Caribbean nations grapple with biofuel issues

27 October 2007

Caribbean nations grapple with biofuel issues

By Paula Lavigne, The Des Moines Register

Omar Bros’ hope for his country lies in an oily seed and a dying sugarcane industry.

Bros, an agronomist and civil engineer in the Dominican Republic, is betting on biofuels. And his country’s effort is just part of a global awakening to renewable energy.

The Caribbean, which includes the Dominican Republic and Central America, offers examples of the uncertainty many regions face in the global energy grid. If those regions have the resources, they have to ask whether biofuels are worth the investment.

"The other question is, ’Do I want to produce ethanol for the domestic market, or do I want to export it?’ " said Sergio Trindade, director of science and technology for International Fuel Technology in St. Louis and former assistant secretary general for the United Nations Science and Technology Committee. "It is a question whose answer depends on time."

In the United States, experts debate whether biofuel growth in the tropics will cut into profits for Midwest producers. Special free-trade agreements with those countries can make it less expensive to ship ethanol from there to the U.S. coasts.

"I don’t think there is an answer right now," said Douglas Newman, who studies ethanol for the U.S. International Trade Commission. "As far as the Caribbean being a threat, it’s been around for a long time, but it’s never amounted to much and the demand has been there."

Investors from Brazil, Europe and United States are already buying into the biofuels industry in the Caribbean and Central American countries. A recent pact between Brazil and the United States helps some of these smaller countries get technology and know-how to make ethanol and biodiesel.

Growing, producing and using renewable fuels can help Caribbean countries become less dependent on imported oil, said Johanna Mendelson Forman, senior associate with the Center for Strategic and International Studies in Washington, D.C.

Much of that region’s oil is supplied by Venezuela, where President Hugo Chavez is known for his animosity toward President Bush. Caribbean countries have been supportive of U.S. policies, and the United States doesn’t want them to start siding with Chavez instead, Forman said.

"Chavez is trying to seek friends and allies. ... The Caribbean has 22 votes at the U.N. If you get some kind of dependency with a country, you have other ways with sticks and carrots of using your dependency," Mendelson Forman said.

But Bros, the agronomist in the Dominican Republic, isn’t working for politics. He’s working to improve incomes and lives. Bros is gathering support for growing sweet sorghum and jatropha hedges, whose oily seeds can be used for biodiesel. And he’s hoping an ethanol plant can revive the island’s dormant sugar fields.

"We are babies in this process," Bros said. "It’s going to be a long road to make this work."

Most ethanol plants in the Caribbean and Central America don’t make ethanol. They merely take sugarcane ethanol from Brazil, suck out the water and send it to the United States, where it’s blended with gasoline. Plants shut down when profit margins disappear and ramp up when prices make it worth their while.

These dehydration operations exist to take advantage of a free-trade agreement the United States has with the Caribbean and many Central American countries.

Ethanol from those countries isn’t subject to the 54-cent per-gallon extra charge tacked on to direct exports from Brazil, the world’s second-largest ethanol producer. The extra charge, or tariff, prevents foreign ethanol from getting the 51-cent federal subsidy that supports U.S. producers.

However, ethanol from Brazil can be sent into the United States without the tariff if it is exported and processed through a free-trade country such as Jamaica or El Salvador.

Last year, when ethanol imports were at an all-time high, ethanol coming into the United States under the Caribbean or Central America duty-free quota peaked at 206 million gallons. That was about 75% of such imports allowed through those countries last year. Trade rules allow pass-through ethanol to equal no more than 7% (268 million gallons) of U.S. ethanol consumption.

Some ethanol workers say that’s an unfair loophole stealing the subsidy advantage from U.S. producers.

"If you’re importing energy through a loophole in another part of the world, you’re bypassing the intent," said James Redding is vice president of external relations for Aventine Renewable Energy, an ethanol producer that also sells ethanol for Iowa plants he said. "Is it a threat? Sure, it’s a threat."

Others say it’s more of an annoyance.

"We do not see it as a threat," said Bob Dinneen, president of the Renewable Fuels Association, noting that U.S. producers are sitting on an annual capacity of 6 billion gallons.

source: USA Today