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PHILIPPINE BIOFUEL PRIMER

I. Acronyms for Vital Linkages and Reference


PAFC – Philippine National Oil Co. – Alternative Fuels Corp. Formerly known as
PNOC Petrochemical Development Corp., it was incorporated in July 2006. It is
mandated to develop, explore, and accelerate the utilization and
commercialization of alternative fuels, focusing on jatropha as biodiesel
feedstock in the country.
AIPSI – Asian Institute of Petroleum Studies
ICRISAT – International Crops Research Institute for Semi-Arid Tropics (India-
based)
ISAAS – International Society for Southeast Asian Agricultural Sciences, Inc. Led
by UP Los Banos vice chancellor Dr. Roberto Ranola, Jr.
ISAAA – International Service for the Acquisition of Agri-Biotech Applications.
New York based.
SEARGA – Southeast Asian Regional Center for Graduate Study and Research
in Agriculture. Based in Los Banos, Laguna.
WIREC - Washington International Renewable Energy Conference
Platts – global energy information group
DOE – Department of Energy. DOE’s Alternative Fuels Program is a key
component of the government’s Energy Independence Agenda. The program is
headed by Dir. Mario Marasigan.
DENR – Department of Environment and Natural Resources
DAR – Department of Agrarian Reform
DND – Department of National Defense
DA – Department of Agriculture. The DA is the lead agency of the government’s
“convergence of agencies” involved in jatropha production, along with DENR and
DAR.
DA-BAR – Dept. of Agriculture-Bureau of Agricultural Research
PBB – Philippine Biofuel Board. As stipulated by the Biofuels Act (RA 9367), DA
is mandated to develop, implement, and monitor the government’s biofuel
production and utilization technology programs.
NBB – National Biofuels Board
DBP – Development Bank of the Philippines
LBP – Land Bank of the Philippines
PCIC – Philippine Crop Insurance Corp.
UP-LB – University of the Philippines-Los Banos. Premier agricultural research
facility in the country.
BIARC – Bicol Integrated Agricultural Research Center
PCARRD – Philippine Council for Agriculture, Forestry and Natural Resources
Research and Development
Chatham House – British food think tank
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PFC – Philippine Forest Corp. A government corporation under the supervision


and control of DENR.
PADCC - Philippine Agriculture Development and Commercial Corp. A
corporation under the control and supervision of the Dept. of Agriculture. The
DA’s implementing arm for its national biofuel feedstock development program.
NRDC – Natural Resources Development Corp. DENR’s corporate arm.
CARP – Comprehensive Agrarian Reform Program
PCA – Philippine Coconut Authority
SRA – Sugar Regulatory Administration
CSPA – Confederation of Sugar Producers Association. The implementing rules
and regulation of the Biofuels Act made the confederation a member of the
Bioethanol Board, a consultative body that will work with the SRA in developing
and implementing bioethanol-related policies.
IPPCA – Independent Philippine Petroleum Companies Association. The new
petroleum players
CAMPI - Chamber of Automotive Manufacturers
JAMA - Japan Automotive Manufacturers Association
IETA - International Emissions Trading Association. Accredited by the UN.
JBIC - Japan Bank for International Cooperation
ESP – Ecological Society of the Philippines. An anti-biofuels group.

II. Other Jatropha Projects


• PNOC-AFC to pursue jatropha project. PAFC, the biofuels arm of state-
owned PNOC is pushing through with its planned jatropha development
project in Iwahig Prison and Penal Farm in Puerto Princesa, Palawan.
PAFC Pres. Peter Anthony Abaya said they will renew talks with the Dept.
of Justice (DOJ) to let the Dept. of Agriculture (DA) develop the flat arable
lands of Iwahig. Since rice is not ideal for rolling and sloping land, the
PAFC will continue its plans to develop jatropha for those sloping areas
this end of April. Iwahig will be a rice and biofuel producer at the same
time. Palawan alone, has more than 200,000 hectares of idle lands said
Palawan Gov. Joel T. Reyes. PAFC and the Palawan government signed
an MOU last March 27 for the plantation of jatropha in over 30,000
hectares of idle lands. Initially, Palawan will identify, consolidate, and
commit an initial area of at least 10,000 hectares for the establishment of
jatropha nursery and plantation. There is already an existing 70-hectare
jatropha nursery in San Isidro, Narra in the southern part of Palawan.
Reyes said they are currently securing some legal documentation for the
lands. He said they are also looking at putting up a refinery in partnership
with the private sector. PAFC has jatropha nurseries in Gen. Santos,
Cagayan de Oro, Saranggani, Agusan del Sur, and Fort Magsaysay.
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• Biofuels Act co-author and former Congressman Herminio G. Teves has


been growing jatropha trees on 10,000 hectares of leased hillsides in
Tamlang Valley, a 24,000-hectare area straddling the municipalities of
Valencia, Siaton, and Sta. Catalina in Negros Oriental, since last year. His
biodiesel plant is set to start operations in 2009. Jatropha production
gradually increases, said Teves who explained that 2,000 trees per
hectare can be planted one year and 4,000 the next. He said jatropha
production has opened up jobs for many residents of Tamlang Valley,
adding that he offers profit-sharing to employees. He expects to harvest
10,000 kilos of seeds per hectare after four years. He said about 3.5 kilos
of seeds can produce a liter of oil which is similar to bunker oil. He is no
hurry to sell the seeds as a lot of local and foreign investors want to buy
them. Teves plans to sell to the more lucrative foreign market. “The PNOC
and the oil companies here want to already sign an agreement with me.
But I’m not in a hurry because I know there are foreign companies willing
to buy,” he said. He added that China and Japan are “very, very
interested” to buy jatropha to produce biodiesel. Minutes of the bicameral
conference committee that fashioned the final version of the Biofuels Act
reveal that Teves was apparently eyeing the foreign market even before
the law was passed.

• Lopez-led First Philippines Holdings Corp. is preparing to enter the


emerging biofuels business, with subsidiary First Philippine Properties,
Inc. forming a new vehicle for plantations and nursery. FWV Biofields
Corp. has an authorized capital of only P5-M with Rafael M. Alunan III,
Rafael M. Abello, Jr., Rodolfo R. Waga, Jr., Aganes le Casabar Oxales,
and Esmeraldo C. Amistad as incorporators. FWV Biofields will also carry
on agribusiness activities such as nursery operations for plant seedlings
and the cultivation of aquatic resources and mangroves. It plans to raise
between P2.94-B and P4.91-B from the sale of 50-M preferred shares.
First Holdings has investments in power generation and distribution, toll
roads, manufacturing, and support industries such as oil pipeline services,
construction, and engineering services as well as property development.

• In Washington D.C. last March 10, Philippine Forest Corp. (PFC) signed a
jatropha production contract with Abundant Biofuels Corp. (ABC), a US
firm engaged in the business of biofuel alternative energy production.
Based in Monterey, California, ABC will operate the jatropha production
and refinery business in Bukidnon through its subsidiary Bio-Fuels
Philippines, Inc. Rene Lacsina, president and CEO of Bio-Fuels
Philippines, Inc. signed a $200-M jatropha production contract with the
Philippine Agriculture Development Corp. (PADC). Lacsina recalled PFC
brought him to Negros to join the group of former Cong. Herminio Teves
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because their company had entered into a similar jathropha production


contract for 10,000 hectares of land with PFC.

III. Competitive Biofuel Crops and Companies


• Malunggay oil tapped as biofuel in US. A Filipino biotechnology firm –
Secura International – reported there has been a growing demand for
Moringa oil in the US for use as biodiesel. Malunggay was tapped by the
North American Biofuels, Inc. last January for its biodiesel needs. Secura
is now completing the farming of malunggay in 500,000 hectares of
farmland. Secura said that to date, there are at least 165 biodiesel
marketing companies that use soybean oil as biofuel in the US. In the next
50 years, Japan and Korea will be the largest market for Moringa oil as
biodiesel. “North American Biofuels Incorporated was earlier looking for
jatropha as source for biofuel, but after looking at a 100-liter sample of
Moringa oil, it ordered the latter instead since it passed biofuels
standards,” said Secura’s Danny Manayaga. At present, Secura has
established 30 malunggay plantations nationwide covering 300,000
hectares. It is now looking for additional 200,000 hectares in Cotabato,
Sultan Kudarat, Davao, Ilocos, Pangasinan, and Bohol. Secura is
encouraging farmers to plant 1,000 hectares of malunggay to be able to
establish a plantation. Secura buys the seeds at P10 per kilo. A farmer
who plants a hectare of malunggay seedlings will harvest 20,000 kilos of
seeds in the first two years or equivalent to a net profit of P200,000 per
year.

• The government witnessed the signing of contracts between FE Clean


Energy and Global Renewable Energy Network (Green) Inc. at the
Washington International Renewable Energy Conference (WIREC) last
March 5. Agriculture Sec. Yap said the agreements present the country
with “valuable opportunities to generate international interest in the
country’s biofuel feedstock development program.” PADC also witnessed
the LOI signing of FE Clean Energy (Darien, Connecticut) and Bronzeoak
Clean Energy committing the two to invest $30-M in the country’s biofuel
industry with the goal of partly supplying the domestic requirements of the
market. FE Clean Energy began to build last year its bioethanol plant in
San Carlos, Negros Occidental, and expects to open this facility in the last
quarter of 2008. It will expand by constructing two more plants in Tarlac
and Bukidnon. BUSCO, owned by Senator Zubiri’s family, partnered with
Bronzeoak Philippines to build an ethanol plant in Bukidnon.

• Ozamis City, in Mindanao, signed an agreement with a major Spanish


bioenergy company.
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• Sweet Sorghum stalk contains sugar-rich juice for production of ethanol.

• In 2006, Toyo Engineering Corp. (TEC) of Japan said it will invest in an


integrated biodiesel facility in the country starting off with planting of
coconuts on 600,000 hectares in the Ilocos region to be funded by the
Japan Bank for International Cooperation (JBIC). A team of TEC officials
has been in the country to identify sites assisted by Ilocos Norte Rep.
Roquito Ablan. This is aimed at supplying Japan’s long-term biodiesel
requirement. Japan has shifted to using a 5% biodiesel mix for its fuel as
part of an effort to use efficient and environment-friendly fuel which TEC
hopes to source entirely, if possible, from the Philippines. The coconut
plantation may extend from Ilocos Sur and Ilocos Norte and nearby
provinces such as Pangasinan and La Union. Its construction of a
biodiesel or coconut methyl ester (CME) plant in the country in the next 5
years is hoped to add up to the existing capacity of the country to produce
biodiesel on top of what Chemrez and Senbel are now producing.

• Chemrez Technologies Inc., which owns the only operational biodiesel


plant in the country, is confident of having more than enough capacity to
meet the demand for international quality biodiesel. Chemrez chief
operating officer Dean Lao, Jr. said the firm’s biodiesel plant, which was
completed and commissioned in June 2006, has a capacity of 60,000
metric tons of BioActiv premium biodiesel per annum. This translates to
68.18-M liters at the rate of 1,136.4 liters per ton. The biodiesel giant also
has an older plant which has a capacity of 15,000 tons a year of 17.05-M
liters.

• Malaysia, the world’s biggest producer of palm oil, is pushing to develop


biofuel from the plant, while the coconut-producing Philippines is offering
to be the regional hub for jatropha and ethanol. Dave Ernsberger, Asia oil
director for energy information giant Platts, said: ASEAN’s biggest
challenge was how to deal with the destabilizing effect on energy security
of Indonesia’s plunge from being an oil exporter to a net importer.
Because of its small size and fragmented markets, ASEAN also doesn’t
have the purchasing power of India or China and the political
cohesiveness of Europe to negotiate over its energy needs.

IV. Government Statements on Biofuel/ Jatropha


• Senator Zubiri (main sponsor of Biofuel Law) insisted that if implemented
properly, biofuels would not compete with food since the feedstock to be
used would be sugarcane of which the country has an oversupply. He said
the excess of production were for export at super low prices. “We have
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enough excess sugar to supply the 10% ethanol requirement of the law
while jatropha can be planted in close to 4-M hectares of cogonal
mountain land that remain idle.”

• RP prepared to meet its 2014 biofuel requirements of about 537 million


liters of bioethanol a year said Agriculture Sec. Arthur C. Yap. He
confirmed that 16 bioethanol projects are being put up. He said the
demand for bioethanol alone would require more than 500,000 hectares of
expansion areas for sugarcane, sweet sorghum, and cassava in the
country. For biodiesel, Yap said there were enough current accredited
coco methyl esther (CME) producers operating in the market, the biggest
of which has an actual production of 70-million liters annually. “Still, new
projects will be needed to meet future CME fuel demands, not only of the
Philippines, but of foreign markets as well,” Yap said.

• PAFC Chair Renato Velasco said that while it is true that the worldwide
biofuels program has generated a food vs. fuel debate since the setting
aside of more land for planting biofuel crops has affected food production,
the scenario in the Philippines is completely different. “As for jatropha as a
biodiesel foodstock, we do not compete for land use with producers of
rice, corn, fruits, vegetables and livestock. We do not entice land-owners
and farmers to shift from food production to jatropha farming since
jatropha can grow on idle lands or denuded hills,” he said. “The issue over
diverting food to fuel does not apply here. That is the biggest advantage of
jatropha. It is unlike other feedstocks which are also vegetable oils and
cosmetics bases such as rapeseed, palm, sunflower, soy, and linseed.
And this is why PAFC is betting on this miracle seed, first and foremost for
our country’s energy independence. Food and fuel security can go hand in
hand. Food security is not a function of productivity, it is a function of
purchasing power,” he added.

V. Legislative Initiatives
• There are twin bills, both pending in Congress, that seek to aggressively
pursue a government policy that requires the use of renewable or
alternative energy. One of them is the Renewable Energy bill authored by
Sen. Miguel Zubiri and the other is the Alternative Fuels authored by Sen.
Miriam Santiago.

VI. Scientific Findings/ Research & Development


• Agricultural experts from the UP-Los Banos have found in a January 2007
study that jatropha only becomes a practical biodiesel feedstock if seeds
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yield at least 34% oil content. The local variety, however, yields less than
the practical standard. “Only 28 to 32% oil is said to be extractable,” the
experts said.

• PAFC spent only P80-M out of a total budget of P1.1-B for jatropha
development said PAFC Chair Renato Velasco. “We spend some P30-M
for the comprehensive R&D for jatropha in the country,” he said. In the
US, he said the University of Michigan has ranged PAFC’s jatropha
development researches among the top 5 in the world.

• The Asian Institute of Petroleum Studies Inc. (AIPSI) recommended that


the government consider jatropha methyl-ester (JME) for industrial use. It
has a strong potential as an industrial fuel, both for bunker and coal-fired
power-generators. Managing Director Rafael Diaz noted that diesel
engines (especially high-tech engines) are very discriminating in quality,
thus biodiesels must be fully supported with technically-documented test
data from reputable testing centers. “There is not a single technically-
documented test data on jathropa that had been published as yet. The
Chamber of Automotive Manufacturers (CAMPI) and the major oil
companies will certainly not accept JME as blend to diesel without
properly-documented and proven test data,” he said. According to Diaz,
the Japan Automotive Manufacturers Association (JAMA) had recently
specified a minimum of 10 hours oxidation stability to accept biodiesel.
Only coco-biodiesel more than surpassed this requirement with 16 hours.
Jatropha, he said, must be directed for industrial applications as heating
fuel (i.e. boiler fuel or furnace fuel) rather than as biodiesel for the quality-
discriminating diesel fuel and diesel engine. Diaz noted that the jatropha
seed alone has a heat value almost similar to bituminous coal. It is sulfur
free and will provide oxygen to the coal blend for cleaner burn. He said
that this is conditioned on a proof that burning jatropha seed or oil will not
produce toxic emission. Jatropha has a poisonous element called “curcin”
which can cause death when ingested and it must be determined if curcin
will develop toxic emissions when combusted in the engine.

VII. Government Financial Institutions (GFIs) for funding


• PAFC Chair Renato Velasco said the company is in close coordination
with government financial institutions that are providing lending facilities to
investors that would want to enter into jatropha production. “There are
facilities from the Land Bank of the Philippines and Development Bank of
the Philippines that are available for investors,” he said. From DBP, only
P17-M was lent out to jatropha project of Rep. Herminio Teves. Velasco
noted that a P10-B facility set aside by Land Bank for biofuels
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development has remained untapped. According to Velasco, PAFC is also


talking with the Philippine Crop Insurance Corp. “We are trying to tap the
PCIC for a possible facility and at the same time on the insurance aspect
of jatropha projects,” he added.

• Congress needs to amend the charters of Land Bank of the Philippines


and the Development Bank of the Philippines to be able to push through
with their proposed merger, Finance Sec. Margarito Teves said last March
7. Proposals to merge the two, which are still pending in Congress, have
been floating as early as 2 years ago as part of moves to consolidate the
banking industry. For instance, House Bill 3258, authored by Quezon Rep.
Danilo Suarez seeks to merge LBP and DBP, the largest state-owned
banks, focuses on lending to rural cooperatives, particularly farmers and
fisherfolk, while DBP conducts development financing. In terms of total
assets, LBP and DBP ranked as the country’s fourth and fifth largest
banks, respectively, as of the end of last year, with P382.5-B and
P241.16-B respectively. Both banks have to amend their charters and
discuss the issue with their employees said Teves.

VIII. Biofuels Act (RA 9367) and Implementing Rules & Regulations (IRR)
• “Yes, we are implementing the Biofuels Act. All diesel fuels sold in the
country already contain 1% biodiesel since May 6, 2007,” explained
Energy Sec. Reyes. Within two years from the effectivity of the act, the
National Biofuels Board, according to the law, shall determine the
feasibility of increasing the blend and recommend to the DOE to mandate
a minimum of 2% of biodiesel by volume subject to domestic supply and
availability of locally-sourced biodiesel component.

• The law is not specific about land use conversion. This is possibly the
trickiest aspect of the law, as it touches on land reform and the food
versus fuel debate that was emphasized in the media lately. The SRA
expressed misgivings about the dearth of policies on land use. The SRA is
tasked to check the suitability of lands for feedstock plantation before a
potential planter ventures into planting vast tracts of sugar crops.

• National Biofuels Board (NBB) Deputy Director John Jacob Gonzales


enumerated the guidelines for biofuel lands as “no competition for food, no
competition for land. Biofuels should be planted on green fields or
marginalized land. Conventional land for food crops like rice and others
should not be in direct competition. Aside from ensuring that there will be
no competition for food, the NBB guidelines also prohibit feedstock land
use that will harm the environment. Surprisingly, the law doesn’t include
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the DENR among the members of the NBB despite the reported ecological
harm associated with feedstock growing. Despite an alleged surplus in
feedstock, especially in the case of sugarcane, the Philippines is expected
to fall short of the target supply needed to comply with the mandated
blends. One reason is that there aren’t enough processing plants for
biofuels. “For biodiesel, I think we have enough supply,” Gonzales said.
“But for bioethanol, we need to set up at least 10 more factories, and each
factory needs 30 million liters. One factory alone needs at least one year
and a half to construct.

• Clearing forests to make way for feedstock implementation has caught the
attention of environmental groups all over the world. Biofuel production in
Indonesia, for instance, is currently under scrutiny by government and
NGOs worldwide. Conversion of forests and grasslands into palm oil
plantations is said to be emitting more carbon than gasoline usage. These
conversions release 17 to 423 times more carbon than the amount
reduced by biofuel use, revealed a February 2008 study by the University
of Minnesota and the Nature Conservancy titled The Dark Side of
Biofuels.

• RA 9367 has no provision mandating local biofuel producers to supply the


local market first before exporting their products. This means biofuel
producers can choose to supply their product to higher-paying foreigners.

• The creation of the National Biofuels Board (NBB) is at least a positive


step forward for the nation. We desperately need investors who could pour
in funds to develop our biofuels industry. It is the new sunshine industry.
The NBB is reportedly mulling a one-stop shop to assist interested foreign
investors in biofuels projects. There should be enough incentives from the
government side to entice these investors. The NBB, composed of key
movers in the government sector – Department of Trade & Industry, Dept.
of Agriculture, Dept. of Finance, Dept. of Science & Technology – and the
sugar and coconut administrative bodies should look into this seriously,
and with haste, because the development alone of this biofuels program
takes quite a long time before it sees light.

• With the passing of the Biofuels Act, the Philippines aims to become the
biofuels capital in Asia. It mandates the granting of government incentives
to companies that will invest in the development and production of
ethanol, biodiesel, and other plant-based fuels. These incentives are in the
form of tax exemptions and concessional loans from GFIs.
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• Domestic consumption of biodiesel is seen to reach close to 70-M liters a


year once the mandated blend of 1% biodiesel into all domestic diesel fuel
is implemented. The ration increases to 5% in 2 years. Industry figures
show that petro-diesel consumption in the country averaged 6.85-B liters
per annum in the last 5 years (2001-2005), with about 7-B liters consumed
in 2005. This figure is projected to increase at an annual rate of between 3
and 4% over the next 5 years.

IX. Department of Energy (DOE) Programs


• DOE’s Alternative Fuels Program is a key component of the government’s
Energy Independence Agenda. It outlines the roadmap that will lead to the
country’s attainment of 60% energy self-sufficiency by 2010. DOE’s thrust
is to implement a long-term program to reduce the country’s dependence
on imported oil, and provide cheaper and more environment-friendly
alternatives to fossil fuels. The transition to alternative energy sources,
however, includes efforts to increase infrastructure, which is crucial for its
success. Based on the 2006 Philippine Energy Plan Update, the
alternative fuels program (biofuels and natural gas) contributes the
equivalent of 14.02 million barrels of fuel oil in the total primary energy
supply estimated at 302.50 million barrels of fuel oil equivalent. As far as
private sector involvement is concerned, DOE has already accredited 9
biodiesel plants with a total annual capacity of more than 287 million liters
with a total investment of more than P10-Billion.

• “We have to focus on infrastructure to support the input of the energy


sector. You have to restructure everything,” said Energy Sec. Angelo
Reyes.

X. Tree Plantations
• The Natural Resources Development Corporation (NRDC) is launching an
agro-forestry program “Planting Futures” designed to enhance the
rehabilitation of the country’s denuded forest areas and create more
income-generating opportunities in the countryside. DENR Sec. Atienza’s
directive seeks to encourage the planting of industrial trees yielding
hardwood and developing other agro-forestry products. Planting Futures
seeks to initially rehabilitate some 50,000 hectares of denuded forest
areas in various parts of the country. Planting Futures will involve the
participation of local government officials in the establishment of industrial
tree plantations in partnership with local government units (LGUs) in
various provinces.
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XI. Carbon Credits


• The World Bank has expressed interest in buying the carbon credits to be
generated by the jatropha project of PAFC. Four other firms are interested
in the same arrangement. The two named are: EcoSecurities and
Mitsubishi Securities of Japan. Some companies have approached them
regarding carbon credits for the plantation and the refinery. PAFC is
looking at carbon credits to either assist jatropha farmers with their loans
or to give them extra income. PAFC is eyeing to generate some $70-M
additional profits annually from the sale of carbon credits. This translates
to $100 per hectare of the company’s target 700,000 hectare plantation
this year. EcoSecurities is one of the world’s leading companies in the
business of originating, developing, and trading carbon credits.
EcoSecurities structures and guides greenhouse gas emission reduction
projects through the Kyoto Protocol, acting as principal intermediary
between the projects and the buyers of carbon credits.

• Carbon trading in Asia is on a “meteoric rise” and the Philippines could


become a major player in the next 5 years, the UN-accredited
International Emissions Trading Association (IETA) said. “When we’re
talking about the $30-B market of trading, 80% of it is in Asia…60% in
China, 12% in India, and 7% in the rest of the region said IETA president
and CEO Andrei Marcu. Although the Philippines currently holds just 3%
of the carbon market, mostly with projects in the pipeline, “it is an
emerging market. By 2012, the Philippines and Malaysia could be major
players in Asia already,” said Marcu. With the increasing debate on the
post 2012 era and the economic growth in the Asian region, the market
potential will continue to grow exponentially. In the region, Marcu singled
out Singapore as a potential carbon trading hub. There are currently 3
international markets for carbon credits: the Chicago Climate Exchange,
the Chicago Climate Futures Exchange, and the European Climate
Exchange.

XII. Anti-Biofuel Groups


• The Ecological Society of the Philippines is urging the government to stop
the biofuels plan and instead tap the vast source of renewable energy.
According to ESP Pres. Antonio M. Claparols, the UN has been alarmed
by the looming food shortage and unrest over food inflation. Biofuel
production is due to increasely hugely worldwide in the next 15 years.
Claparols noted that the long-term use of biorganic fuel as alternative to
replace petroleum gas can bring harm to the country’s food supply in the
future.
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http://gene-gregorio.blogspot.com/p/about-gene-gregorio.html
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