Editorial

Bio-fuel country

With little fanfare, the Philippines last Friday joined the short list of countries that have embraced the use of bio-fuel on a nationwide scale. It is too early to tell if the government will succeed in implementing the bio-fuel law consistently over the long haul. Oil companies have prepared for it since last year and early indications point to an early smooth ride.

The Bio-fuels Law of 2006 requires oil companies, including Petron Corp. and the local subsidiaries of Royal Dutch Shell Plc and Chevron Corp., to use 10-percent ethanol in gasoline and 2-percent bio-diesel in regular diesel to diversify the country?s fuel sources and reduce carbon emissions.

The bio-fuel law is one of the few important energy bills passed by the Philippine Congress, along with the Electric Power Industry Reform Act, which aims to rationalize the power sector in the hope of reducing electricity rates in the country.

The bio-fuel initiative has its early beginnings in the 1980s when then President Ferdinand Marcos drew up an ambitious nationwide program called alcogas. That program failed to take off, essentially because of limited infrastructure and a small automotive market. Oil prices at that time, too, were more competitive, making alcogas impractical.

The recent spikes in crude prices and dwindling supply and calls for lower carbon emissions to prevent global warming, however, have made bio-diesel a viable alternative now. ?Cleaner and more cost-effective, alternative fuels will become more indispensable to the country?s energy mix,? says the Energy Department on Friday.

The availability of ethanol supply will remain key to the sustainability of the alternative fuel program. The Philippines, at the outset, will likely import most of its ethanol requirements from Brazil, a major producer, pending the completion of local refineries.

The pricing of bio-fuels will also be critical to the success of the law. Bio-fuel prices must, at all times, be cheaper than the traditional motor fuel. In the unlikely event that crude prices decline to levels competitive with those of bio-fuels, the government must be ready to support the alternative fuel program through a tax subsidy or by other means. Anything short of this will make the bio-fuel industry unsustainable and irrelevant.