Ex-ante economic analysis of using biofuel blends in motor vehicles in the Philippines, 2007

The study determined the various financial and economic benefits and costs of biofuel utilization and the repercussions on the feedstocks, particularly the sugar and coconut sectors. The study analyzed both the financial and economic Net Present Value (NPV) and the Benefit-Cost Ratio to determine the viability of the base case (without biofuels) and the ex-ante case (with biofuels). The financial NPV in the base case is US$ 13.50 billion while the BCR is 1.23. However, when morbidity and mortality cases associated with air pollution resulting from PM emission were accounted for, NPV decreases to US$ 3.13 billion and the BCR to 1.03. The economic NPV of the ex-ante case is US$ 21.72 billion which is highest among the four cases. This indicates that the use of biofuel blends would engender higher net benefits from the socio-economic standpoint compared to the scenario where there are no such products. Avoided cost of premature mortality contributes US$ 1.73 billion or 87 percent of the total health benefits in the ex-ante case. However, without the biofuel blends, the total cost of mortality and morbidity due to PMsub10 exposure would total US$ 25.36 billion. Total savings in foreign exchange due to reduced fuel importation is roughly US$ 7.1 billion from 2007 to 2022. In the long-run, ethanol has a share of around 96 percent (US$ 833 million) to net welfare gain while 4 percent comes from coco-biodiesel consumption (US$ 38 million). The study found that aside from the benefits from increased demand for sugar and coconut, there are some possible threats worth looking into. This is particularly true for the sugar industry since as the mandated ethanol percentage blend increases, sugarcane requirement for fuel takes on a bigger share of total domestic sugar production. One important finding of the study is that as higher biofuel blends are produced, the higher net economic benefits there are, particularly in terms of reduced pollution and higher foreign exchange savings. Another is that non-food feedstock for biofuels could be more viable in that these would not pose direct threat to food security.