Fuel ethanol program in Thailand: energy, agricultural, and environmental trade-offs and prospects for CO2 abatement

Journal article, 2007

Thailand has established an ethanol program with a target of replacing all conventional gasoline with E10 gasohol (gasoline containing 10% by volume of ethanol) by 2012. This paper assesses the impacts of achieving the target on (1) land-use change, (2) trade balance, (3) gasoline and associated food crop self-sufficiency, and (4) GHG emissions. In addition, the abatement cost of replacing gasoline with gasohol (additional cost of supplying gasohol) and the tax revenue forgone in implementing the program are estimated. Finally, in order to obtain insights in relation to the prospects of the national program vs. project-based Clean Development Mechanism (CDM) for CO2 abatement, the ethanol program is compared with specific biofuel projects. We find that achieving the ethanol program target can lead to a significant improvement in the gasoline self-sufficiency rate (from 10 to 20%) and significantly reduce GHG emissions (corresponding to 2% of the total energy-related CO2 emissions in 2004) over the period of 2005-2012. The ethanol program can induce a significant (up to 200,000 ha in magnitude) transition from food crop production (mainly corn and rice) to cassava production for ethanol leading to a reduction in the self-sufficiency rates of associated food crops. But the crop self-sufficiency rates would still be above 100% and Thailand's agricultural sector should be able to accommodate the present program target. Whether and to what extent the program leads to an improvement in the trade balance depends substantially on fuel and agricultural prices, sources of cassava supply, and responses of refineries to decreased gasoline demand. The annual average gasoline substitution cost is estimated at 25-195 US$/tCO2e, which is high compared with the price of project-based certified emission reductions traded during 2006 but low compared with estimates of the cost of substituting biofuels for fossil fuels in Europe. The tax revenue forgone is estimated at 2-4 times the gasoline substitution cost. Thailand's ethanol program illustrates that under dynamic government support, it may not be possible to identify the additionality of CDM projects for biofuel production and blending with fossil fuels. Implementing national programs as the basis for carbon credits could avoid the issues of double-counting and also have other advantages. © 2007 International Energy Initiative, Inc.