PROPERTY TRANSACTION GUIDE

Why adoption of a biofuels law is now imperative in Nigeria


Guardian, Monday, 24th August 2009

LIQUID Biofuels is generally considered the most sustainable renewable energy source because it is not intermittent, like other renewable alternatives. For instance, wind energy is generated when there is wind and solar when there is sunlight. But in biofuels, the energy crop is grown, consumed and planted again. In fact, while all the feedstock for biofuels production can be grown, such cannot be the case for solar and wind energy.

Again, more jobs are created in biofuels development than other renewable and recently, Shell International suspended investments in all other forms of renewable energy to enable it concentrate on investment in biofuels from biomass and other cellulose.

Unfortunately, as exciting as this business opportunity is, Nigeria has no laws in place to guide the development of biofuels, which could soon constitute a drawback if not properly managed.

Essentially biofuels - obtained from bioethanol and biodiesel-are fuels obtained from biomass derived from organic material in agriculture, fisheries, aquaculture, forestry, algae-culture, households, industrial processes and microorganisms. Biogas is gas produced by biological conversion of biomass as a consequence of the decomposition process. But despite the promise in nascent biofuels development, instead of a law, what has existed since 2007 in Nigeria is a biofuels policy, which in itself requires tremendous efforts to review and update.

With Nigeria's growing population even though arable land is not increasing the nation consumes more of everything, including energy. In rural Nigeria, where about 65 per cent of the country's 140 million inhabitants do not have access to modern and efficient energy, the people produce the food eaten in the cities and see themselves daily in abject poverty. Energy access is therefore one key aspect that could readily promote economic development and growth.

Besides, even if the country succeeds in generating distributing 6000MW in 2009 and 10,000MW in 2010, electricity generated via co-generation during biofuels production could provide electricity to the community where the biofuels factory is situated, thereby complimenting the Federal Government's efforts in solving the current energy crisis.

Sadly, the major source of revenue in Nigeria remains oil and not agriculture. This is unfortunate because with recent developments between China and U.S. - the two biggest emitters of CO2 implicated in global warming - there will be a gradual transformation to a low carbon economy in the two countries. Besides, President Obama, in his inaugural message in January this year, promised that America would seriously pursue clean energy technology and cut down oil consumption to reduce its addiction to oil.

The United States is therefore seriously reviewing its renewable energy policies and laws and creating an intervention fund for the biofuels development as a form of stimulus package.

In Nigeria, however, there is currently no law that regulates biofuels promotion, production, distribution and use. No law guarantees market development and investment for biofuels and there are no guides for biofuels investors within and outside Nigeria on the use and proliferation of genetically modified (GM) crops. Ordinarily, Biosafety laws are used to regulate genetically modified organisms that may open opportunities for the use of specific types of energy crops under controlled conditions as regards to biofuels.

This is a nascent industry in Nigeria and unless a structure is adopted to guide the way people should go about this business legally, there could be problems. Current realities show that investors approach state governors for land and the states ignorantly allocate land, whereas there are fundamental checklists that should be applied before signing agreements for biofuels development, without first perusing such investor documents as environmental impact report, sensitivity analysis report, feasibility studies and business plans of such project.

The illegal dislocation of a community as small as 200 people, for instance, could prepare the grounds for a bad take off for the investment, which may only manifest several years ahead, bringing problems of sustainability. However, no existing biofuels laws protect and preserve the rights of community residents where a biofuels factory is to be sited in Nigeria and no such laws cover how such communities are to be involved, relocated or reimbursed in the event of biofuels projects.

In countries where biofuels laws exist, senior managers given responsibilities to provide resources for environmental compliance or who become aware of environmental problems in biofuels facilities without immediately addressing them can face penalties ranging from fines, jail terms or both. Without appropriate biofuels laws, biofuels feedstock plantations alone can cause deforestation.

In both Malaysia and Indonesia, the world's two largest exporters of palm oil and the two most prominent biodiesel producers in Asia, "the permanent reserved forest areas are protected by law against any deforestation."

In countries like Sweden, U.S.A, Singapore and EU countries, biofuels laws regulate all activities that may generate air emission, wastewater, odor, damage to the environment/community as a result of biofuels production. The laws expressly prohibit changing the zoning from forestry land to agricultural land for the production of biofuels feedstock.

Biofuels laws in Sweden provide 33 per cent reduction in the level of annual road tax on flex fuel cars, free parking in many cities, exemption from Stockholm's congestion charging scheme, insurance is 20 per cent cheaper and 85 per cent of publicly procured cars have to be environment friendly. These is also a long list of incentives contained in Swedish biofuels policies and laws which encourage the sale of green cars, including a zero tax level on ethanol cars. Any private individual who buys a new green car between April 1, 2007 and December 31, 2009 will receive an eco car subsidy of $1600.

In China, the use of corn for bioethanol has been banned, while use of sweet potatoes and cassava for bioethanol is regulated. In fact, as of 2007 China the 3rd largest producer of bioethanol in the world had stopped granting licences to bioethanol producers that will use corn as feedstock. The use of corn for biofuels in Mexico is also regulated until such a time that the existing corn inventories extremely exceed the national demand. Until then, use of corn will not be authorised for biofuels in Mexico.

In Nigeria, government's planning tools for economic development at the rural areas using biofuels investment must be mentioned in such laws. Community education about biofuels benefits ranging from economic development, job creation, added value to farmers, and possible electricity for the rural community where the factory resides should not be left to developers of biofuels, as government needs to assist strongly in educating the community.

Community resistance is one of the difficult challenges in the biofuels industry. For instance, community resistance has terminated biofuels plants in some locations in Europe and the United States.

Increased truck traffic, odors, toxic emission and evacuation of residents in an average 20 miles radius, water usage were some of the concerns that one community voiced out in protests, press releases and newspaper articles. A judge halted the biofuels project because the community was opposed to it. The air quality in a community could be fouled and water and land regulations could be violated, thereby jeopardising the health and environment of the residents.

With a few people now contemplating the risk of going into biofuels business in Nigeria, the regulation of this nascent industry has become even more important. This would allow energy companies, potential biofuels producers and individuals to participate in the development of a regulatory framework for a new emerging biofuels industry in Nigeria.

One of the key elements of such biofuels laws as found in other countries is the attainment of the nine sustainability criteria, including implications on climate change, impacts on biodiversity and natural resources management, food security, implications to trade, foreign exchange balance and energy security, agro-industrial development and job creation, in addition to the standard EIA reports submitted to the Federal Ministry of Environment in Nigeria.

Biofuels market conditions, feedstock supply and prices, transportation choices, environmental issues, energy costs, federal and state incentives, are some of the variables that must be incorporated in the anticipated Nigerian biofuels laws. While it is widely accepted worldwide that the present feedstock for biofuels provides basis for development and may not meet the biofuels requirements of the future, investments are therefore directed towards second generation feedstock for biofuels production.

Such feedstock includes citrus peel, cellulose, switchgrass, for bioethanol and, Thevetia, Jathropha, algae for biodiesel. Thus, the anticipated Nigerian biofuels laws must recognize the tendencies of these 2nd generation inputs - biofuels raw stock that are non-food materials to sustain Nigerian biofuels industry in a competitive and sustainable manner.

One of the exciting benefits of developing biofuels business through the relevant biofuels laws in Nigeria will be a sharp reduction in rural poverty. Biofuels development will provide access to modern forms of energy to rural communities and also provide economic opportunities for people, particularly farmers, to participate in the vast energy economy.

Just because energy is renewable does not mean it is green. All forms of energy have some forms of environmental impacts. Loss of natural ecosystems takes a significant toll on people because of the dependence on services that nature provides. Such services include pollination of crops, natural resistance against pests and protection from floods. All of these environmental services become more important in the context of climate change. Even the second generation biofuels feedstock which may relieve pressure on food crops; prices and availability, but will not necessarily solve the problems of environmental impacts in Nigeria.

Because Nigeria certainly cannot afford the mistake again of undermining the environmental impact in biofuels development as was done in the oil rich Niger Delta, government should provide the lead in this industry through laws and regulatory agencies.

To go about the promulgation of biofuels laws, therefore, Nigerian law makers must fundamentally review the history of the biofuels industry in Nigeria, through discussions with officials of the Federal Ministry of Agriculture, Raw Material Research Council and experts in both private sector and academics, SON, NAFDAC, NNPC (RED), DPR, NESREA, Federal Ministry of Commerce and Industry.

Medical records of at least 20 years fossil fuel emission related diseases and deaths must be obtained, while existing bio-ethanol plants should be visited for discussions with plant managers on their experiences in tariff payment. Production and financial data from each plant visited must also be obtained in order to put together a composite picture of average production cost range in naira per liter.

Among others, policy makers would also need to review all available literatures and past studies/reports relating to the environmental and economic issues connected to ethanol use and production in Nigeria

In summary, because biofuels are environment friendly and also help to meet other national public policy goals, the enactment of biofuels laws in Nigeria will foster development, provide alternative non-petroleum fuels in the transportation sector and reducing oil dependence while, at the same time, creating domestic jobs, improving urban air quality and staying even with, if not reducing, emissions of greenhouse gases.

Failure to meet increasing energy demand with increased energy supplies and vulnerability to disruptions from natural or malevolent causes, could threaten the nation's economic prosperity, alter the way people live their lives and threaten national security.

Also, as climate change is a threat multiplier in already fragile regions of the world, exacerbating conditions that lead to failed states, the relationship between carbon emissions and our national security requires that Nigeria must enact biofuels laws holistically to guide biofuels industry and spur investment.