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Articles

Fuel ethanol program in Thailand: energy,


agricultural, and environmental trade-offs and
prospects for CO2 abatement
Wathanyu Amatayakul and Göran Berndes
Physical Resource Theory, Department of Energy and Environment, Chalmers University of Technology
412 96 Gothenburg, Sweden
E-mail (Amatayakul): frtwa@chalmers.se

Thailand has established an ethanol program with a target of replacing all conventional gasoline
with E10 gasohol (gasoline containing 10 % by volume of ethanol) by 2012. This paper assesses
the impacts of achieving the target on (1) land-use change, (2) trade balance, (3) gasoline and
associated food crop self-sufficiency, and (4) GHG emissions. In addition, the abatement cost of
replacing gasoline with gasohol (additional cost of supplying gasohol) and the tax revenue forgone
in implementing the program are estimated. Finally, in order to obtain insights in relation to the
prospects of the national program vs. project-based Clean Development Mechanism (CDM) for CO2
abatement, the ethanol program is compared with specific biofuel projects. We find that achieving
the ethanol program target can lead to a significant improvement in the gasoline self-sufficiency
rate (from 10 to 20 %) and significantly reduce GHG emissions (corresponding to 2 % of the total
energy-related CO2 emissions in 2004) over the period of 2005-2012. The ethanol program can
induce a significant (up to 200,000 ha in magnitude) transition from food crop production (mainly
corn and rice) to cassava production for ethanol leading to a reduction in the self-sufficiency rates
of associated food crops. But the crop self-sufficiency rates would still be above 100 % and Thai-
land’s agricultural sector should be able to accommodate the present program target. Whether and
to what extent the program leads to an improvement in the trade balance depends substantially on
fuel and agricultural prices, sources of cassava supply, and responses of refineries to decreased
gasoline demand. The annual average gasoline substitution cost is estimated at 25-195 US$/tCO2e,
which is high compared with the price of project-based certified emission reductions traded during
2006 but low compared with estimates of the cost of substituting biofuels for fossil fuels in Europe.
The tax revenue forgone is estimated at 2-4 times the gasoline substitution cost. Thailand’s ethanol
program illustrates that under dynamic government support, it may not be possible to identify the
additionality of CDM projects for biofuel production and blending with fossil fuels. Implementing
national programs as the basis for carbon credits could avoid the issues of double-counting and
also have other advantages.

1. Introduction production and end-use phases [UNFCCC, 2006c; Dalk-


About one-fourth of total global energy-related green- mann et al., 2006].
house gas (GHG) emissions come from the transportation A few studies [Figueres, 2005; Browne et al., 2005]
sector, which is one of the fastest-growing sources of have proposed that a programmatic or policy-based ap-
GHG emissions, especially in developing countries proach might provide a better framework than project-
(4.4 % per year) [IEA, 2006a]. Efforts to reduce GHG based CDM for abating GHG emissions, especially in the
emissions in the transportation sector have led to the de- transportation sector. National biofuel programs such as
velopment of projects for production of biofuels and their the programs which have been implemented in a number
blending with fossil fuels under the Clean Development of developing countries in order to reduce oil import de-
Mechanism (CDM) of the United Nations Framework pendency might be one good example of such a program-
Convention on Climate Change (UNFCCC). However, no matic approach.
such projects have so far been approved [UNFCCC, However, there is a lack of detailed analysis and quan-
2006b]. One of the main reasons for this is the methodo- tification of various impacts and costs of implementing
logical complexity for estimating and monitoring emis- ethanol programs in developing countries, although these
sion reductions of the biofuel projects, including are now emerging as potentially important producers and
demonstrating additionality, estimating leakages and consumers of ethanol. There is also a need for compari-
avoiding double-counting of emission reduction at the sons of ethanol programs vs. projects as options for

Energy for Sustainable Development • Volume XI No. 3 • September 2007 51


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Table 1. Fuel ethanol plants that are currently in operation supply. The net amount of oil import in 2006 was 48 bil-
(as of January 5, 2007) lion liters (Gl), valued at (US)$ 19 billion or about the
net value of all agricultural exports [EPPO, 2007; OAE,
Name of Province/region Feedstock Current
ethanol plant production
2006]. The country also aims to reduce atmospheric emis-
(l/d) sions and to stabilize the agricultural sector. Thailand pro-
duces agricultural crops such as cassava and sugarcane in
Pornvilai Ayudhaya/central Molasses 25,000 excess quantities for export at relatively low prices and
Thai Alcohol Nakorn Pathom/ central Molasses 200,000 is now targeting molasses (a by-product of sugar produc-
tion) and cassava for ethanol production.
Thai Agro-energy Suphanburi/central Molasses 130,000 The purposes of this paper are (1) to assess and quantify
Khonkaen Alcohol Khonkaen/ northeast Molasses 150,000 the impacts of achieving the ethanol program target on
(a) land-use change, (b) trade balance, (c) gasoline and
Thai Nguan Khonkaen/ northeast Cassava 50,000 associated food crop self-sufficiency, and (d) GHG emis-
Petro Green Chaiyaphum/northeast Molasses 130,000 sions; (2) to estimate the costs of replacing conventional
gasoline with gasohol (additional costs of supplying gaso-
hol compared to that of gasoline) and the tax revenue for-
reducing GHG emissions in the transportation sector. gone (due to tax exemption and reduction for gasohol) in
A number of studies have reported the economic, social implementing the ethanol program over the period 2005-
and environmental effects of the ethanol program imple- 2012; and (3) to compare the prospects for CO2 abatement
mented in Brazil. Aspects studied include energy security, by the ethanol program and proposed CDM projects on
trade balance, job creation, atmospheric emissions and production of biofuels for blending with fossil fuels.
land-use change [Moreira and Goldemberg, 1999; Rosillo- Section 2 provides an overview of the production of
Calle and Cortez, 1998; Ortiz and Noronha, 2006]. The ethanol and associated crops in Thailand. Section 3 out-
increasing ethanol production due to increasing domestic lines the methodologies used in the analysis, including
and import demand has also led to an increased concern data sources and assumptions made for calculating the im-
over food security and over negative impacts associated pacts and costs of achieving the ethanol program target.
with expanding non-sustainable production of crops for The results of the analysis are presented in Section 4, fol-
fuel ethanol [Ortiz and Noronha, 2006; Best, 2006; Jack- lowed by a discussion of the prospects for CO2 abatement
son and Morales, 2004; Matsuda and Kubota, 1984]. Ful- by the ethanol program in Section 5. The paper ends with
ton et al. [2004] reviewed recent research and experience conclusions and a discussion about implications for policy
in biofuels and stressed the need for a better quantification in Section 6.
of various benefits and costs of biofuels and a more de-
tailed understanding of environmental impacts of biofuel 2. Production of fuel ethanol and associated crops in
production, which vary from country to country. Thomas Thailand
and Kwong [2001] and Gowen [1989] also argued that Currently (as of January 2007), there are six ethanol plants
increasing the use of fuel ethanol from agricultural crops in operation in Thailand with a combined production of
may not necessarily improve the total trade balance and 685,000 liters/day (l/d) (Table 1) [OCSB, 2007], while the
suggested that the opportunity cost of reducing agricul- total gasoline demand (including conventional gasoline
tural exports should also be considered. Suksunthornsiri and E10 gasohol) in 2006 was about 7.2 Gl, or 20 Ml/d
et al. [2006] carried out an analysis of the economy-wide [EPPO, 2007]. Four new ethanol plants are scheduled to
impacts of policy on ethanol utilization in Thailand, but start operations by the middle of 2007, and more than 10
did not include the impacts on land-use change and self- ethanol plants are planned. Feedstocks for the current and
sufficiency of associated food crops, or the CO2 abatement planned production include molasses and cassava [OCSB,
costs of implementing the ethanol program. 2007; EPPO, 2007]. Molasses and fresh cassava yield
Among developing countries in Asia, Thailand is one about 250 and 143 l of ethanol per tonne (t), respectively
of the major agricultural producers and exporters. Thai- [EPPO, 2007; DEDE, 2005]. Most of the plants will be
land also currently has a strong fuel ethanol growth rate. located in the northeastern and central/eastern regions,
The country has set an ambitious target for its fuel ethanol where most of the cassava and molasses are produced
program for two periods: (1) replacing all octane-95 gaso- [OCSB, 2007].
line with octane-95 gasohol containing 10 % ethanol by To supply feedstock for the increasing ethanol produc-
volume (E10) by 2007; and (2) replacing all octane-91 tion, Thailand could increase crop production (i.e., in-
gasoline with gasohol (E10) by 2012 [EPPO, 2007]. The crease cultivation area and/or yields) or use part of the
country is supporting the replacement of conventional production presently going to export.
gasoline and the octane-booster methyl tertiary butyl ether In 2004, Thailand was the world’s third largest producer
(MTBE) with ethanol in order to reduce dependence on of cassava, with the largest production output of cassava
imports of MTBE and crude oil, which currently lead to per capita [FO Lichts, 2005], and was the largest exporter
large and rising trade deficit due to increasing fuel con- of cassava products [OAE, 2006]. The average annual pro-
sumption and prices. Currently, Thailand’s dependence on duction of fresh cassava during 2000-2005 was 18.8 Mt
crude oil import accounts for almost 90 % of the total (Table 2), with an average yield of 18.0 t per hectare

52 Energy for Sustainable Development • Volume XI No. 3 • September 2007


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Table 2. Thailand’s production of cassava and export of cassava products during 2000-2005 (all figures in Mt)

2000 2001 2002 2003 2004 2005 Average


Fresh cassava production 19.1 18.4 16.9 19.7 21.4 17.0 18.8
Domestic uses 4.4 4.4 4.4 4.4 4.4 4.5 4.4
Export uses 14.7 14.0 12.5 15.3 17.0 12.4 14.3
Export of cassava products 4.7 6.0 4.2 5.4 6.6 4.5 5.2
Cassava chips 0.03 1.0 1.4 1.8 2.8 2.8 1.6
Cassava pellets 3.2 3.7 1.5 1.9 2.2 0.3 2.1
Cassava flour/starch 1.5 1.3 1.3 1.6 1.6 1.5 1.5

Figure 1. Planted area (Mha) of major cash crops during 1986-2005 [OAE, 2006]

(t/ha). Domestic consumption has been roughly constant 3. Methodology, data sources, and assumptions for
at 4.4 Mt (one-fourth of the production), and the rest of assessing the impacts and costs of achieving the
the production has been exported in the form of chips, ethanol program target
pellets, flour, and starch. The amount of land used for The assessments are made for two distinct periods: 2005-
cassava increased from 1.2 Mha in 1986 to a peak of 1.6 2006 and 2007-2012. The assessments for the first period
Mha in 1989, and then declined to 1.0 Mha in 2005 (Fig- are based on actual data, while the assessments for the
ure 1). However, the changes in cassava crop area at the second period are based on the target set by the govern-
provincial and regional level vary substantially (see Sec- ment complemented with assumptions and projections.
tion 4.1). Figure 2 shows the total consumption of different gaso-
In addition, Thailand was the world’s fourth largest pro- line grades[1] during 1992-2006 [DOEB, 2007], and pro-
ducer of sugarcane, with the third largest production per jected total gasoline demand (including conventional
capita [FO Lichts, 2005], and was among the top five gasoline and E10 gasohol) from 2007 to 2012, on the
countries exporting sugar and molasses [OAE, 2006]. The basis of the target set by the government, complemented
average sugarcane production during 2000-2005 was al- with our own assumptions. On the basis of projected GDP
most 60 Mt, with an average yield of about 57 t/ha. The growth at 5 % per year during 2007-2012 and GDP elas-
average annual production of sugar was about 6 Mt, two- ticity of total gasoline demand at 0.87[2], demand for oc-
thirds of which was exported, and the average annual pro- tane-91 and octane-95 fuels are set to increase by 4 %
duction of molasses was 2.7 Mt, half of which was per year, which also equals the average increase of total
exported (Table 3). The amount of land used for sugarcane gasoline demand during 1992-2006 [EPPO, 2007]. In or-
production more than doubled from 0.5 Mha in 1986 to der to achieve the ethanol program target, demand for
1.1 Mha in 2005 (Figure 1). ULG 95 and ULG 91 is set to decrease to zero by 2008
Sugarcane is not currently used as feedstock for ethanol and 2012 respectively, and the supply of ethanol as well
production, mainly because of a government law setting as total gasohol demand are set to increase by 70 % in 2007,
the earnings from sugar and sugarcane production for the 50 % in 2008, and 30 % per year during 2009-2012.
sugarcane growers and sugar millers at 70 % and 30 %, The growth of the total fuel demand (4 % per year) is
respectively. There is no agreement yet on how to divide assumed to accommodate also the increased demand aris-
earnings from the sales of ethanol produced from sugar- ing from the fact that cars running on E10 gasohol require
cane [OCSB, 2007]. 1-3 % more fuel (volume basis) per kilometer (km)

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Table 3. Thailand’s production of sugarcane, and production and export of sugar and molasses, during 2000-2005 (all figures in Mt)

2000 2001 2002 2003 2004 2005 Average

Sugarcane production 54.1 49.6 60.0 74.3 65.0 49.6 58.8

Sugar production 5.8 5.4 6.5 7.3 7.0 5.2 6.2

Domestic use 1.8 1.9 2.0 1.9 1.9 2.0 1.9

Export 4.1 3.3 4.0 5.1 4.6 3.0 4.0

Molasses production 2.4 2.3 2.8 3.5 3.0 2.3 2.7

Domestic use 1.4 0.9 1.4 2.2 1.5 1.1 1.4

Export 1.0 1.4 1.4 1.3 1.5 1.2 1.3

Figure 2. Total consumption of gasoline during 1992-2006 and projected demand for gasoline during 2007-2012

compared to when running on conventional gasoline set to be constant over the period and the annual average
[Bangchak, 2006; PTTRTI, 2007; USEPA, 2007]. The yield is 18 t/ha.) Two contrasting scenarios are defined
lower fuel efficiency of gasohol is mainly due to the lower for the cassava supply: in one scenario all additional cas-
energy content of ethanol compared to that of conven- sava comes from increased cultivation, in the other sce-
tional gasoline. Although the combustion efficiency of an nario all additional cassava comes from export reduction.
engine improves with the use of ethanol relative to con- 3.1. Impact on land use
ventional gasoline [UNFCCC, 2006a], in this paper, we If the cassava is cultivated on a larger area, either the
assume that E10 gasohol 95 and E10 gasohol 91 have total agricultural area increases or the areas under other
2 % and 3 % lower fuel efficiency (measured on fuel vol- crops will need to be reduced. The land-use change in-
ume basis) than ULG 95 and ULG 91, respectively, on duced by increased cassava cultivation is modeled by first
the basis of the relative energy content of the fuels (see calculating the total amount of land required for meeting
Section 3.2). the part of cassava demand that is not met by reducing
Figure 3 shows the actual supply of ethanol during cassava exports. The total agricultural area in each prov-
2004-2006 and projected ethanol supply during 2007- ince is assumed not to increase significantly since it has
2012. For the projection of the feedstock requirement dur- been stable over the last 20 years. The expanding cassava
ing 2007, 2008 and 2009-2012, it is assumed that cultivation is assumed to claim land from other land uses
molasses is used as feedstock for ethanol production, at in the same way as has happened over the last 20 years
60, 80 and 100 % of the average molasses export quantity (see Section 4.1). This replacement of other land uses by
during 2000-2005, respectively, on the basis of current cassava cultivation is defined on the basis of a correlation
and planned production of ethanol from molasses [EPPO, analysis using data of the annual change in cassava area
2007] with a load factor of 80 %. The additional feedstock and other land uses over a period of 20 years (1986-2005).
requirements can be met by using cassava as feedstock The analysis covers 12 provinces in the northeastern (see
for ethanol production instead of exporting it and/or by Figure 4) and eastern regions including 6 provinces where
cultivating cassava on a larger area (the cassava yield is cassava-based ethanol plants are scheduled and planned

54 Energy for Sustainable Development • Volume XI No. 3 • September 2007


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Figure 3. Actual and projected supply of ethanol during 2004-2006, and 2007-2012, respectively

Figure 4. Major land use changes in the northeastern part during 1986-2005.

to locate as well as their surrounding provinces, using [Moore and McCabe, 1999]:
land-use data compiled from the annual sample surveys
of the Office of Agricultural Economics, under the Thai
Ministry of Agriculture [OAE, 2006].
Other land uses include (1) agricultural areas, which
cover areas of major cash crops such as sugarcane and
corn, rice fields, areas covered by fruit trees and other
where:
tree crops, vegetables, and flowers, pasture, idle area, resi-
i= year during 1987-2005 when the annual change in cassava area is positive
dential areas within the agricultural area, and non-crop
n= the number of years during 1987-2005 when the annual change in cassava area
agricultural area such as fish and shrimp ponds and roads is positive
in the farm area; (2) forest area; and (3) non-agricultural DXi = annual increase in the amount of cassava area in year i (ha)
area, which covers degraded forest area, industrial areas, (i.e., the increase in the amount of cassava area in year i from that in year i-1)
and public and town areas. DYi = annual change in the amount of another land-use area in year i (ha)
We use the uncentered standard correlation coefficient (i.e., the change in the amount of another land-use area in year i from that in
year i-1)
(R) to measure the strength and direction of the correla-
SD∆x = standard deviation of ∆X
tion of the annual increase in cassava area and the annual
change in area under another use in a given province. The SD∆y = standard deviation of ∆Y
basic formula for the correlation coefficient is as follows For the provinces in a given region as a whole, the above

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Table 4. Annual average import prices (f.o.b.) of MTBE and crude oil, export price (c.i.f.) of gasoline, and export prices of agricultural
products during 2007-2012 (reference fuel price scenario and low agricultural export price scenario)
(all prices are at 2006 levels) [DOEB, 2007; EIA, 2007; OAE, 2007]

2004 2005 2006 2007 2008 2009 2010 2011 2012


[1]
Fuel prices ($/barrel )

MTBE 51 70 73 73 73 73 73 73 73

Finished gasoline 50 69 80 80 80 80 80 80 80

Crude oil 42 56 66 66 66 66 66 66 66

Agricultural prices ($/t)

Molasses 30 58 81 57 57 57 57 57 57

Cassava chips 84 113 104 92 92 92 92 92 92

Corn 143 144 170 152 152 152 152 152 152

Note
1. Quantities and prices of petroleum and its products are commonly quoted in barrels. 1 barrel = 159 l approximately.

formula for the correlation coefficient is expanded as or export of associated agricultural products. Other im-
follows. pacts on the trade balance may arise due to, e.g., a de-
crease in fertilizer import due to the generation of liquid
fertilizer as a by-product of ethanol production, increase
in fertilizer import due to intensive cultivation of cassava
where: to meet increasing ethanol demand or increase in import
j= province in a given region of equipment for ethanol plants. However, only the im-
m= the number of provinces in a given region pacts on the export of associated agricultural products are
considered here.
The formula for the standard deviations is also expanded To analyze the impact on the trade balance, we compare
in the same way. The closer the coefficient (Rxy) to -1, the opportunity benefit of the reduction in MTBE import
the stronger the indication that the cassava area is likely and increase in gasoline export or reduction in crude oil
to have displaced the other land-use area. In addition, the import, with the opportunity cost of the reduction in ag-
higher the ratio of the standard deviation of the annual ricultural export. Calculations are made for three fuel
change in the other area to that of cassava area, the larger price scenarios whose definition is partly based on [EIA,
is the part of the increase in cassava area that is explained 2007]:
by the correlation coefficient. • constant at average 2006 fuel prices (reference price
3.2. Impact on trade balance scenario) (see Table 4);
Replacing conventional gasoline with E10 gasohol would • constant at 20 % above the average 2006 fuel prices
lead to a reduction in MTBE import and the gasoline de- (high price scenario); and
mand. This could have an impact on the production of • constant at 20 % below the average 2006 fuel prices
gasoline and the refining of crude oil. If the refineries do (low price scenario);
not reduce crude oil intake, there would be an excess and two scenarios for the agricultural export prices:
amount of finished gasoline and gasoline components for • constant at average 2006 agricultural prices (reference
export or else the refineries would have to take a grade price scenario); and
of crude oil with lower gasoline yield and adjust the con- • constant at average prices during 2004-2006 (low price
version unit to produce less gasoline. On the other hand, scenario) (see Table 4).
if the refineries want to produce the same amount of gaso- The exchange rate is set to 40 baht/$.
line for current domestic and export demand, the crude For Impact Scenario 1, the annual net trade benefit (NTB)
oil intake would have to be reduced. Adjustments to re- from the (1) reduction in MTBE import; (2) increase in
duced gasoline demand will vary from refinery to refinery finished gasoline export; and (3) reduction in agricultural
[Vivat and Sudarat, 2007]. In this paper, we define two export can be calculated as follows:
contrasting scenarios for the calculation of the impact on NTB = (Vm×IPm + Vg×XPg) - (Wmo×XPmo +
the trade balance of gasoline replacement with ethanol: Wca×XPca +Wo×XPo)
• Impact Scenario 1 has an increased export of finished where:
gasoline: and Vm = total volume of MTBE annually replaced by ethanol (barrels)
• Impact Scenario 2 has a decreased import of crude oil. IPm = annual average import price of MTBE ($/barrel),
However, producing ethanol from a feedstock that goes Vg = total volume of gasoline annually replaced by ethanol (barrels),
to export or from expanding the area of cassava to another XPg = annual average export price of finished gasoline ($/barrel),
agricultural area would lead to reduction in the production Wmo = total weight of molasses annually used for ethanol production (t),

56 Energy for Sustainable Development • Volume XI No. 3 • September 2007


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Table 5. High heating values of gasoline and gasoline components in E10 gasohol 95 substitutes 0.8 l gasoline. Thus, 1 l of
ethanol in E10 gasohol 95 replaces 0.6 l of MTBE and
Gasoline and gasoline components High heating values 0.2 l of other gasoline components. For ULG 91, 1 l of
(MJ/l)
ethanol in E10 gasohol 91 replaces 0.7 l of gasoline.
Octane-91 non-MTBE blended 31.6 For Impact Scenario 2, the NTB from the reduction in
conventional gasoline (ULG 91) MTBE and crude oil import and the reduction in agricul-
tural export can be calculated as follows:
MTBE 26.1
NTB = (Vm×IPm + Vco×IPco) - (Wmo×XPmo +
Ethanol 21.2 Wca×XPca +Wo×XPo)
where:
ULG 95 31.3
Vco = total volume of crude oil intake annually reduced due to the replacement of
gasoline by ethanol, leading to lower gasoline demand (barrels),
E10 gasohol 95 30.6
IPco = annual average import price of crude oil ($/barrel), other terms being the
E10 gasohol 91 30.6 same as before.

The annual reduction in the import of crude oil is calcu-


lated as the product of the total volume of gasoline an-
XPmo = annual average export price of molasses ($/t),
nually replaced by ethanol and the reduction in crude oil
Wca = total equivalent weight of cassava chips annually used for ethanol production
instead of export (t),
intake/l gasoline replaced.
XPca = annual average export price of cassava chips ($/t),
Given a gasoline yield at 20-25 % [Vivat and Sudarat,
Wo = annual decline in total equivalent weight of other agricultural product export as
2007], a lower demand for gasoline by 1 l would reduce
a result of ethanol production (t), the crude oil intake by 5 l. But that would also lead to a
XPo = annual average export price of other agricultural product ($/t) lower production of other finished refinery products. A
3.2.1. Opportunity benefit conservative assumption is used: the reduction in crude
The annual reduction in the import of MTBE and gasoline oil intake due to reduced gasoline demand is estimated
is estimated on the basis of the product of the volume of on the basis of the heating values of crude oil and gasoline
ethanol annually used to blend in the gasoline (10 % of at 38.8 and 31.6 MJ/l, respectively [Vivat and Sudarat,
the annual total demand of gasohol 95 and gasohol 91) 2007; USEPA, 2007].
and the volumes of MTBE and gasoline replaced by 1 l 3.2.2. Opportunity cost
of ethanol, respectively. The reductions in molasses and cassava chip exports are
The volume of gasoline replaced by 1 l of ethanol is estimated on the basis of the ethanol demand given in
calculated on the basis of [UNFCCC, 2006a]: Figure 3 and ethanol yields of 250 and 143 l/t of molasses
and fresh cassava, respectively. 1 t of cassava chips is
FCg − (FCgh × X)
Rg = produced from 2.1 t of fresh cassava [OAE, 2006].
FCgh − (FCgh × X)
where On the basis of the result of the correlation analysis of
Rg = volume of gasoline displaced by 1 l of ethanol when ethanol is blended in gaso- historical land-use change, the major crops that are likely
line (l) to be replaced by cassava are corn in the northeastern part
FCgh = fuel consumption of gasohol (l/km) and rice in the eastern part. Since the potential for ex-
FCg = fuel consumption of gasoline (l/km) panding cassava cultivation on cropland used for corn in
X = blend of gasoline in gasohol (0.8 ≤ X ≤ 1) the northeastern part is largest, and since corn is mainly
The fuel efficiencies of the different gasoline grades are produced as animal feed, it is assumed that cassava cul-
estimated on the basis of their relative heating values. In tivation expands on cropland used for corn. The reduction
Thailand, the specification of ULG 95 is set to contain in export of other agricultural products is therefore limited
MTBE between 5.5 and 11 % by volume [DEDE, 2005]. to corn export reduction. The annual yield of corn during
We assume ULG 95 contains 6 % MTBE and 94 % ULG the period 2006-2012 is set to be constant at 3.7 t/ha.
91 by volume, while gasohol 95 contains 10 % ethanol 3.3. Self-sufficiency of gasoline and
and 90 % octane-91-based gasoline by volume. The high cassava/molasses/corn
heating values used for non-MTBE blended conventional Replacing conventional gasoline with gasohol would lead
gasoline with 91-octane number, MTBE, and ethanol are to an increased domestic production of gasoline based on
given in Table 5 [USEPA, 2007; Chevron, 2007]. This domestic resources (domestic crude oil and ethanol) or
leads to the high heating values for ULG 95 and E10 less dependence on imported crude oil. However, in-
gasohol 95 (Table 5). Thus, the fuel efficiency of E10 creased ethanol production will, as described above, lead
gasohol 95 is estimated to be 2 % lower than that of to reduced domestic production of cassava, molasses and
ULG 95. corn for food or feed purposes. A self-sufficiency rate in-
ULG 91 does not contain MTBE while gasohol 91 con- dicator is defined as the ratio of domestic production to
tains 90 % octane-88-based gasoline and 10 % ethanol by domestic consumption, following [Matsuda and Kubota,
volume. The heating value of gasohol 91 is estimated at 1989]. The indicator is used to assess the impact of re-
30.6 MJ/l (Table 5). Thus, the fuel efficiency of E10 gaso- placing conventional gasoline with gasohol on the self-
hol 91 is estimated to be 3 % lower than that of ULG 91. sufficiency of gasoline, cassava, molasses and corn.
From the equation above, for ULG 95, 1 l of ethanol Annual average self-sufficiency rate of gasoline

Energy for Sustainable Development • Volume XI No. 3 • September 2007 57


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(including conventional gasoline and gasohol) (SSg): The baseline scenario assumes that emissions occur
Pg from conventional gasoline to be substituted by ethanol,
SSg =
Cg taking into account the difference in fuel efficiency be-
where: tween conventional gasoline and gasohol. Thus, the base-
Pg = annual domestic production of gasoline based on domestic resources line emissions are calculated from the product of the
(conventional gasoline equivalent-Ml) life-cycle GHG emissions of conventional gasoline and
Cg = average annual domestic consumption of gasoline the total volume of gasoline replaced by ethanol annually.
(conventional gasoline equivalent-Ml) The total life-cycle (well-to-wheels) GHG emission factor
Annual average self-sufficiency rate of cassava for food for gasoline used in Thailand is set to 2.4 kgCO2e/l, based
and feed (SSca): on [Thu Lan et al., 2006; UNFCCC, 2006a]. The same value
Pca is used for MTBE, although it has been estimated to be
SSca = higher [UNFCCC, 2006a]. The annual demand for ethanol
Cca
where:
corresponds to 10 % of the total volume of projected annual
Pca = annual domestic production of fresh cassava for food and feed (Mt)
gasohol demand. The volume of gasoline replaced by 1 l of
Cca = annual domestic consumption of fresh cassava (Mt)
ethanol is calculated in the same way as in Section 3.2.
The program emissions are estimated on the basis of
The self-sufficiency rates of molasses and corn are calcu-
the product of the life-cycle emissions of ethanol and the
lated in the same way as for cassava. To distinguish the
total volume of annual demand for ethanol. The annual
impact of the ethanol program on self-sufficiency rates of
reduction in GHG emissions from replacing conventional
gasoline, cassava, and corn for the period 2006-2012, an-
gasoline with gasohol is calculated as follows:
nual domestic consumption of all the products over the
Annual reduction of GHG emissions (RE):
period is set constant at the average values during 2000-
RE = Eg× Rg -(Ee-m×De-m + Ee-ca×De-ca)
2005. The annual average domestic consumption of gaso-
where:
line during 2000-2005 was 7,250 conventional gasoline-
Eg = life-cycle GHG emissions of gasoline (tCO2e/l of gasoline)
equivalent Ml [EPPO, 2007], while that of corn was 3.6
Rg = total volume of 95-octane and 91-octane gasoline replaced by ethanol annually
Mt/yr [OAE, 2006]. The annual average domestic con- (Ml of gasoline)
sumption of cassava and molasses during 2000-2005 is Ee-m = life-cycle GHG emissions of ethanol produced from molasses
presented in Tables 2 and 3, respectively. The annual pro- (tCO2e/l of ethanol)
duction of gasoline based on domestic resources over the De-m = total volume of annual demand for ethanol produced from molasses
period is calculated as the sum of the average domestic (Ml of ethanol)
production of gasoline based on domestic crude oil during Ee-ca = life-cycle GHG emissions of ethanol produced from cassava
(tCO2e/l of ethanol)
2000-2005 (820 Ml) [EPPO, 2007] and the annual in-
De-ca = total volume of annual demand for ethanol from cassava (Ml of ethanol)
creased domestic production of gasoline based on ethanol.
The domestic annual production of gasoline based on do- The life-cycle emission factor for ethanol from molasses
mestic crude oil is calculated from the product of the self- is set on the basis of the emission factor for sugarcane
sufficiency of crude oil and the total domestic production production and ethanol production from sugarcane in Bra-
of gasoline based on total crude oil. The amount of in- zil (18 and 4 kgCO2e/t of sugarcane, respectively)
creased domestic production of gasoline-equivalent fuel [Macedo et al., 2003]. The life-cycle emissions from sug-
from ethanol is based on the fact that 1 l of ethanol cor- arcane production include the emissions from the cultiva-
responds to 0.8 and 0.7 l of gasoline for ULG 95 and tion and transportation of sugarcane and the production
ULG 91, respectively. The annual domestic production of of agricultural inputs such as fertilizers for sugarcane pro-
cassava and molasses (for non-fuel purposes) over the pe- duction. The allocation of emissions from sugarcane pro-
riod is calculated by deducting the amount of the cassava duction between molasses and raw sugar is based on the
and molasses required for ethanol production from the av- amount of actual sugar content in these two process
erage total production during 2000-2005. The domestic streams, since the major reason for growing sugarcane is
annual production of corn for food/feed purposes is simi- to obtain sugar and the sugar content also correlates di-
larly calculated by deducting the reduction in the produc- rectly with ethanol output [UNFCCC, 2006a].
tion due to cassava area expansion from the average total Smo
Emo = × Esd
production during 2000-2005. Rmo × Smo + Rr s × Sr s
3.4. GHG emissions where:
The annual reduction of GHG emissions due to the re- Emo = life-cycle GHG emissions of molasses (kgCO2e/t of molasses)
placement of conventional gasoline with gasohol is esti- Rmo = molasses recovery rate from sugarcane (t of molasses/t of sugarcane)
mated from the difference between the baseline emissions Smo = sugar content of molasses (t of sugar/t of molasses)
and the emissions from the ethanol program. The emis- Rrs = raw sugar recovery rate from sugarcane (t of raw sugar/t of sugarcane)
sions due to land-use change are assumed negligible on Srs = sugar content of raw sugar (t of sugar/t of raw sugar)
the basis that cassava area expansion is likely to take place Esc = life-cycle GHG emissions of sugarcane (kgCO2e/t of sugarcane)
mainly on corn area and not likely to cause significant 1 t of cane produces 0.1 t of raw sugar and 0.047 t of
deforestation (See Section 4.1, “Land-use change im- molasses [OAE, 2006]. The sugar content of raw sugar
pact”). and molasses is 80 % and 45 %, respectively [UNFCCC,

58 Energy for Sustainable Development • Volume XI No. 3 • September 2007


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Figure 5. Monthly average ex-refinery price of ULG 95 and gasohol 95 during 2005-2006 [EPPO, 2007]

2005]. As a result, the emission factor for ethanol gasoline with gasohol (per tCO 2 e of GHG emission
produced from molasses is estimated at 0.4 kgCO2e/l. For reduction) is calculated from the total annual cost of re-
ethanol produced from cassava in Thailand, the emission placing gasoline with gasohol per tCO2e annual reduction
factor has been estimated at 0.96 kgCO2e/l [Thu Lan et of GHG emissions as follows.
al., 2006]. Annual average cost of gasoline substitution (Cgs) dur-
3.5. Cost of replacing gasoline with gasohol ing 2005-2006 ($/tCO2e):
The cost of replacing conventional gasoline with gasohol
is defined as the additional cost of supplying gasohol
compared to that of supplying conventional gasoline at
the gasoline station. The transportation and distribution Where:
costs of conventional gasoline and gasohol are assumed i = month (1, 2, ..., 12)
to be the same. Consequently, the cost of replacing con- Pgh95i = monthly average ex-refinery price of gasohol 95 ($/l of gasohol 95)
ventional gasoline with gasohol is the additional cost of Pgh91i = monthly average ex-refinery price of gasohol 91 ($/l of gasohol 91)
producing gasohol in place of conventional gasoline. Pg95i = monthly average ex-refinery price of ULG 95 ($/l of ULG 95)
The additional cost of producing gasohol during 2005- Pg91i = monthly average ex-refinery price of ULG 91 ($/l of ULG 91)
2006 is calculated from the difference between the actual Cgh95i = monthly consumption of gasohol 95 (Ml)
prices of conventional gasoline and gasohol of the same Cgh91i = monthly consumption of gasohol 91 (Ml)
octane number (monthly ex-refinery prices, i.e., the prices RE = annual reduction of GHG emissions (MtCO2e)
at the refinery gate before taxes and marketing margin) (taken from the previous section)

[EPPO, 2007]. The ex-refinery prices of conventional The cost of replacing gasoline with gasohol during 2007-
gasoline (ULG 95 and ULG 91) are not determined on a 2012 is calculated in the same way as during 2005-2006
cost-plus basis but are set equal to the mean price of ULG but based on the difference between the future annual
95 at the spot market Platt in Singapore plus a premium. average ex-refinery prices of ULG and gasohol of the
The ex-refinery prices of gasohol 95 and gasohol 91 are same octane number. We assume that the prices of gaso-
set at the sum of 90 % of the ex-refinery price of ULG line at the spot market in Singapore and the prices of
95 and ULG 91, respectively, plus 1 $/barrel, and 10 % ethanol during 2007-2012 are constant at the average val-
of the price of ethanol [EPPO, 2007]. Thus, the difference ues in 2006. The annual average ex-refinery price of ULG
between the ex-refinery prices of conventional gasoline 95 and gasohol 95 is set to be constant at the average
and gasohol reflects the additional costs of producing values in 2006: 0.45 $/l of ULG 95 and 0.46 $/l of gaso-
gasohol. Since the consumption of gasohol 91 was rela- hol 95. The annual average ex-refinery price of ULG 91
tively small compared to that of gasohol 95, the cost of is set to be 0.013 $/l lower than that of ULG 95 and the
gasoline substitution during 2005-2006 is based on only annual average ex-refinery price of gasohol 91 is set to
octane-95 ULG and gasohol. be 0.008 $/l lower than that of gasohol 95, the average
Figure 5 shows that the ex-refinery price of ULG 95 difference in the values in 2006 [EPPO, 2007]. From
has mostly been lower than that of gasohol 95 per equiva- 2008, it is assumed that there would be no sale of ULG
lent l of gasohol 95. This is due to the higher production 95 and thus there would be no cost of replacing ULG 95
cost of ethanol and 91-octane base gasoline compared to with gasohol 95 (the first term in the above equation).
that of ULG 95. Since gasohol 95 is set to have 2 % 3.6. Tax revenue forgone in implementing the ethanol
lower fuel efficiency than gasoline, 1 l of ULG 95 cor- program
responds to 1.02 l of gasohol 95. The government has subsidized the ethanol program by
The annual average cost of replacing conventional setting the retail price of gasohol at the gasoline stations

Energy for Sustainable Development • Volume XI No. 3 • September 2007 59


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Figure 6. The amount of tax subsidies for ethanol compared with gasoline during January 2004-October 2006

lower than the retail price of conventional gasoline. The fuel retail price gap at 0.038 $/l of ULG and gasohol for
structure of the retail prices of conventional gasoline and both octane-95 and octane-91 [EPPO, 2007], as it cur-
gasohol is the sum of the ex-refinery price, excise tax, rently is, and the difference between the annual average
municipal tax, Oil Fund tax, Energy Conservation Promo- ex-refinery prices of gasohol and ULG of both octane-95
tion Fund tax, VAT, and marketing margin. The retail price and octane-91 (Section 3.5). A similar equation to the
of gasohol is set lower than that of conventional gasoline above equation is applicable to 91-octane gasoline and
by the exemption of tax for fuel ethanol production and gasohol. From 2008, it is assumed that there would be no
the reduction of tax for ethanol blended in gasoline, in- sale of ULG 95 and that the retail price of gasohol 95
cluding the reduction of excise and municipal tax and of would no longer be subsidized and there would thus be
tax collected for the Oil Fund and Energy Conservation no tax revenue forgone in replacing 95-octane gasoline
Promotion Fund. The retail price difference was initially with gasohol 95.
set at 0.013 $/l in 2004, but has later increased to 0.025
and 0.038 $/l (November 2006). The tax revenue forgone 4. Results
in implementing the ethanol program is based on the sum 4.1. Land-use change impact
of the difference between all the taxes on conventional The result from the correlation analysis indicates that the
gasoline and on gasohol. The tax revenue forgone in im- historical increase in cassava area in the northeastern and
plementing the program during 2005-2006 is estimated on eastern provinces has most likely resulted in a decrease
basis of the monthly average of all taxes on conventional in different combinations of a few of the following areas:
gasoline and gasohol. Figure 6 shows the contributions of corn area, rice fields, pasture, idle area, non-crop areas,
different tax reductions for gasohol 95 compared with non-agricultural area and forests (Table 6).
ULG 95 during January 2004-October 2006. For the seven northeastern provinces as a whole, the
The tax revenue forgone in implementing the program historical increase in cassava area is most strongly linked
is calculated as follows: to a decrease in corn area (strongest correlation), pasture
Annual average tax revenue forgone (TRF) during and non-crop area (Table 6). The standard deviation of
2005-2006 ($/tCO2e): the ratio of change in corn cultivation to change in cassava
cultivation suggests in fact that close to 100 % of the
increase in cassava area is explained by the reduction in
corn area. Besides, the other two areas currently available
are much smaller than the corn area. This altogether in-
where: dicates that cassava cultivation has expanded mainly on
i = month (1, ..., 12) land previously used for corn cultivation and only to a
Tg95i = total monthly average of all taxes on ULG 95 ($/l of ULG 95) limited extent on pasture and non-crop area.
Tgh95i = total monthly average of all taxes on gasohol 95 ($/l of gasohol 95) For the five eastern provinces as a whole, the result
Tei = monthly average tax exemption for fuel ethanol production ($/l of ethanol) indicates that cassava cultivation has likely expanded on
= 0.013 $/l mainly rice fields and only to a small extent on pastures.
Cgh95i = annual consumption of gasohol 95 (Ml) The indication from the correlation analysis – that the
RE = annual reduction of GHG emissions (MtCO2e) expansion of cassava cultivation is likely to take place on
The tax revenue forgone in implementing the ethanol pro- land used for corn and rice – is also consistent with the
gram during 2007-2012 is calculated from the sum of the survey of farmers’ land-use plan and forecast for the area

60 Energy for Sustainable Development • Volume XI No. 3 • September 2007


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Table 6. Annual increase in cassava area and annual change in other areas. The latter, given as negative numbers, indicates a negative
correlation coefficient. The standard deviation of the ratio of the annual change in other areas to the annual increase in
cassava area is given in parentheses in provinces where ethanol plants are planned to locate (marked with *)
and in their surrounding provinces in northeastern (NE) and eastern (E) Thailand during 1986-2005

Region/province Average annual Agricultural area Non- Forest


increase in agricultural
Corn area Rice fields Pasture Idle area[1] Non-crop
cassava area area[3]
area[2]
(kha)

Northeastern
1. Nakornrat–chasima* 12.2 -0.46 -0.50 -0.86 -0.77
(1.2) (0.26) (0.22) (0.18)
2. Khon Kaen* 5.0 -0.75 -0.46 -0.47
(0.29) (0.61) (3.9)
3. Chaiyapoom* 5.2 -0.43 -0.54 -0.37 -0.69
(1.0) (2.2) (0.92) (0.75)
4. Loey 2.4 -0.48 -0.39
(4.3) (1.4)
5. Udornthani 6.0 -0.67 -0.49
(0.39) (2.7)
6. Burirum 2.0 -0.62 -0.77 -0.64
(0.81) (1.1) (0.55)
7. Kalasin 4.9 -0.49 -0.83 -0.43
(0.32) (0.21) (1.0)
7 northeastern provinces 5.3 -0.42 -0.32 -0.37
as a whole (1.1) (0.27) (0.38)
[184][4] [907] [11] [49] [27] [83]
Eastern
1. Prajinburi* 3.4 -0.60 -0.96 -0.89 -0.71
(0.30) (2.3) (0.20) (0.26)
2. Chachoengsao* 3.4 -0.31 -1.0 -0.71 -0.97
(0.64) (0.03) (1.4) (0.22)
3. Rayong* 3.0 -0.41 -0.30
(0.04) (0.50)
4. Chantaburi 2.8 -0.57 -0.59 -0.84
(0.77) (0.06) (3.4)
5. Cholburi 2.6 -0.62 -0.36
(0.14) (2.1)
5 eastern provinces as a whole 3.1 -0.63 -0.61
(1.4) (0.11) [0.5]
[4] [154] [2] [4] [86]

Notes
1. Idle areas are areas unutilized for more than 5 years.
2. Non-crop areas include other agricultural areas such as areas of fish and shrimp ponds, water ponds, canals, roads and walking areas, etc., within farm areas.
3. Non-agricultural areas (excluding forest areas) include degraded forest, industrial areas, public and town areas, roads, etc.
4. The number in square brackets [ ] is the total area (kha) currently available in the province with the negative correlation coefficients, indicating the potential amount of area for cassava
area expansion.

of cassava in both regions in 2007, conducted by the Office tunity cost of molasses export (Figure 7). This net benefit
of Agricultural Economics under the Ministry of Agricul- takes into account the fact that Thailand imported 15.4
ture [OAE, 2007]. On the basis of this land-use change Ml and 8.6 Ml ethanol in 2005 and 2006 (M$ 7 and 4),
pattern and given the earlier stated feedstock requirements respectively, due to a temporary shortage of domestic
for the ethanol program, an estimated 0.01 and 0.23 Mha ethanol production.
of corn and rice land is likely to be converted to cassava The result shows that achieving the ethanol program
land in 2007 and 2012, respectively (Table 7). target could lead to a NTB as high as M$ 190 per year
4.2. Trade benefit and opportunity cost or a net opportunity cost as high as M$ 110 per year
The ethanol program is estimated to have led to a NTB during 2007-2012. Whether and to what extent the pro-
of M$ (million dollars) 5 and 20 per year in 2005 and gram leads to an improvement in the trade balance de-
2006, respectively. This is mainly because the opportunity pends substantially on many factors, including how
benefit of MTBE import reduction outweighs the oppor- refineries would respond to the increased replacement of

Energy for Sustainable Development • Volume XI No. 3 • September 2007 61


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gasoline with ethanol (export more gasoline or reduce Table 7. The accumulated cassava area expansion required (the case
crude oil import), share of cassava supply from export of 0 % of cassava supply from export reductions) and major areas
reduction vs. production increase, as well as import and that are likely to be replaced by cassava
export prices of fuel and agricultural products. Accumulated cassava area Major areas likely to be
4.2.1. Scenario 1, where refineries would export more expansion (Mha) replaced
gasoline (see Figures 7 and 8)
2005 - -
The outcome of the ethanol program in this scenario is
estimated to range from a NTB of M$ 190 per year to a 2006 - -
net opportunity cost of M$ 45 per year. If all the cassava 2007 0.01
supply for ethanol production were from cassava area ex-
2008 0.03
pansion replacing corn area, there would be an improve-
2009 0.04 Area of corn
ment in trade balance for all scenarios of agricultural and
and rice fields
fuel prices. On the other hand, if all the cassava supply 2010 0.09
for ethanol production were from export reductions, there
2011 0.15
would be lower NTBs for all prices scenarios. This is due
to the fact that the opportunity cost of reducing the export 2012 0.23

Figure 7. Opportunity benefit and cost for Scenario 1: export more gasoline (reference fuel prices and low agricultural export prices scenario)

Figure 8. Net trade benefit for Scenario 1 (export more gasoline) with different scenarios of agricultural and fuel prices at 0 and 100 % of cassava
supply from export reduction

62 Energy for Sustainable Development • Volume XI No. 3 • September 2007


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Figure 9. Net trade benefit for Scenario 2 (reduce crude oil import) with different scenarios of agricultural and fuel prices at 0 and 100 % of cassava
supply from export reduction

Figure 10. Self-sufficiency rates of fresh cassava, molasses, corn and gasoline during 2006-2012 with the ethanol program (for 2005*, the rates are
the average values during 2000-2005) at 0 and 100 % of cassava supply from export reduction

of cassava chips outweighs the opportunity cost of re- rate of gasoline during 2000-2005 was 11 % while those
ducing the export of corn. of fresh cassava, corn, and molasses were 425 %, 118 %
4.2.2. Scenario 2, where refineries would reduce crude and 193 %, respectively (Figure 10). With the ethanol
oil import (Figure 9) program, the self-sufficiency rate of gasoline increases to
Compared to Scenario 1, where refineries would export 13 % in 2006 and to 21 % in 2012. On the other hand,
more gasoline, this scenario is estimated to yield less the self-sufficiency rate of molasses would decrease to
NTBs for all the cases of cassava supply. The outcome 100 % in 2012. To what extent the self-sufficiency rates
ranges from a NTB of M$ 95 per year to a net opportunity of cassava and corn decrease depends on the shares of
cost of M$ 110 per year. This is partly due to the fact the supply of cassava from export reduction and area ex-
that the import price of crude oil is less than the export pansion replacing corn area.
price of gasoline per unit volume. If all cassava supply for ethanol production were from
4.3. Self-sufficiency of gasoline, cassava, corn, and export reduction, the self-sufficiency rate of cassava
molasses would decrease to 332 % in 2012. On the other hand, if
Without the ethanol program, the average self-sufficiency all the cassava supply were from cassava area expansion

Energy for Sustainable Development • Volume XI No. 3 • September 2007 63


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Table 8. GHG emission reduction, the cost of gasoline substitution, and the tax revenue forgone in implementing the program
(all costs are normalized at 2006 values)

Ethanol demand Annual GHG Total cost of Average cost of Total tax Tax revenue
(Ml) reduction gasoline gasoline revenue forgone forgone per unit
(Mt) substitution (M$) substitution (M$) of GHG reduction
($/tCO2e) ($/tCO2e)
2004 6 0.01 NA NA 1 100
2005 67 0.1 7 69 29 281
2006 129 0.2 35 177 72 370
2007 217 0.3 60 194 140 452
2008 326 0.5 12 27 26 58
2009 424 0.6 39 70 85 152
2010 551 0.7 75 114 163 249
2011 717 0.8 122 157 267 344
2012 913 0.9 179 194 391 425

replacing corn area, the self-sufficiency rate of corn would biofuel production for blending with fossil fuels, includ-
decrease to 95 % in 2012. ing projects on the production of fuel ethanol, palm bio-
The result shows that at the present program target diesel and sunflower biodiesel in Thailand, and the
Thailand would still be self-sufficient in associated food production of biodiesel from non-edible oil crops in India.
crops for food/feed purposes with the self-sufficiency However, the methodologies developed for these projects
rates of about 100 % or higher. have not yet been approved. There are a number of issues
4.4. GHG emission reduction, cost of gasoline that still need to be addressed before the methodologies
substitution, and tax revenue forgone in implementing can be approved, including the estimation of a baseline
the program and leakage emissions, estimation and monitoring of
Meeting the program targets reduces GHG emissions by emission reductions, and the issue of double-counting
4.0 Mt during 2005-2012 (see Table 8), corresponding to [UNFCCC, 2006c].
2 % of the country’s total energy-related CO2 emissions 5.1. Baseline and additionality
in 2004 [EIA, 2006; IEA, 2006b]. According to the modalities and procedures for the CDM,
The annual average gasoline substitution cost during relevant national or sectoral policies and circumstances
2005-2012 is estimated at 27-194 $/tCO2e. The average shall be taken into account in the identification of a base-
cost of gasoline substitution is estimated at 69 $/tCO2e in line and demonstration of additionality [UNFCCC, 2005].
2005 and increases to 177 $/tCO2e in 2006 mainly due Under Thailand’s ethanol program, the government sup-
to the increased difference between the ex-refinery prices port has been dynamic. The government has set the retail
of gasohol 95 and ULG 95. The average cost is expected price of gasohol at the gasoline stations lower than the
to increase to 194 $/tCO2e in 2007 due to the increased retail price of conventional gasoline by the exemption of
replacement of ULG 91 with gasohol 91 and relative in- tax for fuel ethanol production and the reduction of tax
creased use of ethanol from cassava. The average cost of for ethanol blended in gasoline in order to boost the de-
gasoline substitution is expected to decrease to 27 $/tCO2e mand for gasohol and supply of fuel ethanol. In response
in 2008, when there would be no sale of ULG 95 and no to fluctuating crude oil prices and ethanol feedstock price,
further cost of replacing ULG 95 with gasohol 95. the government has several times adjusted the retail price
The tax revenue forgone in implementing the program gap and the level of tax reductions as shown in Figure 5.
is estimated at 281 $/tCO2e in 2005 and increases to 370 In addition, during the end of 2005 and the beginning of
$/tCO2e in 2006 due to the increased difference between 2006, the demand for ethanol outweighed its supply and
the ex-refinery prices of gasohol 95 and ULG 95 and the the government responded by importing a certain amount
increased retail price gap in 2006 compared with that in of ethanol. On the other hand, since the end of 2006, the
2005. The tax revenue forgone in 2005 and 2006 corre- government has postponed an earlier target of replacing
sponds to about four times and twice the average cost of ULG 95 with gasohol 95 from January 1, 2007, so the
gasoline substitution in the two years, respectively. During supply of ethanol has outweighed the demand for it. For
2007-2012, the tax revenue forgone is expected to show the only CDM ethanol project in Thailand proposed so
the same trend as the average cost of gasoline substitution far, a proposed methodology requires that the relevant na-
and correspond to twice to thrice the average cost of gaso- tional ethanol market is production-constrained or a lack
line substitution in the respective years. of supply of ethanol is the limiting factor for the ethanol
use and that there does not exist an effectively enforced
5. Prospects for CO2 abatement by the national mandate on the use of ethanol [UNFCCC, 2006a]. Thus,
ethanol program in the case of Thailand, the proposed methodology is not
So far, there have been a few proposed CDM projects on applicable.

64 Energy for Sustainable Development • Volume XI No. 3 • September 2007


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In fact, after the CDM project on ethanol production 5.3. Other advantages of the ethanol program
in Thailand was proposed in 2004, the number of ethanol 1. The program is derived from and reflects the country’s
production plants in operation in Thailand has increased development priorities of reducing dependence on
(see Table 2) and even more ethanol plants are scheduled crude oil and fuel import and trade deficit, enhancing
and planned for operation. This indicates that with the the agricultural sector, and reducing atmospheric emis-
government policy and support, ethanol production plants sions. The ethanol program could have more substantial
are economically feasible without the CDM, and thus the development impacts in addition to GHG emission re-
proposed CDM project would not necessarily lead to the ductions than the proposed CDM projects on biofuels.
use of ethanol: the additionality can be questioned. 2. The ethanol program could lead to annual average
5.2. Monitoring methodology and the issue of emission reductions of 0.5 MtCO2e compared with
double-counting 0.05 MtCO2e of the only CDM ethanol project in Thai-
Although there might be cases where no significant land proposed so far [UNFCCC, 2005]. Till the end
change in the government support and responses to chang- of 2012, the ethanol program is expected to lead to a
ing conditions occurs, the methodology for these CDM total emission reduction of 4.0 MtCO2e compared with
project activities still needs to ensure that double-counting 0.2 MtCO2e of the CDM ethanol project in Thailand.
of emission reductions does not occur at the production So, the ethanol program allows for large volumes of
and use phase – as well as of project activities using bio- emission reductions to take place.
fuels domestically and exporting them. Thus, monitoring 3. Although the estimated average cost of replacing gaso-
of different uses and export of biofuels produced from line with gasohol is substantially higher than the price
the project activities is needed. Although imposing a con- of project-based certified emission reductions (CERs),
tractual obligation with identified biofuel consumers and at 6-24 $/tCO2e transacted during 2006 [Capoor and
taking into account biofuel sales to unidentified consum- Ambrosi, 2006], the estimated average cost is lower
ers was suggested to avoid double-counting [UNFCCC, than or within the lower range of the marginal CO2
2006d], monitoring different uses of biofuels produced abatement cost for the road transportation sector of
from each project activity becomes more complicated, for 70-350 Euro/tCO2e [Blok et al., 2001] and is relatively
instance, in cases where there are various gasoline grades, low compared with estimates of the cost of substitut-
various ratios of biofuels in the blend, and other biofuel ing biofuels for fossil fuels in Europe, at 230-2,000
production plants. Euro/tCO2e [Ryan et al., 2006]. In addition, taking into
In fact, Thailand’s ethanol program illustrates that un- account the easier monitoring of emission reductions
der dynamic government support, it may not be possible of the national program compared to the proposed
to identify and claim additionality of CDM projects on CDM projects, the transaction cost per tCO2e of the
biofuel production for blending with fossil fuels. On the program might be less than that of the project-based
other hand, compared to the proposed CDM projects on emission reduction activities.
biofuels, the national ethanol program could in itself be However, it should be noted that the government currently
an example of a suitable programmatic approach, avoid the subsidizes the ethanol program through reductions of
problems of double-counting and also have other advan- taxes for gasohol, which serves to lower the retail price
tages. of gasohol compared to gasoline. This directly benefits
A national program might be credited for emission re- car users. The distribution of the benefits to other relevant
ductions through CDM or other mechanisms. A national stakeholders such as ethanol producers and farmers who
program as the basis for carbon credits would also require cultivate feedstock crops, and also the possibility of en-
adequate baseline and monitoring procedures. However, tailing an increased use of gasoline, should be considered.
the baseline could be established more easily, and in a
more transparent manner. The national baseline scenario 6. Conclusions and policy implications
for the national program would be the scenario without In this paper, we quantify the impacts of achieving the
the government support. For instance, before the govern- targets set in the ethanol program in Thailand. However,
ment’s ethanol program and support by setting the retail we do not analyze whether and to what extent the targets
price of gasohol lower than conventional gasoline started could be achieved. We find that achieving the current
in 2004, there were almost no sales of gasohol. With ethanol program target of replacing all non-ethanol refor-
the ethanol program there is now a substantial amount mulated gasoline with E10 gasohol in 2012 leads to a
of gasohol use and sales. This is the program scenario. significant improvement in gasoline self-sufficiency and
The difference is the cumulative amount of gasohol sales a significant reduction of GHG emissions. Whether and
from the start of the program; this is the amount of emis- to what extent the program leads to an improvement in
sion reductions as a result of the government support. the trade balance depends substantially on the future fuel
In addition, the national program could allow for easier import and export prices and agricultural export prices as
monitoring. Emission reductions are monitored at the use well as the shares of cassava supply from export reduction
of biofuels based on the well-established national statis- and cassava area expansion. It also depends on how re-
tics of different total biofuel-blended gasoline sales and fineries would respond to the increasing replacement of
biofuel import as partly illustrated in Section 3.4. Thus, gasoline with ethanol (export more gasoline or reduce
double-counting of emission reductions could be avoided. crude oil import).

Energy for Sustainable Development • Volume XI No. 3 • September 2007 65


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Achieving the ethanol target could lead to a significant EIA (US Energy Information Administration), 2007. Short Term Energy Outlook, January 9
release, www.eia.doe.gov/emeu/steo/pub/jan07.pdf.
reduction of self-sufficiency of molasses. To what extent
EPPO (Energy Policy and Planning Office), 2007. Energy Data Notebook Quarterly, Energy
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sion has significantly taken place on areas of food crops
FO Lichts, 2005. World Ethanol and Biofuels Report, No. 4, 25 October.
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program target leads to a reduction in the self-sufficiency
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should be able to accommodate the present level of pro- national Energy Agency, Paris, www.iea.org.
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in Thailand could contribute significantly to abating GHG Matsuda, S., and Kubota, H., 1984. “The feasibility of fuel-alcohol programs in southeast
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problems of double-counting. The gasoline substitution Moreira, J.R., and Goldemberg, J., 1999. “The alcohol program”, Energy Policy, 27, pp.
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cost is high compared with the price of project-based
Moore, S.D., and McCabe, P.G., 1999, Introduction to the Practice of Statistics, (3rd ed.),
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OAE (Office of Agricultural Economics), 2006. Yearbook of Agricultural Data of Thailand (in
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Acknowledgements OCSB (Office of Cane and Sugar Board), 2007. Sugarcane and Sugar Economics News
The authors thank Pornpun Hensawang at the Office of Agricultural Economics under the and Announcements (in Thai), Ministry of Industry, Thailand, www.ocsb.go.th.
Thai Ministry of Agriculture for providing valuable agricultural data, Christian Azar for his Ortiz, L., and Noronha, S., 2006. Agribusiness and Biofuels: an Explosive Mixture: Impacts
critical comments and useful advice, Paulina Essunger for critical review, and the Swedish of Monoculture Expansion on Bioenergy Production in Brazil, Friends of the Earth Brazil.
Energy Agency for financial support. PTTRTI (PTT Research and Technology Institute), 2007. Gasohol: Tests Conducted by PTT
Research and Technology Institute: Effects on Emission and Fuel Consumption, Bangkok,
Notes
Thailand, www.pttplc.com.
1. Octane-91 unleaded gasoline (ULG 91), octane-91 gasohol (gasohol 91), octane-95 Rosillo-Calle, F., and Cortez, L., 1998. “Towards Proalcool 2: a review of the Brazilian
unleaded gasoline (ULG 95) and octane-95 gasohol (gasohol 95). bioethanol program”, Biomass and Bioenergy, 14(2), pp. 115-124.
2. Based on regression analysis with the logarithm of the gasoline demand during 1998- Ryan L., Convery, F., and Ferreira, S., 2006. “Stimulating the use of biofuels in the European
2005 as the dependent variable [NESDB, 2006; EPPO 2007]. Union: implications for climate change policy”, Energy Policy, 34, pp. 3184-3194.
Suksunthornsiri, P., Tia, W., and Limmechokchai, B., 2006. “Economy-wide impacts of policy
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66 Energy for Sustainable Development • Volume XI No. 3 • September 2007