The government has a subsidy scheme for the use of biofuels, which allows tax reduction rates of 0.5 USD and 1 USD per gallon of ethanol and biodiesel respectively.

3.2

Environmental and social impacts of biofuel

3.2.1 General impacts of biofuels development

Recently in a number of countries, the logic of mass production of biofuels and corresponding policies were called into question, because these were allegedly not taking into account potential
(10) Why biofuels have not been interested in Vietnam?. Online, 23 July 2007 (http://www.sinhhocvietnam.com/ vn/modules.php?name=News&file=article&sid=1063).

Background Paper No. 1

13

BIOFUEL ISSUES IN VIETNAM

negative impacts on the environment and ecosystems. Certain environmental associations alerted the general public and governments to the dangers of non-controlled biofuel development. Specically targeted were deforestation of virgin forest for planting oil palms in Indonesia, overturn of native pastures, deforestation in Brazil, or intensive corn growing in the United States that did not take good agricultural practices into account and also displayed excessive consumption of water and fertilizer. Such controversy has driven countries calling upon biofuel imports from outside, such as the United Kingdom, to lower their targets. Transparent criteria for sustainable biofuel production are therefore crucial for future development perspectives.

3.2.2 CO2 emission

The environmental impact of biofuel in term of GHG emissions is still a controversy due to different approaches used. The FAO report, The State of Food and Agriculture in 2008, indicates that depending on the methods used to produce the feedstock and process the fuel, some crops can even generate more greenhouse gases than do fossil fuels.(11) The figure below illustrates the GHG emission reductions by using biofuels to replace fossil fuvels differentiated by types of feedstock, locations, and production methods.

FIGURE 23. REDUCTIONS IN GREENHOUSE GAS EMISSIONS OF SELECTED BIOFUELS RELATIVE TO FOSSIL FUELS
Sugar cane, Brazil Second-generation biofuels Palm oil Sugar beet, European Union Repeseed, European Union Maize Maize, United States of America

-100

-90

-80

-70

-60

-50

-30 -40 -20 -10 Percentage reduction

Note: Excludes the effects of land-use change

Sources: IEA, 2006, and FAO, 2008d.

(11) 11 ftp://ftp.fao.org/docrep/fao/011/i0100e/i0100e05.pdf. (12) See : ADEME. Analyses de cycle de vie appliques aux biocarburants de premire gnration consomms en France. February 2010.

14

Background Paper No. 1

BIOFUEL ISSUES IN VIETNAM

In France, the ADEME (Agence de la Matrise de lEnergie et de lEnvironnement) recently completed a comprehensive study on the life cycle benefits and impacts of first generation biofuels in France.12) The study highlights significantly the extreme complexity of the evaluation process from the seed to the wheel for 1st generation biofuels. As a general result, and without taking into account the impacts of modifications in land use, the biofuels produced in France allow reduced energy consumptions and present better greenhouse gases balance than conventional fossil fuels, but with significant differences depending on the technology. The study conducted by ADEME in France also underlines the impacts of modifications in land use which can be discriminating. When the development of cultures for energy conducts, directly or indirectly, to the disappearance of grassland, wetland or primary forests the greenhouse gas balance of biofuel can be negative compared to conventional fossil fuels.

3.2.3 Sustainability criteria

The sustainability criteria, stipulated in article 17 of the European Union renewable energies directive, aim to guarantee that the biofuels used in Europe are compliant with environmental, social and economic criteria. The biofuels in question must not be produced from raw materials being derived from land of high value in terms of biological diversity such as virgin forests, areas allocated for the protection of ecosystems or rare species and native pastures with high biodiversity. They shall not be produced from raw materials being derived from land with high carbon stocks, such as wetlands (covered by or saturated with water) and continuously forested areas of more than one hectare. Finally, the Commission shall present a report every two years, to the European Parliament and the Council, on the impact of increased demand for biofuel on sustainability in the EC and in third countries, as well as on the impact of the EU biofuel policy on the availability of foodstuffs at an affordable price, in particular for people in developing countries, and on wider development issues.

4. Recommendation and policies options for scaling-up biofuel development in Vietnam

As mentioned above, the use of biofuel as an alternative for fossil-fuel products may have both positive and negative impacts to the food security and the climate change abatement. Thus, scaling-up biofuel development in Vietnam shall be considered carefully and objectively, based on the specific practices and perceptions in Vietnam.

Background Paper No. 1

15

BIOFUEL ISSUES IN VIETNAM

4.1

Policies supporting the development of biofuels in Vietnam

4.1.1 Completion of legal framework for biofuels

The Scheme on Development of Biofuels up to 2015 with the Vision to 2025 only provides a general orientation on the targets for each period and the prioritized list of activities. It is expected that a road map for biofuel development shall be completed soon in order to provide detailed instructions on needed steps to achieve the set targets, and a workable implementing plan to follow. Besides, it is also expected that the sources of funding for biofuel projects will be well defined. By reviewing the progress of biofuel development in Vietnam following the Scheme in the last three years, the following actions are recommended to complete a legal framework for biofuels: Carry out reviews (focusing on reviewing documents related to management of petroleum producing and trading activities), build up and promulgate or submit to competent authorities to promulgate legal documents that support biofuel producing and trading projects. Build up detailed incentives and support policies for production of biomass feedstock for biodiesel production. (Ministry of Industry and Trade to preside; Ministry of Agriculture and Rural Development, Ministry of Planning and Investment and Ministry of Finance to cooperate). Build up a plan for fuel ethanol production to serve biofuel production industry. (Ministry of Industry and Trade to preside; Ministry of Agriculture and Rural Development, Ministry of Planning and Investment and Ministry of Finance to cooperate). Build up a plan for raw material plantation development to supply the biofuel production industry. (Ministry of Agriculture and Rural Development to preside, Ministry of Industry and Trade to cooperate). Build up and promulgate standards and technical regulations related to producing and utilizing biofuels (Ministry of Industry and Trade to preside; Ministry of Science and Technology and Ministry of Transport to cooperate). Build up a roadmap for implementation of mixing biofuels with traditional fuels in mandatory percentage. (Ministry of Industry and Trade to preside; cooperation with other related Ministries to submit to Government in November 2011). Build up and promulgate or submit to competent authorities to promulgate incentives mechanisms for ultilizing clean fuel in Vietnam. (Ministry of Industry and Trade to preside; Ministry of Planning and Investment and Ministry of Finance to cooperate).

4.1.2 Promoting the use of biofuel as an environment-friendly alternative to fossil- fuel products
In the recent years, the investment from both public and private sectors in biofuel increase significantly, not only on R&D but also on industrial-scale production. However, people still raise

16

Background Paper No. 1

BIOFUEL ISSUES IN VIETNAM

questions in regard to the safety of the biofuels, the negative effects of using biofuels for the combustion engines and fossil-fuel based devices (such as automobiles, electric generators etc.), and the economics of producing and using biofuels in terms of cost-benefit and food safety. It is recommended that the Government of Vietnam shall review all achievements and experiences from pilot/try-out programs in Vietnam relating to biofuels, then provide to the public: (i) an assessment on the benefit of biofuels vs. side effects; (ii) technical advice on how to better use biofuel to replace fossil fuels; and (iii) guidance on the good varieties/seedlings and recommended soils suitable for biofuel raw material production. For biogas, the Government shall promote the localization of biogas processing products and components, and shall develop a National Program on biogas to coordinate all biogas programs in the country.

4.2

Sustainable raw material supply for biofuel production

With the new policy on biofuel development, there is a need to expand the areas for production of raw material for biofuel. However, land available for agricultural production is very limited, and any cultivation dedicated to biofuels will be detrimental to other types of crop production. a) Cassava for ethanol production In 2011, cassava fresh root production in Vietnam was about 9.40 million tones, up from only 1.99 million tones in 2000. This was achieved through both area expansion (from 237,600 to 555,700 ha) and marked increases in yield (from 8.36 t/ha in 2000 to 16.91 ton/ha in 2011). When all the new ethanol factories of PetroVietnam will come into operation, each factory will consume about 240,000 tons of chip starch/year, accounted for around 16% of the total cassava produced in 2012 and up to 35% by 2015. With the introduction of gasohol E10 to the market, it is expected that by 2025 about 48% of the cassava production will be used for ethanol production(13) However, the cassava production area will be reduced to around 450.000 hectares between 2011 to 2015, thus to maintain fresh root production the Ministry of Agriculture and Rural Development (MARD) has planned to put an effort on increasing fresh root yield from 16,90 to 23.00 - 24.00 ton/ ha in 2015 (MARDs Annoucement No. 7256/TB- BNN-VP dated 25 December 2009).(14) The targeted yields are actually achievable comparing with the current yield in Thailand, but more efforts should be put on R&D activities.

(13) http://www.baomoi.com/Info/Vai-tro-cua-nhien-lieu-sinh-hoc-doi-voi-phat-trien-nong- nghiep-va-nongthon/45/4015248.epi (in Vietnamese). (14) Bo, N.V. et al. Current situation of cassava in Vietnam and its potential as a Bio-fuel. Working paper presented at IFAD/ICRISAT Project Launching Meeting Harnessing wateruse efficient bio-energy crops for enhancing livelihood opportunities of smallholder farmers in Asia, Africa and Latin America, hosted by ICRISAT- Patancheru, 502 324, Andhra Pradesh, India, 1-2 May, 2008, updated and renews 20 Dec. 2009.

Background Paper No. 1

17

BIOFUEL ISSUES IN VIETNAM

Due to its high adaptivity to poor soils, low rainfall and low-value crop, cassava planting tends to be moved to less favourable areas, in which the yield may be low and with high demand from foreigners, the reserve for biofuel production might be affected. To avoid the conflict in policy in regard to biofuels, it is advisable that MOIT shall work closely with MARD and related business associations (VCCI, exporter associations, etc.) to secure the soils reserved for cassava production and the quantity of chip starch for ethanol production. b) Raw materials for biodiesel production Vietnam has a variety of raw materials suitable for biodiesel production, but most of them are also suitable for producing vegetable oils (palm, rapeseed, coconut, sesame, etc.) which can be sold at higher prices, and thus is not feasible to use for biodiesel production. Therefore, options for biodiesel raw materials stay in oil plants (jatropha, algae) or residues from production/process (agricultural by-product, catfish fat-oil, used cooking oil). As the production of biofuel from residues may not be stable due to the supply, here we only focus on the oil plants as raw materials for biodiesel production. Jatropha Related researches and studies have demonstrated that biodiesel from jatropha can satisfy most technical requirements of the fuel for combustion engines and only minor modification are needed. Besides, biodiesel from jatropha is clean and environmentally friendly, and provides more heat rate than the oilseeds. Each 4 kg of jatropha seeds can produce a liter of pure biodiesel, and generate 20,000 kcal of heat when burning out. However, there are two major challenges relating to the jatropha plantation: the seeds itself, and the purchasing price of the jatropha seeds. To avoid the conflict with agricultural cropping, jatropha planting is encouraged in the mountainous regions or barren lands, so that it can also help preventing soil erosion and runoff of sand. Many pilot jatropha planting projects have been carried out, but as jatropha is a half- wild plant immigrated to Vietnam in the last century and just getting attraction in recent ten years, no convincing proofs on the productivity and economic benefits have been provided. In many cases, even the productivity of seeds was high but the oil content of the seeds was low and not profitable for biodiesel production.(15) Therefore, it is necessary to have a good policy toward multiplication of high oil content seeds through selection and cloning to preserve good genetic traits. In regard to the purchasing price of jatropha seeds, the Government has to deal with the pricing paradox: to encourage the jatropha plantations in the country the purchasing price should be attractive, but the production costs of biodiesel from jatropha seeds will be increased and may not be competitive with the traditional petrol-based diesel. However, if looking into the socio- economicenvironmental benefits (more jobs in poor areas, reducing petroleum import dependence, less environmental impacts, contribution to climate change mitigation), it is recommended that the Government shall provide financial support to the planting of jatropha.
(15) http://www.kinhtenongthon.com.vn/Story/khoahoccn/2008/9/14318.html

18

Background Paper No. 1

BIOFUEL ISSUES IN VIETNAM

So far the Jatropha development project, led by the Ministry of Agriculture and Rural Development, is still in the orientation phase for plantation development. The Ministry of Industry and Trade have received and evaluated some project in jatropha plantation development and biodiesel plant build up. The Green Energy Company, PetroVietnam, and some local authorities have carried out pilot jatropha plantations in October 2010 as a basis for development of raw materials for biodiesel production. Microalgae Biodiesel and bioethanol produced from agricultural crops using existing methods cannot sustainably replace fossil-based fuels, but there is an alternative. According to related research and study, biodiesel from microalgae seems to be the best renewable biofuel having the potential to completely displace petroleum-derived fuels without adversely affecting supply of food and other crop products. Most productive oil crops, such as oil palm, do not come close to microalgae in being able to sustainably provide the necessary amounts of biodiesel. The oil content of microalgae can be up to 77% of dry weight and growing rate is much higher than other crops, commonly double their biomass in 24 hours(16). Therefore the oil yield from microalgae is much higher than other crops (see table below). Comparison of some sources of biodiesel(16)

Crop
Corn Soybean Canola Jatropha Coconut Oil palm Microalgae (a) Microalgae (b)

Oil yield (liters/ha)

172 446 1190 1892 2689 5950 136,900 58,700

a) Microalgae with 70% oil (by weight) in biomass b) Microalgae with 30% oil (by weight) in biomass

However, the technology for farming microalgae in large scale is still undergoing studying and not yet widely applied. Achieving the capacity to inexpensively produce biodiesel from microalgae is of strategic significance to an environmentally sustainable society. Extensive efforts are already underway to achieve commercial-scale production of microalgal oil. Some positive progresses have been reported, such as the use of the biorefinery concept and advances in photobioreactor engineering to lower the cost of production and increase application scale.

(16) Chisti, Y. (2007) Biodiesel from microalgae. Biotechnol. Adv. http://www.massey.ac.nz/~ychisti/Biodiesel.pdf (17) Miguel A. Altieri. Agroecology: principles and strategies for designing sustainable farming systems. URL: http://www.cnr.berkeley.edu/~agroeco3/principles_and_strategies.html.

Background Paper No. 1

19

BIOFUEL ISSUES IN VIETNAM

In Vietnam microalgae is only produced in experimental scale, and some a few results have been reported from this type of material in Vietnam. Doctor Truong Vinh from Ho Chi Minh University of Agriculture and Forestry has researched on using Chlorella algae to produce oil and achieve positive results.

4.3 Gradually shifting to agro-ecology production

The real challenge to make biofuel crops climate-compatible is to shift to agro-ecology to maintain productivity in the long term. The main principles of agro-ecology include:(17) Enhance recycling of biomass and optimizing nutrient availability and balancing nutrient flow. Securing favorable soil conditions for plant growth, particularly by managing organic matter and enhancing soil biotic activity. Minimizing losses due to flows of solar radiation, air and water by way of microclimate management, water harvesting and soil management through increased soil cover. Species and genetic diversification of the agro-ecosystem in time and space. Enhance beneficial biological interactions and synergisms among agro-biodiversity components thus resulting in the promotion of key ecological processes and services. Through the application of agro-ecological principles, the basic challenge for sustainable agriculture to make better use of internal resources can be easily achieved by minimizing the external inputs used, and preferably by regenerating internal resources more effectively through diversification strategies that enhance synergisms among key components of the agro- ecosystem. These principles can be applied by way of various techniques and strategies. For biofuels, a long term strategy shall be considered to ensure the sustainable production. The following options shall be taken into account: Maintain vegetative cover as an effective soil and water conserving measure, met through the use of no-till practices, mulch farming, and use of cover crops and other appropriate methods. Provide a regular supply of organic matter through the addition of organic matter (manure, compost, and promotion of soil biotic activity). Enhance nutrient recycling mechanisms through the use of livestock systems based on legumes, etc. Promote pest regulation through enhanced activity of biological control agents achieved by introducing and/or conserving natural enemies and antagonists. The final results of agro-ecological design is improved economic and ecological sustainability of the agroecosystem, with the proposed management systems specifically in tune with the local resource base and an operational framework of existing environmental and socioeconomic conditions, indirectly contributing to climate change abatement.

Publisher: Vietnam National University Publisher, Hanoi A publication of French Development Agency in Hanoi: http://www.afd.fr/home/pays/asie/geo-asie/vietnam 6 - 8 Ton That Thiep, Ba Dinh, Hanoi / Tel: 04 38 23 67 64 / Fax: 04 38 23 63 96 Publishing registration No.: 962-2012/CXB/03-158/_HQGHN. Printed and registration submitted on Quarter III - 2012

20

Background Paper No. 1