International Symposium on

Agricultural and Biofuel Policy –

Presentation by the Philippines
(Summary)

Date: 25 February 2008

Venue: Bangkok, Thailand
Ms. Mercedes S. Fernando, Senior Agriculturist, Department of Agriculture,
Bureau of Soils and Water Management, Philippines

Environmental issues have commanded top priority on the international agenda,

escalating efforts in the search for renewable and alternative energy sources. Given the
wild fluctuations in crude oil prices, the Philippine Government estimates it will save
about US$22 million per year with the use of a 1% coco-methyl ester blend and US$179
million with a 5% ethanol blend.

The Philippine National Standard for coco-diesel is scientifically proven to result in

30-60% lower diesel emissions. Carbon dioxide is likewise reduced by three kg for
every liter of biodiesel use. Additional advantages of biodiesel are that it is safe to
handle and transport, is biodegradable, and is 10 times less toxic than table salt. It is
also cost effective. Even a 1% blend can result in substantial monetary savings while
contributing to national energy conservation efforts. Additionally, a 1% biodiesel blend
does not require engine modification for cars, motorcycles, pump boats and hand
tractors. A bioethanol blend up to 10% is capable of operating without any engine
modification.

The Philippines is ideal for biodiesel production for several reasons. With more than 30
varieties of energy plants, trees and shrubs, in addition to idle lands and superior
bioscience technology infrastructure, the domestic market is large enough to sustain a
biofuel industry and its various byproducts. There are, however, hurdles that need to be
overcome, in terms of available financing and lack of industry partnerships.

At present, local demand for coco-biodiesel or Coco Methyl Ester (CME) in the
Philippines is estimated at 980,000 liters per year while the existing capacity for
producing coco-biodiesel is estimated at 256.9 million liters annually. These supplies
come from six firms accredited by the Department of Energy and two firms with
provisional accreditation to produce CME.

Jatropha is the feedstock of choice for cultivation in identified areas of the country. In
collaboration with the Philippine Army, the Philippine Fuel Corporation jointly
established a plantation at Fort Magsaysay, Nueva Ecija and a nursery in Ligao, Albay
in Southern Luzon. At present, there is no local production of bioethanol fuel, however

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the San Carlos Bioenergy Project is scheduled to be operational this year, which will
have a capacity of 100,000 liters per day or 30 million liters per year.

The Philippine Biofuels Act of 2006, approved by President Arroyo on January 12, 2007,
mandates that all liquid fuels for motors and engines sold in the Philippines must
contain locally sourced biofuel components: 5% bioethanol in gasoline fuel-fed engines
within two years of affectivity of the Act, to rise to a minimum of 10% within four years,
and 1% biodiesel by volume in diesel-fed engines within three months of affectivity of
the Act. The law also provides incentives to investors, such as a zero-specific tax for
local and imported biofuel components. Gasoline and diesel-fuel components shall
remain subject to the prevailing tax rate. In addition, the sale of raw material used in the
production of biofuel, such as, but not limited to, coconut, jatropha, sugarcane, cassava,
corn and sweet sorghum, are exempt from the value-added tax (VAT).

Biofuel development will be conducted on the two million hectares of idle lands to be
identified for agribusiness development and job creation under the 2004-2010
Medium-Term Philippine Development Plan. This area will be culled from a total of six
million hectares of idle lands that are rated highly suitable for biofuel development.

Several areas of improvement and future development have been identified, including
further assessment on the effects of using degraded lands on ecological, social and
economic situations in different regions; consideration of the risk involving biomass
production, such as the loss of biodiversity, increase in water consumption and potential
water contamination; threat to wildlife species and deforestation; net greenhouse gases
(GHG); emission gains and concern over the rights of the indigenous and local people.
An internationally accepted standard for biomass production should be adopted to
ensure the preservation of land, air, water and benefits to all of humanity.

Following the presentation, a question was posed to Ms. Fernando regarding the
difference between using coconut and jatropha to produce biodiesel in terms of cost
effectiveness and the quality of biodiesel. She explained that similar to palm oil, all
parts of the coconut are used in the production of coconut oil. An increase in the variety
of uses, coupled with a decrease in production area have prompted the pursuit of
additional sources of biodiesel. Jatropha is being recommended not only in the
Philippines, but in other research institutions, including Icrisat.

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Concerning jatropha, a request for clarification on the collaboration with the Philippine
Army was made. Ms. Fernando advised that there was a partnering scheme between the
Philippine National Oil Corporation and the Army to establish an additional 1,000
hectares inside Fort Magsaysay Camp in Nueva Ecija. They invite interested parties
from the private sector to participate, and provide technology and training on
maintenance and management.

A participant asked about property ownership rights for foreign corporations in the
Philippines, particularly in the context of owning farmland for biofuels production. The
speaker advised that only Philippine nationals could own property, so if a foreign
corporation wanted to establish a business, they would need to lease the land, or form a
partnership with a locally-based enterprise.

The final question concerned restrictions on farmers’ production, noting that if the
biodiesel industry became successful in the Philippines, perhaps all the farmers would
convert their agricultural lands to produce biodiesel feedstocks. Ms. Fernando explained
that there was a law mandating that only idle and marginal land could be used in the
production of energy crops. No additional land previously allotted for agricultural
production of food crops can be converted for biofuels development.