Colombia can grow its economy with biofuels: the promise of energy transformation

Currently, the war in Europe, the energy transition and the recovery of the economy are driving the growth of biofuels production.

In 2022, biofuels replaced more than 20 thousand barrels per day of fossil fuels consumed in the country, irrigated resources to the rural sector and generated more than 90 thousand jobs, according to Fedebiocombustibles.

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In its production, our country manufactures bioethanol from sugar cane and biodiesel from palm oil and in 2022 this sector closed with positive figures as stated by the president of the Colombian Biofuels Federation, Jorge Bendeck, in his most recent report.

That year, Colombia consumed 207 thousand cubic meters of palm oil biodiesel, mainly in cargo, goods and passenger transportation activities. Likewise, fuel alcohol consumption was 394 thousand cubic meters, of which 360 thousand cubic meters were sugarcane ethanol produced by 6 sugar mills: Mayagüez, Providencia, Incauca, Manuelita, Risaralda and Riopaila.

The world biofuels market is growing steadily

According to the Atlas of liquid biofuels of the Inter-American Institute for Cooperation on Agriculture (IICA), bioethanol and biodiesel production grew 928% between 2000 and 2019 worldwide.

This boost came about because biofuels facilitate mobility without major technical changes towards cleaner alternatives, while impacting most of the economy’s value chains through transportation or energy services.

Production is concentrated in a few players

As IICA’s Atlas shows, since 2010 the global biofuels sector grew by 53%, explained by a 31% growth in bioethanol and 140% growth in biodiesel. In 2019, before the pandemic, global biofuels production reached 163 million cubic meters: biodiesel 50 million cubic meters and bioethanol the remaining 113 million cubic meters.

Three quarters of the biofuels market is dominated by the United States (40%), Brazil (23%), Indonesia (5%), China (3%) and Germany (3%). The remaining share is shared by France, Argentina, Thailand, India and Spain, and a long list of countries that is growing all the time.

Bioethanol production and consumption is concentrated in the United States and Brazil, which account for 53% and 28% of production and 48% and 27% of demand, respectively.

The biofuels sector has export potential

Another element revealed by the IICA report is that foreign trade accounts for barely one-fifth of biofuels consumption, so these products are focused on the domestic market in most countries.

For example, world exports of biodiesel account for around 20% of world consumption, approximately 9.5 million cubic meters. Foreign trade of bioethanol represents 12% of world consumption, with approximately 12 million cubic meters.

Most of the trade is within the European Union thanks to intraregional trade. However, the list of protagonists is led by the United States, Brazil, Malaysia, Indonesia, Singapore, Argentina, Peru and Canada.

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Colombia in the consumption of raw materials

The use of new raw materials in the production of biofuels has also had a positive impact thanks to the development of production processes such as FAME (Fatty Acid Methyl Ester) or HVO (Hydrotreated Vegetable Oil). In addition to palm, soybean and rapeseed oil, inputs such as used vegetable oil, animal fats, virgin vegetable oils and hydrotreated vegetable oils have been added.

IICA figures reveal that most of the production, 66%, has corn as raw material. In 2019, more than 170 million tons of corn (16% of the harvest) were used in countries such as the United States or Canada.

With 23% of the total, sugarcane was the second most used raw material in the production of biofuels: 370 million tons, 18% of the harvest, were dedicated to bioethanol production in countries such as Brazil, Paraguay and Colombia.

Argentina and the European Union are registered as important consumers of both raw materials for bioethanol production.

In the case of biodiesel, 29% of world production is made from palm oil from countries such as Colombia, Indonesia and Thailand; 25% from soybean oil, used mainly by the United States, Argentina, Brazil and Paraguay; and 17% from rapeseed oil, widely used in the European Union.

New regulations drive demand

By 2020, IICA has registered 53 countries with bioethanol use obligations through three types of mechanisms: the mandatory blending mandate for bioethanol with gasoline and biodiesel with fossil diesel, general mandates for blending biofuels with fossil fuels, and greenhouse gas (GHG) reduction targets.

Brazil, Paraguay and Argentina lead in volumetric blending standards. With “general blending” policies, the cases of Finland and the Netherlands stand out for their required blending levels: 18% and 12.5%, respectively; as well as China’s new regulations on energy transition.

In the case of biodiesel, the Atlas reports that there are at least 43 countries with modalities such as those mentioned above. Indonesia, Brazil, Argentina, Colombia and Malaysia stand out in the list in terms of the volumetric quantities required.

It is time to ride the wave

Boosting this sector in Colombia is strategic. Not only because of international trends and the comparative advantages the country has in the case of ethanol and diesel. Blending with fossil fuels makes it possible to replace imports and reduce the fiscal impact of the Price Stabilization Fund.

It is necessary for the new government to include in its transition proposal, as principles, the assurance of energy sovereignty and security, for which biofuels play a leading role in the short and medium term.

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