An Exploration of the Potential of Producing Biofuels and the Prospective Influence of Biofuels Production on Poverty Alleviation among Small-Scale Farmers in Tanzania

Tanzania is among the countries which depend entirely on imports for their oil needs. Consequently, the recent increases in world oil prices have led to rapid increases in the country’s expenditure on petrol and diesel imports. It is with this concern in mind that, just recently, the Tanzanian government started to think about the possibility of displacing fossil fuels with liquid biofuels. Unfortunately, however, the government has not yet backed its interest on biofuels with detailed economic analyses on the feasibility of producing biofuels in the country. Thus, the present study is an attempt to contribute towards the knowledge base regarding the feasibility of producing ethanol and biodiesel in the country. The general objective of the present study is to explore the potential of producing biofuels and the prospective influence of biofuels production on poverty alleviation among small-scale farmers in Tanzania. To achieve its objective, the present study estimates the costs of producing biofuels from various feedstocks. The estimates of the costs of producing biofuels are then compared with the prevailing petrol and diesel prices to find out whether biofuels produced in the country can compete with the traditional fossil fuels. Furthermore, the present study uses a linear programming model to determine the quantities of various crops which could be produced for use as feedstocks for producing biofuels. The results show that the costs of producing ethanol are 351, 570, 676 and 584 TZS/l for sugarcane, maize, sorghum and cassava respectively. At the same time the threshold ethanol production cost has been estimated to be 597 TZS/l. A quick comparison of the ethanol production cost figures and the threshold production cost shows that ethanol can be produced profitably in the country by using sugarcane, maize and/or cassava as feedstocks. Also the results show that ethanol can be produced competitively by using sugarcane even if world oil prices would fall to as low as US$ 40 a barrel. Moreover, the results show that the costs of producing biodiesel are 601 and 648 TZS/l for palm oil and jatropha respectively. Furthermore, the results show that the country can produce about 4010.10 and 1726.80 million litres of ethanol and biodiesel respectively. The annual demands for petrol and diesel in Tanzania are 375 and 789 million litres respectively. Thus it is clear that the country can produce enough biofuels to meet the local demand (for those fuels). The results also show that the use of sugarcane and jatropha for producing biofuels would increase the net returns for the producers of those crops by 28 and 53% respectively. In addition to increasing net returns for small-scale farmers, the results show that the production of biofuels would create about 1.8 million employment opportunities for the rural poor. Furthermore, the results show that the production of biofuels, by using sugarcane and jatropha as feedstocks, would reduce rural poverty by about 31%. Given the high potential of producing biofuels in Tanzania and their likely impact on poverty alleviation among small-scale farmers, the present study recommends deliberate efforts to attract investments in biofuels production in the country.