Commentary: What's the problem with biofuels?

SINGAPORE: The recent United Nations’ COP28 summit concluded with a landmark deal aimed at transitioning away from fossil fuels. One strategy includes a pledge to reduce aviation emissions by 5 per cent by 2030 through use of cleaner energies such as nature-derived fuels. Biofuels are one promising green alternative.

Biofuel refers to energy drawn from organic materials such as vegetable oils, animal fats, or even used cooking oil. One can liken it to squeezing the juice out of corn, only it is not meant for breakfast, but to fuel planes, ships and ground transportation.

Biofuels can be seen as the greener cousin of traditional fossil fuels due to their renewable nature and lower carbon emissions. They are also versatile and can be mixed with conventional fuels for energy. Despite the many perks, the growth of biofuels is fraught with challenges.

BIOFUEL NOT AS GREEN AS IT SEEMS

For one, biofuels generally have lower carbon emissions because the carbon dioxide (CO2) emitted by biofuels when burned is partially offset by the CO2 absorbed by the plants as they grow.

However, it is worth noting that the process is not entirely emission-free. The biofuel family comprises diverse sources, including the common ethanol and biodiesel. But not all biofuels are created equal: Some are more eco-friendly or efficient than others, depending on their source and how they are made. In some instances, the manufacturing process of biofuels can end up emitting more greenhouse gases than fossil fuels.

Then, there is the question of scalability. Currently, the world churns out about 600 million litres of sustainable aviation fuel - a type of biofuel - each year.

The International Air Transport Association aims to up this number to 17.5 billion litres annually by 2030. This is a stunning 2,800 per cent increase in seven years, all in pursuit of achieving just a 5 per cent reduction in aviation emissions.

Achieving such an ambitious target would require substantial investments in infrastructure beyond planting more trees and crops. It will also need to be supported by advanced technology to revolutionise biofuel production.

In Singapore, a 20-month sustainable aviation fuel pilot by the Civil Aviation Authority of Singapore, Temasek-backed investment platform GenZero and Singapore Airlines has yielded positive results. The aviation authority stated Singapore is ready to switch to sustainable aviation fuel but highlighted the need for more support to upscale. Still, the sheer magnitude of the targeted growth is daunting, even with economic incentives and policy support in place.

One also cannot overlook the shadow of environmental costs. A 2020 report by the European Union revealed that an area as large as The Netherlands has been used to support biofuel production over the last decade. This is a land size that is around 58 times that of Singapore, dedicated to growing crops like soy and palm oil, among others, for biofuel production.

As it stands, palm oil is a fuel source with a bad reputation. Aside from links to deforestation and habitat destruction, it has also been involved in fraud cases. The EU has been investigating cases of biofuel authenticity, where some suppliers in Asia have been accused of mixing palm oil with other substances, fraudulently labelling them as sustainable fuel to cash in on EU import incentives.

Ramping up sustainable aviation fuel production to 28 times the current output without an update to existing biofuel production technologies would therefore cause greater deforestation and bulldoze biodiversity at an extraordinary pace, in addition to higher potential for fraudulent practices.

Perhaps the most crucial challenge of all is monetary cost. Biofuels carry a heftier price tag, sometimes twice as much as conventional fuels. Are today’s consumers willing to foot the bill for greener fuel at the expense of possibly costlier groceries?

Biofuel production involves planting crops for fuel use, which directly competes with agricultural land use to feed the population, leading to the possibility of higher food costs.

Pursuing cleaner energy may thus inadvertently burden household budgets, forcing consumers to balance environmental aspirations with economic realities.

LACK OF ENFORCEMENT MECHANISMS

Finally, nations have taken a commendable step in vowing to increase biofuel production dramatically by 2030 at COP28.

However, without a binding climate enforcement mechanism, voluntary commitments often lack the muscle to power through. It remains to be seen if nations will stay true to their promises and implement plans to steer away from fossil fuels.

Biofuels may shine as a beacon of greener energy, but they are but one piece of a much larger sustainability puzzle.

As we navigate this complex terrain, we must consider the delicate balance of environmental, economic and ethical factors. We cannot expect biofuel to be the single raindrop that fills an empty lake overnight. Let us not be beguiled by the “bio” prefix as a quick fix but rather move forward with our eyes peeled, recognising the potential and the limitations of every step we take.

Kelvin Law is Associate Professor of Accounting at Nanyang Technological University, Nanyang Business School, and his research examines corporate sustainability and financial fraud.