Int. J. Global Energy Issues, Vol. 28, No. 4, 2007 357

Copyright © 2007 Inderscience Enterprises Ltd.

Economic evaluation and environmental benefits of biofuel: an Indian perspective

Anuj Kumar Chandel and Rajeev Kumar Kapoor Lignocellulose Biotechnology Laboratory, Department of Microbiology, University of Delhi South Campus, New Delhi-110 021, India E-mail: anuj_chandel@yahoo.co.in E-mail: laccase11032@yahoo.com

M. Lakshmi Narasu Centre for Biotechnology, Jawaharlal Nehru Technological University, Kukatpally, Hyderabad-500 072, Andhra Pradesh, India E-mail: mangamoori@rediffmail.com

Viswajith Viswadevan Department of Microbiology, National Facility for Marine Cyanobacteria, Bharathidasan University, Tiruchirapalli-620 024, Tamilnadu, India E-mail: viswam4444@rediffmail.com

S.G. Saravana Kumaran Lignocellulose Biotechnology Laboratory, Department of Microbiology, University of Delhi South Campus, New Delhi-110 021, India E-mail: sarvana@yahoo.com

Ravinder Rudravaram and L. Venkateswar Rao Department of Microbiology, Osmania University, Hyderabad-500 007, Andhra Pradesh, India E-mail: nr_ravinder@rediffmail.com E-mail: vrlinga@yahoo.com

358 A.K. Chandel et al.

K.K. Tripathi Department of Biotechnology, 8th Floor, Block II, C.G.O Complex, Lodhi road, New Delhi-110 007, India E-mail: kkt@dbt.nic.in

Banwari Lal The Energy Research Institute, Darbari Seth Block, India Habitat Center, Lodhi road, New Delhi-110 007, India E-mail: banwaril@teri.res.in

R.C. Kuhad* Lignocellulose Biotechnology Laboratory, Department of Microbiology, University of Delhi South Campus, New Delhi-110 021, India Fax: 91-11-24115270 E-mail: kuhad@hotmail.com *Corresponding author

Abstract: Biomass based fuel technologies are rapidly developing and the barriers in implementing such technologies are being identified to achieve their widespread commercialisation. The two most common biofuels are biodiesel and bioethanol. About 500 million litres of ethanol is required in India itself for 10% blending to gasoline. Indian Planning Commission sees tremendous potential in Jatropha curcus and has supported through various government agencies nationwide programmes to cultivate using wastes/degraded lands. Biofuel policy might capitalise on the production of biofuels supporting rural economic development and sustainable agriculture. This paper discusses the economic and environmental aspects of Biofuel specially in Indian perspective.

Keywords: bioethanol; biodiesel; biofuel economics; Jatropha curcus; kyoto protocol.

Reference to this paper should be made as follows: Chandel, A.K., Kapoor, R.K., Lakshmi Narasu, M., Viswadevan, V., Saravana Kumaran, S.G., Rudravaram, R., Venkateswar Rao, L., Tripathi, K.K., Lal, B. and Kuhad, R.C. (2007) ‘Economic evaluation and environmental benefits of biofuel: an Indian perspective’, Int. J. Global Energy Issues, Vol. 28, No. 4, pp.357–381.

Biographical notes: Anuj K. Chandel holds an MSc in Biotechnology. He is a research scholar in the Department of Microbiology, University of Delhi, New Delhi, India. His area of specialisation is microbial biotechnology and he has one publication to his credit.

Rajeev K. Kapoor holds an MSc in Biotechnology. He is a research scholar in the Department of Microbiology, University of Delhi, New Delhi, India. His area of specialisation is microbial biotechnology and he has five publications to his credit.

Economic evaluation and environmental benefits of biofuel 359

M. Lakshmi Narasu holds an MSc and PhD in Microbiology. He is a Professor at the Centre for Biotechnology, Jawaharlal Nehru Technological University, Kukkatpally, Hyderabad, Andhra Pradesh, India. Her area of specialisation is microbial biotechnology and she has 35 publications to her credit.

Viswajith Vasudevan holds an MSc in Microbiology. He is a research scholar in the National Facility for Marine Cyanobacteria, Bharathidasan University, Tiruchirappalli, Tamil Nadu, India. His area of specialisation is marine biotechnology and he has one publication to his credit.

S.G. Saravana Kumaran holds an MSc in Microbiology. He is a research scholar in the Department of Microbiology, University of Delhi, New Delhi, India. His area of specialisation is microbial biotechnology.

Ravinder Rudravaram holds an MSc and PhD in Microbiology. He is a Research Associate in the Department of Microbiology, Osmania University, Hyderabad, Andhra Pradesh, India. His areas of specialisation include microbial biotechnology and molecular biology and he has 35 publications to his credit.

L. Venkateswar Rao holds an MSc and PhD in Microbiology. He is a Professor and Head of the Department of Microbiology, Osmania University, Hyderabad, Andhra Pradesh, India. His area of specialisation is industrial microbiology and he has 50 publications to his credit.

K.K. Tripathi holds an MSc and PhD in Microbiology. He is Advisor (Scientist–G) in the Department of biotechnology, Ministry of Science and Technology, (Government of India) C.G.O Complex, New Delhi, India. He has 80 publications to his credit and his areas of specialisation include microbial biotechnology, biotechnology-based policies and IPR industrial microbiology.

B. Lal holds an MSc and PhD in Microbiology. He is Director of the Biotechnology Division, The Energy and Resources Institute, Darbari Seth Block, India Habitat Center, Lodi Road, New Delhi, India. He has 80 publications to his credit and his areas of specialisation include microbial biotechnology, biotechnology-based policies and IPR industrial microbiology.

R.C. Kuhad holds an MSc, MPhil and PhD in Microbiology. He is Professor and Head of the Department of Microbiology, University of Delhi, New Delhi, India. He has 70 publications to his credit and his area of specialisation is environmental and industrial microbiology.

1 Introduction

Demand for energy and transportation fuels is growing steadily worldwide over the last century. This is owing to increasing world population and industrialisation globally. Fossil fuel and other natural reserves have been the major resource to meet out this ever-increasing energy demand. At the current rate of consumption as estimated, the global oil reserves will last for about another 40 years (Puppan, 2002). According to Campbell and Laherrere (1998) a decline in worldwide crude oil production will begin

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before 2010 from the 25 billion barrels to approximately 5 billion barrels in 2050. The inevitable depletion of the world’s oil reserve has induced an increasing interest in searching alternative non-petroleum based sources of energy. The petroleum products provide about 97% of the energy consumed for transportation and industries. So, governments worldwide have been actively identifying, developing and commercialising technology for alternative transportation fuels over the past 20 years (Mielenz, 2001; Sheehan and Himmel, 1999). India is the 5th largest energy consumer in the world in terms of million tones of oil equivalent after USA, Japan, China and Africa (Table 1) (Balu, 2003). India’s contribution to world carbon emission has increased in recent years owing to the rapid pace of urbanisation, increased vehicular usage and continued use of older and more inefficient coal fired power plants. Vehicular pollution is estimated to have increased eight times over the last two decades. Automobiles alone contribute to about 70% of the total air pollution (Subramanian et al., 2005). Therefore, there is a need to look for cost sustainable and environmental friendly alternatives to fossil fuels.

Table 1 World Energy Consumption (in million tonnes oil equivalent)

Country Oil Gas Coal Nuclear Hydro Total Per capita (KG) USA 883 553 543 198 26 2205 8077 Japan 259 67 92 82 8 507 3995 China 200 19 511 4.1 18 753 602 Africa 116 47 89 3.9 6 261 416 India 95 21 150 3.3 7 276 277 (%) 34 8 54 1.1 2.5 100 – World 3462 2064 2130 651 227 8537 1428

Source: Balu (2003)

India is not self-sufficient in production of petroleum and imports about three – quarters of its needed crude oil, making 100 million tons during the year 2004–2005 as compared to 90.4 million tons in year 2003–2004 (Subramanian et al., 2005). Our national demand of crude oil is increasing dramatically every year, which is evident from the comparison made between production and import of crude oil during the last three and half decades (Table 2) (Subramanian et al., 2005). This expenditure on crude oil purchase is in the range of Rs. 800 billion per year, influencing in a big way the country’s foreign exchange reserves. As the oil prices go up, the import cost also increases immediately, apart from the demand-pull prices increase owing to the continuing increase in demand for oil in transport, power and industry sectors. As global oil prices climbed past $64 per barrel in the year 2005, the Indian government has reduced the subsidy on gasoline, kerosene and cooking gas. The measure is expected to increase inflation rate that surpassed 8%, the highest in three and a half years.

Economic evaluation and environmental benefits of biofuel 361

Table 2 Production and import of crude oil in India

Year Production

(million ton) Import

(million ton) Total

(million ton)Import as %

of total Import value crore USD ($) (billion)

1971 6.8 11.7 63 18.5 107 0.024 1981 10.5 16.2 61 26.7 3349 0.744 1991 33 20.7 39 53.7 6118 1.360 2000 32 57.9 64 89.9 30,695 6.821 2003–2004 33.4 90.4 73 123.8 81,000 18 2004–2005 33.4 100 75 133.4 1,21,500 27

Energy and Sustainable Alternatives (Balu, 2003). Source: Ministry of Petroleum and Natural gas

Both alternative fuels – biodiesel and bioethanol, represent a complete carbon dioxide – cycle during combustion, they reduce the emission of other compounds, such as nitrogen oxides, carbon monoxide, and Volatile Organic Compounds (VOCS). Biomass energy currently contributes 9–13% of the global energy supply accounting for 45 ± 10 EJ per year (Kim and Dale, 2004). Besides the traditional uses, modern sustainable uses of biomass (e.g., generation of electricity, steam and liquid biofuel) have a tremendous future. There are numerous strategic, economic and environmental benefits to be gained by developing ‘home-grown’ fuels such as biodiesel/bioethanol from abundant and renewable biomass resources (Lynd, 1990).

India has a vast potential to grow non- edible oil seed bearing trees to produce large amount of biodiesel with cheaper cost and at the same time generate employment opportunities in rural areas. According to the Planning Commission’s figures, of the estimated 130 million hectares of wasteland in India about 33 million hectares can be reclaimed for energy plantations (http://planningcomission.nic.in/).

This paper reviews current biofuel production technology, Indian government policies to encourage usage of biofuels, environmental assessment, economic impact and future scenario of biofuels in India.

2 Biodiesel

Biodiesel is a clean burning mono-alkyl ester based oxygenated fuel. It is a renewable fuel, which is simple to use, biodegradable, nontoxic and essentially free of sulphur and aromatic compounds (Puppan, 2002). Biodiesel can be used in diesel engines without any modification and brings down almost 70% pollution than fossil fuel making great socio-economic and environmental benefits. Biodiesel has a high cetane rating, which improves engine performance. A 20% blending of biodiesel to conventional diesel improves the cetane rating by three points, making it a premium fuel.

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3 Raw material sources

3.1 Edible oil sources

In most of the developed countries, rapeseed oil is preferred as a source for biodiesel production making 84% of overall other sources. The other feedstocks like sunflower oil in France and Italy, coconut oil in Philippines and soyabean oil in USA and palm oil in Malaysia are also being exploited for biodiesel production (Figure 1) (Korbitz, 2000). In India, production of soya, sunflower, rapeseed was 4.56, 0.91 and 3.92 metric tonnes respectively in the year 2002–2003 (www.agricoop.nic.in/statatglance2004/ AtGlance.pdf). These edible oils are being consumed as food and near about 50% of which is imported in India. Hence, in India, use of edible oils as a source of biodiesel may not be economically viable option. However, waste-frying oil could be an alternative source for biodiesel production (Zheng et al., 2006) especially in countries using higher percentage of processed and fried foods because industries in such countries expel such oils after use.

Figure 1 Raw material sources for world biodiesel production

Source: Korbitz (2000)

3.2 Non-edible oil sources

Non-edible oil yielding plants like Jatropha curcas, Pongamia pinnata and Pongamia glabra offer greater hope for the country. There are some other potential sources of non-edible oil in India viz. Madhuca indica, Shorea robusta, Calophyllum inophyllum and Azadirachta indica with an estimated annual production potential of more than 20 metric tonnes, of which Madhuca indica contributes 181 kilotonnes (Ghadge and Raheman, 2006).

The Jatropha plant when compared to other oil yielding plants has certain advantages like hardness; wide environmental tolerance; grown on any type of soil; easy propagation through seeds and cuttings; high oil content; requires minimal after plantation care; rapid growth and not grazed by animals even during times of drought, which strengthens its case of promotion in wastelands (Azam et al., 2005)

Economic evaluation and environmental benefits of biofuel 363

3.3 Other sources

Apart from the sources already discussed some reports of biodiesel production from microalgae have appeared (Benemann and Oswald, 1996). More recently Chlorella protothecoides, microalga, has been exploited for biodiesel production (Miao and Wu, 2006) however there is need to do concerted research in order to bring it to the commercial scale. The microalgal based process for biodiesel production has a lot of scope in India because it has diversified water bodies and microalgae as well. These sources can really play a pivotal role in the production of biodiesel.

4 Production technology

Oils or fats can be converted into fatty acids, which in turn are converted into esters, through the process of base catalysed transesterification that produces esters and glycerol. First, a fat or oil is treated with ethanol/methanol in the presence of acid/base to accelerate (catalyse) the transesterification reaction (Figure 2). Base is preferred for the quick reaction. Meher et al. (2006) at Center for Rural Development and Technology, Indian Institute of Technology Delhi, India demonstrated that the process of transesterification is affected by the mode of reactions conditions; molar ratio of alcohol to oil, type of alcohol, type and amounts of catalysts, reaction time and temperature and purity of reactants. The methanol is charged in excess to assist fast conversion and can be recovered for reuse. The reaction is carried out at 66°C and 20 psi. This process has a maximum conversion factor (98%) with minimal side reactions and reaction time (Puppan, 2002).

Figure 2 Flow diagram of biodiesel production

4.1 Bioethanol

Fuel ethanol derived from plant biomass is considered as a suitable alternative to fossil fuels and has the potential to serve as a sustainable transportation fuel. Biomass in the form of cellulose, hemicellulose, and lignin provide the means of collecting and storing

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solar energy and hence they represent an important energy and material resource (Kuhad and Singh, 1993). For example, sugarcane bagasse is available in plenty in tropical and subtropical countries such as Brazil, India, Thailand, Hawaii and the southern USA. Theoretically, one dry ton of bagasse can generate 112 gallons of ethanol (Knauf and Moniruzzaman, 2004). The production and combustion of ethanol do not contribute significantly to the total amount of carbon dioxide in the atmosphere, because the amount of carbon dioxide released during the production and combustion of fuel ethanol would be equivalent to the amount of carbon dioxide being absorbed by replanted biomass. The emission and toxicity of ethanol are lower than fossil fuel sources (Wyman and Hinman, 1990).

4.2 Raw materials

Lignocellulosics such as agricultural, forest products (hardwood and softwood) and their residues offer a potential source of carbon substrate for the production of ethanol by fermentation. Apart from the conventional residues, recently wild plant materials like Lantana camara, Prosopis juliflora and Saccharum spontaneum have been found as potential sources of fermentable sugars for bioethanol conversion at University of Delhi South Campus, India (Kapoor et al., 2006; Gupta, 2006). Approximately 90% of the dry weight of most plant material is stored in the form of cellulose, hemi-cellulose, pectin, and lignin (Iranmahboob et al., 2002). Table 3 shows the composition of selected crop residues. Carbohydrates (hexosans and pentosans) account for approximately 50–70% with lignin 9–19%. Based on an average of 42% cellulose and 21% hemicellulose in wood biomass the maximum theoretical ethanol yield can be calculated to be 0.32 grams (0.41 ml) of ethanol per gram of wood (Taherzadeh, 1999).

Table 3 Estimation of ethanol production from Indian agro crop residues

Crop residues

Dry matter

(%) Lignin

(%) Carbohydrate

(%) Ash (%)

Crop resiowing production

(million tonnes)

Ethanol production (giga litre)

Ethanol yield L/Kg of dry

biomass

Barley straw 81 9 70 11 1.71 0.53 0.31 Corn stover 78.5 18.69 58.29 6 12.3 3.56 0.29 Oat straw 90.1 13.75 59.1 12 9.1 2.36 0.26 Rice straw 88 7.13 49.33 12 125.0 35.0 0.28 Sorghum straw

88 15 61 10 10.4 4.57 0.27

Wheat straw 90.1 16 54 10 94.38 27.3 0.29 Sugarcane bagasse

71 14.5 67.15 4 179.0 50.1 0.28

Source: Kapoor et al. (2006)

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5 Production technology

The bioconversion of lignocellulosics to ethanol includes four processes:

• pretreatment of lignocellulosics to increase amenability for cellulolytic enzymes action

• enzymatic hydrolysis for deploymeristion of structural polysaccharide into reducing sugars

• fermentation of these sugars subsequently into ethanol

• ethanol recovery (Figure 3).

Figure 3 Flow diagram for bioethanol production

5.1 Pretreatment

The presence of lignin in lignocellulosics limits cellulose biodegradation by cellulolytic enzymes. In order to remove the protecting lignin and to increase the accessibility of the cellulolytic enzymes to cellulose, the lignocellulosic biomass must be pretreated. Pretreatment acts on the structure of plant cell wall by solubilising or otherwise altering hemicellulosic, breaking lignin structure, reducing cellulose crystallinity and increasing the available surface area and pore volume of the substrate. Pretreatment can be carried out in different ways such as mechanical combination, steam explosion, ammonia

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fibreexplosion, acid or alkaline and biological pretreatments (Table 4) (Cadoche and Lopez, 1989; Fan et al., 1987; Gregg and Seddler, 1996; Holtzapple et al., 1992; Kim et al., 2003; Zheng et al., 1998; Draude et al., 2001; Vidal and Molinier, 1988; Itoh et al., 2003; Damaso et al., 2004; Bustos et al., 2003; Sawada et al., 1995; Keller et al., 2003). The main problems of biological conversion of lignocellulosics into carbohydrate rich material are:

• to search suitable microorganisms with higher lignin degrading abilities

• to recognise factors influencing selective delignification of lignocellulosics

• to develop strategies and technologies for cost effective large-scale process

• to search industrial partner/ support for the practical realisation of projects.

Table 4 Pretreatment technologies available for the hydrolysis of lignocellulosics

Class Method known as References

Mechanical comminution Cadoche and Lopez (1989) Physical method Pyrolysis Gregg and Seddler (1996) Steam explosion (auto hydrolysis) Fan et al. (1987) Ammonia fibre explosion (AFEX) Holtzapple et al. (1992) Ammonia recycled percolation (ARP) Kim et al. (2003)

Physico-chemical pretreatment

CO2 Explosion Zheng et al. (1998) Oxidative delignification Draude et al. (2001) Ozonolysis Vidal and Molinier (1988) Organosolve process Itoh et al. (2003) Alkaline hydrolysis Damaso et al. (2004)

Chemical pretreatment

Acid hydrolysis Bustos et al. (2003) Pretreatment with white-rot fungi Sawada et al. (1995) Biological

pretreatment Fungal pretreatment Keller et al. (2003)

Acid hydrolysis of lignocellulosics release xylose as the main sugar fraction in hydrolysates. Unfortunately, these hydrolysates also contain several inhibitors like; furan derivatives from degradation of sugars, aliphatic acids released from hemicellulosic acetyl groups and phenolics from lignin. In order to remove the inhibitors and increase the hydrolysate fermentability, several chemical, biological and physical methods have been used. These methods include overliming (Martinez et al., 2000), charcoal adsorption (Rodrigues et al., 2001) ion exchange (Nilvebrant et al., 2001), enzymatic detoxification with laccase (Martín et al., 2002) and biological detoxification (Lopez et al., 2004).

5.2 Enzymatic hydrolysis

The acid, alkaline or fungal pretreated lignocellulosics can be saccharified enzymatically to get fermentable sugars (Kuhad et al., 1999; Ghose and Bisaria, 1979; Tucker et al., 2003; Duff and Murray, 1996). Bacteria and fungi are good sources of cellulases and hemicellulases, which could be used for the hydrolysis of pretreated lignocellulosics. The enzymatic cocktails are usually mixtures of several hydrolytic enzymes comprising

Economic evaluation and environmental benefits of biofuel 367

cellulases, xylanases and mannanases etc. The most important process improvement made for the enzymatic hydrolysis of biomass was the introduction of Simultaneous Saccharification and Fermentation (SSF), which has been improved to include the co- fermentation of multiple sugar substrates. This new variant of SSF is now known as Simultaneous Saccharification and Cofermentation (SSCF) (Sun and Cheng, 2002).

5.3 Fermentation of lignocellulosic hydrolysates

Bioconversion of various agro residues into ethanol by different yeasts has been summarised in Table 5 (Palmarola-Adrados et al., 2005; Mohagheghi et al., 2004; Abbi et al., 1996a, 1996b; Mamma et al., 1995; Sharma et al., 2004; Nigam, 2001; Krishna et al., 2001). The sugar syrup obtained after thermochemical or enzymatic hydrolysis is used for ethanol fermentation. The xylose and the glucose in syrup are fermented to ethanol at theoretical yields of 85% and 92%, respectively. The ability to ferment pentoses along with hexoses is not wide spread among microorganisms (Toivola et al., 1984). The ideal organism for the production of ethanol from lignocellulosic hydrolysate would be the one, which can utilise various sugars generated from lignocellulose hydrolysis. Saccharomyces cerevisiae is capable of converting only hexose sugars to ethanol. Of various xylose-fermenting yeasts, Candida shehatae has shown greater ethanol production than Pichia stipitis. This was owing to increased uptake of xylose, glucose, mannose and galactose (Abbi et al., 1996a, 1996b). However, genetically engineered organisms are now being employed for ethanol fermentation. These organisms can greatly improve ethanol production efficiency and reduce the cost of operation (Dien et al., 2000; Sun and Cheng, 2002). The recombinant strains of E. coli with the genes from Zymomonas mobilis for the conversion of pyruvate to ethanol have been constructed. The recombinant plasmids with xylose reductase and xylitol dehydrogenase genes from P. stipitis and xylulokinase gene from S. cerevisiae have been transformed into Saccharomyces sp. for the cofermentation of glucose and xylose (Ho et al., 1998). Though new technologies have greatly improved bioethanol production, yet there are still a lot of problems that have to be solved. The major problems include maintaining a stable performance of genetically engineered yeast in commercial scale fermentation operations, developing more efficient pretreatment technologies for lignocellulosic biomass, and integrating optimal components into an economic ethanol production system (Ho et al., 1998).

Table 5 Various agro residues for which ethanol production have been reported

Agro residues Microorganism used References

Barley husk S.cereviseae Palmarola-Adrados et al. (2005)

Corn stover Z.mobilis Mohagheghi et al. (2004) Rice straw C.shehatae NCL-3501 Abbi et al. (1996a) Sugarcane bagasse S.cereviseae Abbi et al. (1996b) Sorghum S.cereviseae Mamma et al. (1995) Sun flower stalk S.cereviseae var.ellipsoideus Sharma et al. (2004) Wheat straw P.stipitis NRRL-Y-7124 Nigam (2001) Sugarcane leaves K.fragilis NCIM-3358 Krishna et al. (2001)

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6 International scenario of biofuel production

According to the International Energy Association (IEA), www.iea.com the use of oil, including diesel, for road transport will double in the next 25 years and green house gases will increase commensurably. Several countries have active biodiesel programmes, with the European Union (EU) and the USA as leaders. The EU wants biofuels to make up from 0.3% to 5.75% of total engine fuel composition in Europe by 2010. To meet the targets for Kyoto protocol, some 9.3 million tones of bioethanol would be needed annually. Additionally the new guidelines and production targets will expand the production and use of biofuels derived from agricultural, forestry and organic waste products (Herrera, 2004). In EU, the biofuels targets for 2005 was 2% of transportation fuel and projected target by 2010 will be 5.75% (http://www.europa.eu.int/eur-lex/en/com). Several countries have provided legislative support and have drawn up national policies on biodiesel development. Biodiesel is registered as an alternative fuel with the US Environmental Protection Agency (EPA) and meets clean diesel standards established by the California Air Resources Board (CARB) and is also approved by the US Department of Energy (USDOE) and of Transportation (DOT). It may be noted that the feedstock for the production of biodiesel in the EU and USA is vegetable oils- soyabean oils in the USA, sunflower and rapeseed in the EU. In 2001, about 20 plants in the EU produced around one million metric tone of biodiesel, which saw a growth of about 30% as compared to the year 2000. In the EU, legislation is already in place to mitigate increase in the proportion of biodiesel in Europe’s transport energy mixture. The EU biofuels directive requires a minimum level of biofuels as a proportion of fuels sold in the EU, 2% by 2005, 5.75% by 2010 and 20% by 2020. The major objectives of the EU renewable fuel programme include reduction on dependency on crude oil and achievement of green house gases reduction by 8% as decided in the Kyoto conference. The biofuel qualifies as clean development initiatives under the Kyoto Protocol on climate change. The Kyoto Protocol classifies biofuel as being environmentally neutral owing to the ability of vegetation to absorb as much carbon dioxide during its period of growth as it or its byproduct emits when combusted. To mitigate greenhouse gas emissions and substitute conventional fossil fuels, a supranational approach is desired, comprehensive research development, demonstration and deployment trajectories for key options as biomass integrated gasification combined cycle and advanced biofuel concepts (Faaij, 2006). The Kyoto Protocol is in operation w.e.f February 16, 2005. Globaly 141 countries are taking the steps to decrease green house gases released into the Earths atmosphere which will slow the rate of global warming. India signed and ratified the protocol in August, 2002. By signing the Kyoto Protocol, countries agree to decrease the amount of GHG’s they release into the atmosphere. Overall, the cuts will reduce carbon dioxide emissions by 5.2% by the year 2012 for the countries that agree to the protocol. The countries that did not sign it together account for 55% of the world’s GHG’s. However, the country that emits the most green house gases, the USA, has not agreed to sign on Kyoto Protocol. Large developing countries including India, China and Brazil are not required to make changes in the amount of green house gases released. Developing countries are aware that the planting of biofuel crops may well create carbon sinks that can earn them cash through their sale of emissions credit to polluting industries in developed countries.

The other biofuel, ethanol is being used in large quantities in other countries like in USA and Brazil. Some incentives are also provided to expand ethanol programme.

Economic evaluation and environmental benefits of biofuel 369

Promoted by the increase in oil prices in the 1970s, Brazil introduced a programme to produce ethanol for use in automobiles in order to reduce oil imports. Brazilian ethanol is made mainly from sugarcane. Pure ethanol (100% ethanol) is used in approximately 40% of the cars in Brazil. The remaining vehicles use blends of 24% ethanol with 76% gasoline. Brazil consumes nearly 4 billion gallons of ethanol annually. Some Canadian provinces also promote ethanol use as a biofuel by offering subsidies of up to 45 cents per gallon of ethanol. In France, ethanol is produced from grapes that are of insufficient quality for wine production. The total bioethanol production from crop residues and crops in the world is 491 GL/year, about 16 times higher than the current world ethanol production. This potential bioethanol production from the latter substrates could replace 353 GL of gasoline (32% of the global gasoline consumption) when bioethanol is used in E-85 fuel for a midsize passenger vehicle (Kim and Dale, 2004).

The major producers of ethanol are Brazil and the USA, which account for 62% of world ethanol production using sugarcane juice and corn grain respectively (Berg, 2001). Brazil led world ethanol production in 2004, distilling 4 billion gallons (15 billion litres). The USA is rapidly catching up, however, produced 3.5 billion gallons last year, almost exclusively from corn grain. China’s wheat- and corn-rich provinces produced nearly 1 billion gallon of ethanol, and India turned out 500 million gallons made from sugarcane molasses. France, the front-runner in the EU’s attempt to boost ethanol use, produced over 200 million gallons from sugar beets and wheat grain (Figure 4) (Licht, 2005). In all, the world produced enough ethanol to displace roughly 2% of total gasoline consumption. As per the futuristic projections, about 14 billion gallons of bioethanol is expected to replace around 348 billion barrels of oil in the USA by 2020.

In India, ethanol is mainly produced from sugarcane molasses. As per indicative estimates, projected alcohol production is expected to increase from 1869.7 million litres in 2002–2003 to 2,300.4 million litres in 2006–2007. Thus, the surplus alcohol available in the country is expected to increase from 527.7 million litres in 2002–2003 to 822.8 million litres in 2006–2007 (Table 6) (Goel, 2002). According to Ministry of Petroleum and Natural Gas, Govt. of India, 5% ethanol blends on all India basis would require 500 million litres, if we have surplus alcohol, 527.7 million litres will fulfil the requirement for potable, industrial and other sectors.

Figure 4 World ethanol production 2004

Source: Licht (2005)

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Table 6 Ethanol productions from sugarcane molasses in India

Year

Molasses production

(million litre)

Production of ethanol

(Giga litre)

Industrial use

(million litre)

Portable use (million

litre)

Other use (million

litre)

Surplus availability

(million litre)

1998–1999 7 1411.8 534.4 5840 55.2 238.2

1999–2000 8.02 1654 518.9 622.7 576 455.8

2000–2001 8.33 1685.9 529.3 635.1 588 462.7

2001–2002 8.77 1775.2 5398 647.8 59.9 527.7

2002–2003 9.23 1869.7 550.5 660.7 61 597.5

2003–2004 9.73 1969.2 578 693.7 70 627.5

2004–2005 10.24 2074.5 606.9 728.3 73.5 665.8

2005–2006 10.79 2187 619 746.5 77.2 742.3

2006–2007 11.36 2300.4 631.4 765.2 81 822.8

Source: www.winrock.com

According to Kim and Dale (2004) the total bioethanol production from crop residues is estimated to be 491 GL/yr globally. India alone has the capacity to produce 25% i.e., 123 GL/yr of the total world ethanol production, if the entire crop residues as shown in Table 5 are available for ethanol production (Kapoor et al., 2006). We have calculated ethanol yield from crop residues using (USDOE) website, which provides “Theoretical Ethanol Yield Calculator” available at http://eereweb.ee.doe.gov/biomass/ ethanol_yield_calculator.html that ethanol production efficiency from other crop residuesis equal to that of ethanol production from corn stover. About 432 million tons (Mt) agro residues was generated in the year 2004. India has a large cattle population of 294 million. Even though India has 67 million hectare of grazing land, but grass productivity is low owing to land degradation, leading to near total dependence of cattle on crop residues of cereals and pulses. The estimated total residues utilised as fodder was 301 Mt in 1996–1997 and is projected to be 385 Mt for 2010, accounting for about 47% of total residues generation (Ravindranath et al., 2005). Amongst the major crop residues viz. sugarcane, wheat, rice, maize, oat, sorghum and barley, sugarcane bagasse cannot be used as fodder. If we deduct the share of cattle feed (fodder) from the available crop residue, still 89.42 GL of ethanol can be produced. Beside the fact that crop production for non-renewable sources (fossil fuel) conversion is not sustainable in the long term, however, the main merit of using bio-based fuels is their potential to decrease global warming (Fredriksson et al., 2006). Considering the fact that specific crop production may reduce the later potential benefit. Other environmental issues in crop production like soil erosion, soil organic matter trends, water and ground water use should also be fully reviewed Kim and Dale (2004).

7 Policy issues for biofuels by Govt. of India

A joint concerted action by various government agencies, industry and research institutes is the key to success of this national level ethanol programme. It is envisaged that the Ministries; Rural Development, Environment and Forestry, Petroleum and Natural Gas,

Economic evaluation and environmental benefits of biofuel 371

Agriculture and Non-Conventional Energy Resources can play a leading role in launching this programme. The Government of India through its Planning Commission has initiated a national programme to cultivate energy rich plants in vast areas of waste/degraded lands. The Indian Railways are the largest users of diesel (about two million MTPA) and also own large areas of land. The Railways have shown an interest in planting these bioenergy crops along the rail tracks. It is estimated that the Railways can produce enough biodiesel to replace about 5–10% of diesel requirement for captive use.

Indian Government has taken initiatives to explore the biofuels starting with 5% blends of both the biofuels (ethanol with petrol and biodiesel with diesel) and to increase the percentage to 15–20 when biofuel production increases. About 500 million litres would be needed for full implementation if 10% blending were envisaged (Vijayaraghavan, 2002). After successful field trials, the government has made it mandatory to blend 5% biofuel in fossil fuel for the supply in nine states Andhra Pradesh, Goa, Gujrat, Haryana, Karnataka, Maharashtra, Punjab, TamilNadu, Uttar Pradesh and four contiguous union territories (Daman and Diu, Dadra Nagar Haveli, Chandigarh, Pondicherry with effect from January 1, 2003. According to Bureau of Indian Standards (BIS) only 5% mixing of ethanol with gasoline is allowed which needs to be increased to 10% to make E-10 which is a high-octane clean burning fuel. The ethanol in E-10 unleaded adds 2–3 octane points to gasoline helping improve engine performance while keeping engine parts clean along with reductions in exhaust emissions.

Both administratively and financially the role of the central government is crucial for biofuel development. A national policy has to be enunciated and a fully funded programme in the form of a central scheme is necessary as most states are in no financial position to fund even a fraction of the cost. Central legislation wherever needed and technical assistance of the Agricultural and Environment Ministries have to be extended. For encouragement of biodiesel programme in India, it is proposed that all aspects of production and distribution of non-edible oil seeds biofuels should be fully exempted from all taxes and duties by the central and state governments for ten years as a matter of firm policy declaration backed by enforceable notifications under the relevant laws. A visionary scientist, Dr. A.P.J. Abdul Kalam, The President of India, sees an answer in biofuels. Discussing the national problems of water scarcity and drought, he stated, “India needs to grow Jatropha to tackle dry land and generate bio-diesel”. Similarly US President Mr. George W. Bush during his recent visit to India (March 03, 2006, The Times of India) emphasised the need of alternative sources of energy for surpassing the current Indian economic growth rate of 8%. He discussed with Indian Government ethanol production from biomass to meet the energy needs in India.

The Indian Supreme Court has recently banned undiluted petrodiesel for commercial vehicles. The objective of the biofuel policy is to cover specifically the renewable fuel that can be processed from non -edible oilseeds such as Pongamia pinnata, Jatropha curcus, Havea braziliensis and Madhuca indica as they are abundant in India and there is need for systematic propagation and processing of these oilseeds, which have many benefits. Some of the key issues of national and international importance involved in non-edible oilseed trees are; dependence on imported oil, fuel security, increasing rural income and employment, empowering women, sourcing organic fertiliser and increasing renewable energy, promoting Clean Development Mechanism (CDM) and sequestering carbon.

372 A.K. Chandel et al.

If Indian Railways can use biofuel blend in all its locomotives the government can save a whopping Rs. 6 billion in foreign exchange every year. For Indian Railways biofuel is not a new concept. In December 2002, the Shatabdi Express between Delhi and Amritsar was run with a biodiesel (5% blends) powered locomotive supplied by Indian Oil Corporation (IOC). To make this project viable Jatropha is being planted in vacant wastelands and alongside railway tracks. The Indian Railways has also leased 5,000 hectares of land to IOC to plant Jatropha and attain high factors such as yield and availability of oil. Tata Motors Limited – IOC joint initiatives are launching trials on Tata motors employee buses with 10% biodiesel. Southern online Biotechnologies Ltd. Hyderabad is setting up a biodiesel project at an estimated cost of Rs.15 crores in Andhra Pradesh. Natural Bioenergy Ltd. set up a R&D unit for improvement in biodiesel production and launched a plant having production capacity of 300 tones biodiesel by investing Rs.135 crores in Andhra Pradesh. The biodiesel project of Nandan bio matrix, another Hyderabad-based organisation has already established new business models in place, offering consultancies directly to farmers, cultivation support, research and development of clonal technology, processing and extraction, value addition, manufacturing and marketing of the product (www.renewingindia.org).

Council for Scientific and Industrial Research, (CSIR), Govt. of India has started a public- private partnership to check the efficiency of Jatropha biodiesel in internal combustion engines. This project can be considered as best known Jatropha project and a major Jatropha promoter in India. The World Bank has also recommended the Jatropha system for renewable energy development, poverty reduction and well being of women, erosion control and soil improvement.

8 Biofuels and environmental assessment

Biofuels are ecologically beneficial because their use reduces emission of carbon dioxide into the atmosphere significantly and also sequesters carbon from the atmosphere through plant biomass. India can also profitably trade this carbon saving with developed countries through accruals of carbon credits apart from not emitting carbon into the atmosphere on its own.

As biofuels are a direct substitute for fossil fuel, it is an instrument of the CDM and the carbon thus saved results in tradable credits to the organisations participating in their production. By the end of current year (2006), there may be fines on developing countries that do not buy such carbon credits and then the price for carbon trading may go up several folds from the present US$ 3 or so per ton of carbon saved. It is therefore necessary to organise the decentralised nature of such bio-fuel production with an apex body at least for the purpose of maximising the benefits of carbon credit trading with developed countries. Currently, a small amount of ethanol (5% by volume), called E-5 is added to gasoline to increase the octane rating and to provide oxygen to decrease tail pipe emissions of carbon monoxide. The new flexible – fuel vehicles run by using blends up to 85% ethanol (E-85) – a mixture of 85% ethanol and 15% of gasoline by volume. For E-85 fuel, 100 km driven consumes 2.2 l of gasoline and 12 l of bioethanol, replacing 0.72 l of gasoline by 1 l of bioethanol. Biodiesel contains no petroleum, but it can be blended at any level with petroleum diesel to create biodiesel blend. Much of the world uses a system known as the ‘BD factor’ to state the amount of biodiesel in any fuel mixture. For example, 20% biodiesel is labelled BD20 (A blend of 20% by volume

Economic evaluation and environmental benefits of biofuel 373

biodiesel with 80% by volume petroleum diesel) and likewise BD-100, which is meant for pure biodiesel, 00%. http://www.ethanolindia.net/biodiesel_india.html.

In India, in the last seven years, the number of vehicles has shot up to 18 millions making 43,000 tones of total emissions. In Delhi alone, the vehicle number has crossed about 4.6 millions, which contributes roughly 64% of total air pollution in Delhi, followed closely by Mumbai at 52% and 30% for Kolkata (Garg et al., 2004). In India, most of the petroleum products consumed in the transport sector are mainly in the form of high-speed diesel and gasoline.

As energy demand increases, the global supply of fossil fuel decreases, causing inflation, instability from fossil fuels causes harm to human health and contributes to the green house gas emission, deforestation and the destruction of agricultural lands threaten this earth. Biodiesel is non-flammable and in contrast to petroleum diesel it is non-explosive, with a flash point of 50°C for biodiesel as compared to 64°C for petrodiesel. Unlike petrodiesel, it is biodegradable and nontoxic, when burned as a fuel. When compared to petrodiesel, biodiesel reduces up to 50% carbon monoxide emissions, particulate emissions reduced up to 30% and carbon dioxide by 78.45% on a net basis. This is owing to the carbon in biodiesel emissions is recycled from carbon that was already in the atmosphere, rather than being new carbon from petroleum that was sequestered in the earth’s crust. Biodiesel reduces aromatic hydrocarbons like benzofluoranthene 56% and benzopyrenes up to 71%. It also eliminates sulphur emissions (SO2), because biodiesel does not include sulphur. However, biodiesel does produce more NOx emissions than petrodiesel, but these emissions can be reduced through the use of catalytic converters. Biodiesel has a higher cetane number, higher flash point temperature and lower aromatics than that of petrodiesel, and therefore causes less exhaust emissions and less knocking.

The other Biofuel, ethanol is one of the best tools to fight vehicular pollution, contains 35% oxygen that helps complete combustion of fuel and thus reduces particulate emissions that pose health hazard. With its ability to reduce ozone precursors by 20–30%, bioethanol can play a role in reducing the harmful gases in metro cities of India. Ethanol blended diesel (E-15) causes 41% reduction in particulate matter and 5% NOx emission (Joshi, 2002). Ethanol is also a safer alternative to Methyl Tertiary Butyl Ether (MTBE), the most common additive to gasoline well recognised for causing reduced carbon mono oxide levels by improving overall combustion of the fuel. MTBE is a toxic chemical compound and has been found to contaminate groundwater. Therefore, it has been phased out of use in USA. One tablespoon full of MTBE has the potential supposedly to pollute a whole Olympic size swimming pool (Mielenz, 2001).

9 Economic assessment of biofuels

India’s known crude oil reserve is estimated to last only for about 21 years. With insufficient oil resources, India cannot rely on imported oil, which will seriously affect economic development and sovereignty in international political relations. The import cost of crude oil during the year 2004–2005 was around Rs. 1,21,500 crores (Subramanian et al., 2005) (Table 2). Historically, the projected cost of bioethanol has dropped from US$ 1.22 per litre to about US$ 0.31 per litre on the basis of continuous improvement in pretreatment, enzyme application and fermentation (Wyman, 1999). Wingren et al. (2003) have discussed SHF and SSF economics using enzymes in

374 A.K. Chandel et al.

both configurations, with SSF being less expensive by about 10%; their estimates of 0.56–0.67 $/l ethanol seem to be relatively high. Further economic analysis of the bioethanol process has yielded a projected cost of as low as US$ 0.20 per litre in 2015 if enzymatic processing and biomass improvement targets are met (Wooley et al., 2001).

However in both the process SHF and SSF used for ethanol production, the use of cellulolytic enzymes makes the process cost effective (Alzate and Toro, 2006). Recently the cost of enzymes has been reduced by a combination of protein engineering and process development. The use of novel, tailored cocktails of enzymes with higher specific activities are required for further cost reductions (Gray et al., 2006) World leaders in enzyme production, Genencore (http://www.genencore.com), Novozym (http://www. novozyme.com) and Iogen (http://www.iogen.ca), are actively working towards reducing cost of cellulases production for bioethanol production using new and improved enzymes developed by protein engineering and directed evolution. Iogen corporation, is now producing ethanol commercially from cellulosics from its biomass-to-ethanol demonstration facility. Iogen makes its ethanol from wheat straw and corn stover and uses steam explosion to free the cellulose from hemicellulose and lignin digesting the cellulose with cellulase. The company’s newly opened demonstraion plant has a capacity of 260,000 gal per year (Griffith and Atlas, 2005) and the company plans a 42-million-gallon plant with an expected completion date of 2007.

The economics of ethanol production using different available raw materials is compared in Table 7 (http://www.renewingindia.org/newsletter/). The cost of ethanol today is $1.16/gal. According to USDOE analysis, if the enzymes necessary to convert biomass to ethanol can be bought for less than 10 cents per gallon of ethanol, the cost of making ethanol could drop as low as 75 cents a gallon (Griffith and Atlas, 2005). Even though in India ethanol is mainly produced from molasses, a byproduct of sugarcane industry, but other crops, which require less input than sugarcane like, sweet sorghum, which is a multipurpose crop can be utilised for the purposes. This crop produces grain, sweet juice and bagasse, which is an excellent feed for cattle. It uses almost 50% less water than sugarcane and is a 4-month crop. Looking into production cost economics ethanol from damaged food-grains has the lowest cost but the availability is insufficient to meet the demand for 5% ethanol petrol blends. The next lowest cost option is ethanol from surplus molasses and sugarcane juice, but again its availability is low to meet the blending demand (http://www.renewingindia.org/newsletters/ethanol). Corn is used as corn flour and in other food products for human consumption thus none of it is available for ethanol production in India. Therefore the most promising alternative is agro-residues which are available plentiful in India, while unfortunately the production of ethanol from agro residues is nil. Fuel ethanol production will remain a significant industry and become a potentially self-sustainable agricultural based system for the 22nd century, if the utilisation of lignocellulosics becomes a commercial reality. R&D work for converting lignocellulosic biomass into ethanol is continuing in various laboratories and more research in this area needs to be encouraged for reducing the cost of ethanol production.

Economic evaluation and environmental benefits of biofuel 375

Table 7 Comparative cost of ethanol production from different raw materials

Raw material Ethanol yield

(litre/ton) Landed price

(Rs./ton) Net ethanol price

(Rs.)

Sugarcane molasses 205 2,100 15.36 Sugarcane juice 70 800 14.89 Corn 400 4,850 16.36 Damaged food grain 360 745 6.27 Agroresidue 250 1,000 23.64

Source: www.renewingindia.org/newsletter/

India is a net importer of edible oils and it may not be feasible to set aside farmland for biocrops. However, a very vast land area in India is classified as below marginal/waste land. It is estimated that currently about 100 million hectares has been designated as wasteland (mostly under the 10% of our current diesel demand. The cultivation of bio-crops could be taken up to serve two major objectives. Firstly, with proper selection of low nutrition demanding oil-bearing species, the wasteland can be brought under compaction. Secondly, rejuvenation of the wasteland can also be achieved by upgrading the soil quality by addition of seed oil meal, which is obtained after extraction of oil that has a higher nutritional value. The propagation of non-edible oil yielding plants like Jatropha curcas and Pangomia pinnata suits well for these targets. Both these seeds have high oil content (25–30%) and the yield/hectare is enough to justify these as suitable bio crops for biodiesel production. It is estimated that even if 10% of the total wasteland is brought under cultivation of these species, India can produce about 4–5 million Mt per annum of biodiesel. However, if the macroeconomic effects associated with renewable energy sources are also considered, then biodiesel competes with petroleum diesel. In India, it is estimated that cost of biodiesel produced by transesterification of oil obtained from Jatropha curcas oil-seeds is approximately the same as that of petroleum diesel. The cost of biodiesel is calculated Rs. 15.78 per litre6 (Table 8). Assumptions are that the seed contains 35% oil, oil extraction will be 91–92%, 1.05 Kg of oil will be required to produce 1 Kg of biodiesel and recovery from sale of glycerol will be at the rate of Rs. 40–60 per Kg. The price of glycerol is likely to be depressed with processing of such large quantities of oil and consequent production of glycerol raising the cost of biodiesel (www.jatrophaworld.org). However, new applications are likely to be found creating additional demand and stabilising its price. With volatility in the price of crude, the use of biodiesel is economically feasible and a strategic option.

Although oil can be extracted from 80 known plant species, Jatropha is currently the first choice of biodiesel. Per hectare yield of Jatropha varies from 0.5 to 12 tones/year depending on soil and rainfall conditions (Makkar and Becker, 1999). An average of about five tones of seeds per hectare can be produced under optimum conditions. An annual yield of 0.75–2 tones of biodiesel could be expected per hectare from the fifth year onwards (Foidl and Eder, 1997). The global market demand for biodiesel is growing. International energy and environment policies have helped create a demand for biodiesel, which is estimated to reach at least 10.5 million litres by 2010 in the EU alone. Based on the current capacity, feedstock availability and positioning in the market, the global production of biodiesel is expected to reach approximately 3 billion litres in 2010.

376 A.K. Chandel et al.

Table 8 Estimated cost of biodiesel production from Jatropha

Rate Cost Rs. kg–1 US$ kg–1 Quantity (kg) Rs. US$

Seed 5.00 0.11 3.28 16.40 0.36 Cost of collection 2.36 0.05 1.05 from

3.28 Kg of seed 2.48 0.06

Cake produced 1.0 0.02 2.23 from 3.28 Kg of seed

–2.22 –0.05

Transesterification cost

6.67 0.15 1.0 6.67 0.15

Cost of glycerol produced

40–60 0.88–1.3 0.095 –3.8–5.7 –0.08–0.13

Cost of biodiesel per kg

– – – 19.52–17.62 0.43(43)–0.39(39)

1US$ = 45 Indian Rupees. Source: Subramanian et al. (2005)

Referring to the Planning Commission’s demonstration project involving planting of Jatropha over 400,000 hectare at a cost of over 200 million $. The current rate of Indian development of biofuel, particularly biodiesel, is just a drop when compared to its potential. If 10 million hectares of India’s vast and sometimes destructive wastelands were used for potential biodiesel production modest estimate of 1.5 tonnes of seeds per hectare, 4 million tones of biodiesel would be produced which is equal to 1/10th of the country’s annual oil requirement. Moreover, for use or sale, 11 million tones of organic seedcake fertilisable feed and 0.4 million tones of technical grade glycerol would be produced. If one person is employed per hectare, it means 10 million new jobs will be created http://ecoworld.com.

10 Future needs for development

The use of biofuels is hampered by ad hoc production and high cost that lowers demand. If blending of biofuel in petrol and diesel is increased from 5%; it would build up sustained production and supply and bring down the cost. It is proposed that a limited subsidy should be given on a reducing scale for a limited period. This would help in establishing supply chains quickly. Established biotech companies in India like- Biocon India Ltd. Bangalore, Advance Biochemicals, Pune and Reliance Life Sciences Ltd. should come in front to produce new technologies for production of biofuels.

Government has declared comprehensive biofuel policies. The need of the hour is to correct certain tax anomalies, rationilisation of such rules; exemption from excise duty and sales tax, deregulation of feedstock and its pricing, simplification of licensing for biofuel production this will make biofuel industry strong and vibrant.

In India, currently there are no full scale or demonstration plants for the ethanol production from agro residues or forestry waste. The ongoing 5% blending of ethanol into petrodiesel are being fulfilled by sugarcane molasses ethanol. Uttar Pradesh, India based sugar giants (Triveni Sugar Engineering Unit, Khatauli; Daurala Sugar Works,

Economic evaluation and environmental benefits of biofuel 377

Daurala; Modi Sugar Mills, Modinagar; Sir Shadi Lal Sugar and Distillers Unit, Mansurpur etc.) should initiate their R&D programme for biofuel production. However, these industries are doing excellently in sugar and ethanol production from sugarcane molasses but they need to explore the ethanol production from sugarcane bagasse. Integration of sugar production from cane juice and bioethanol production from bagasse will benefit the industry and nation as a whole.

The next generation technologies would be more advantageous in terms of lower CO2 equivalent GHG emissions and low cost of production. If we consider the environmental friendly characteristics of biofuel blended gasoline as an automobile fuel, the pricing of ethanol/biodiesel needs to be viewed not only in terms of a financial cost benefit analysis, but also in terms of an economic cost benefit analysis.

11 Conclusion

The use of biofuels would generate employment and income in the rural areas and would emit less green house gases, which make it worthwhile for the government to encourage biofuels by providing tax benefits. A review of current worldwide effort on biomass to fuel production has shown that in spite of numerous difficulties encountered, it remains a vital biotechnological problem. A positive solution to this challenging issue could bring economic advantage not only for fuel and power industry but also benefit to environmental protection. As world deposits of crude oil shrink, causing its price to rise; the interest in technologies enabling the processing of biomass into liquid fuel will grow stronger, particularly in those countries, which do not have their own crude oil deposits. Conversion of surplus lignocellulosic feedstock to biofuels will open new ways for rural employment, increase commodity prices, increase farm income, improve the balance of trade, and reduce country’s dependency on imported fuel and chemicals. It is suggested that appropriate policy objectives should be imposed to foster a transition to lignocellulosic feedstock at a pace such that the opportunities for biofuel producers and the farmers those supply them are expanded rather than contracted.

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