FRAMING CLEAR BIOENERGYPOLICY AND REGULATION

THE CASE OF MALAWI

BY GRAIN WYSON PHILIP MALUNGA, FIMMM.

(APRIL 2015)

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Table of Contents

Contents1.0 Introduction.....................................................................................................................................2

2.0 Current Biofuels Feed Stock in Malawi............................................................................................2

2.1 Sugarcane Molasses for Ethanol Production...............................................................................2

2.2 Jatropha Curcus for Biodiesel Production....................................................................................3

2.3 Other potential feedstock............................................................................................................3

3.0 Production Systems.........................................................................................................................4

4.0 Policy and Regulatory Issues............................................................................................................5

4.1 Policy on Food Production...........................................................................................................5

4.2 Land Policy...................................................................................................................................5

4.3 Biofuel Standards and Blending...................................................................................................5

4.4 Policy on SecuringFeedstock........................................................................................................6

4.5 TaxationPolicy and Fiscal Incentives............................................................................................6

5.5.1 TaxationPolicy Benefits.............................................................................................................6

5.0 Conclusion.......................................................................................................................................7

7.0 Recommendations...........................................................................................................................7

8.0 References.......................................................................................................................................8

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1.0 Introduction

In Malawi the national energy policy provides a supportive legislative framework for the development of the biofuel sector in the country while safeguarding the livelihood systems of the rural communities. Biofuels offer a great opportunity for diversifying energy sources and livelihood systems of rural communities through employment creation in the bioenergy industry, production and marketing of biofuel products. In order to promote a sustainable biofuels industry in Malawi, it is necessary to create appropriate policies and legal framework for the production of non-food feedstock for biofuel production as a way of safeguarding the potential dangers of biofuel on food production and environmental protection. The Malawi Energy Regulatory Authority (MERA) is a regulating authority on biofuels with a generic biofuels framework. This means that investors in the biofuels industry who are interested in producing biofuels are free to apply for a license from MERA.

2.0 Current Biofuels Feed Stock in Malawi

Two major crops are being promoted in Malawi for the production of bioethanol and biodiesel at present and these are sugarcane and Jatropha respectively.

2.1 Sugarcane Molasses for Ethanol Production

Malawi started producing ethanol in 1982, which is blended with petrol in order to reduce the fuel import bill where between 90 and 100 million litres of petrol is imported every year. The target is to blend 20% ethanol with fossil petrol. Currently the blend is at 10% ethanol and 90% petrol.

In October 2007, Malawi imported an ethanol-propelled car from Brazil and launched a pilot program of modifying the engines of some vehicles to run on ethanol or a mixture of ethanol and petrol. Sugar cane is already being widely grown in Malawi and its production can easily be expanded wherever there is irrigation and water. Its impact on employment is high. Considering that ethanol is produced from a by-product of sugar (molasses) there is a double benefit in terms of income. Ethanol is already widely used as a petrol blend and the processing technology is known and available.

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2.2 Jatropha Curcus for Biodiesel Production

Malawi plans to promote the production of biodiesel from Jatropha curcus. Jatropha curcas is a small tree or shrub with smooth grey bark, which exudes whitish coloured, watery, latex when cut. Normally, it grows between three and five meters high, but can attain a height of up to eight or ten meters under favourable conditions. Jatropha curcas belongs to the family of Euphorbiaceae and produces a “physic nut”, and “purging nut” as some of the synonyms. The local name in Malawi is “nsatsi manga” in Chichewa or “mono” in Tumbuka languages respectively.

Jatropha curcas is a drought-resistant perennial crop and can grow in marginal/poor soil. It is easy to establish, grows relatively quickly (it takes around 5 years to mature) and can produce seeds for up to 50 years. Jatropha curcas grows wild in many parts of the country and thrives on infertile soils. It is rugged in nature, easy to propagate, can survive with minimum inputs, and a good crop can be obtained with little effort.

It grows on well-drained soils with good aeration and is well adapted to marginal soils with low nutrient content. Of course marginal soils will lead to lower yields.

Jatropha curcas produces nuts with annual yield that range from 0.5 to 12 tons. The nuts contain up to about 30% oil which can be transformed into biodiesel fuel through esterification. The oil can be combusted as fuel, without being refined and it burns with a clear, smoke-free flame. The oil has also been tested successfully as fuel for simple diesel engines.

Jatropha curcas or its parts/products are also used for medicinal purposes to treat certain ailments such as piles, snakebite, paralysis, dropsy and wounds.

It has also been established that Jatropha curcas has been grown in Malawi for over 30 years as a hedge crop and it has never been reported to be invasive.

2.3 Other potential feedstockSoya beans, cotton seed, sunflower and palm oil can also be used for production of biodiesel while maize, cassava and sweet sorghum can be used for production of ethanol. However in Malawi the use of food crops is discouraged.

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3.0 Production Systems

The Ethanol Company of Malawi (Ethco) has a factory for processing sugarcane molasses in Dwangwa. Commissioned in 1982, Ethanol Company Limited has produced well over a quarter billion litres of ethanol. They are the pioneers of Ethanol production in Malawi. PressCane is an ethanol distillery which is a subsidiary of the conglomerate Press Corporation Limited and began operations in June 2004. The plant is located in Chikhwawa on the east bank of the Shire River about 25 km north of Nchalo (55km south of Blantyre) and employs 115 Malawians including management. The main products of the distillery are fuel ethanol also known as anhydrous alcohol (AA 99.8% v/v) and industrial alcohol (rectified spirit 96.5% v/v). Sugar cane molasses are procured from Illovo in Nchalo and fermented into ethanol. The high quality of the ethanol is possible due to the new molecular sieve dehydration (MSDH) technology installed in the distillery. The molasses are a waste material (effluent) for the Illovo Sugar Mill whose environmental disposal issues have been solved by the establishment of PressCane Limited. The fuel ethanol is blended with petrol in the ratio of 10 - 20% ethanol to 90 - 80% petrol by the

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petroleum companies such as BP Malawi, TOTAL Malawi and CHEVRON Malawi. Fuel blending in Malawi was precipitated by the energy crisis in the early 1970s.

BERL has a pilot biodiesel processing plant in Lilongwe to process Jatropha seed into oil. Jatropha oil can be extracted from the nuts with very basic pressing. At the processing centre, the seed is processed into crude oil. The seedcake can also be used as compost. The crude oil can be used for lighting or engine fuel in rural areas or for the production of biofuel.

4.0 Policy and Regulatory Issues

One of the major challenges will be the harmonisation of various existing agricultural and energy policies and strategies to provide a framework for development of the biofuels industry. To enable this development, a Biofuel Advisory Council has been created with the sole purpose of developing this policy and legal framework harmonisation.

4.1 Policy on Food Production

There is no plan to convert existing food production into biofuels and the government has made it very clear that developing biofuels cannot be done at the expense of food production.

4.2 Land Policy

Looking at land availability in Malawi, there is land pressure in the Central and Southern Regions. But there is still 26% of arable land in Malawi unused. The current policy is to utilise marginal land for Jatropha production while for sugar production areas with irrigation potential are targeted.

4.3 Biofuel Standards and Blending

The need to have clear biofuel standards and legalised blending levels are driven by the fact that all petroleum products in Malawi are imported. This is exacerbated by the fact that Malawi is a landlocked country and has no oil reserves of its own; it relies solely on fuel imports. Looking at the development of the economy of Malawi, the country’s growth also relies on secure fuel imports. At the current rate of consumption the demand for diesel in Malawi has increased from 155 million litres in 2006 to 300 million litres in 2014, with the on-going trend of about 6.5% increase per year. Blending diesel with

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biofuels will require clear standards and legalised blending level. Ethanol is well established with internationally accepted standards and legalised blending levels. Biofuel Standards have been developed and approved by the Malawi Bureau of Standards. However, they need to be tested by a large population of vehicles so that they can be firmed up.

4.4 Policy on Securing Feedstock

One of the major challenges facing the growing of feedstock for biofuel on an out-grower model is, side selling. The presence of refining capacity without feedstock in neighbouring countries like Zambia and Mozambique poses a major risk on side selling of feedstock by smallholder farmers in Malawi.

The Government of Malawi can take several steps to prevent this from happening like export ban on oilseeds like Jatropha and on crude oil. Also it can be incorporated in the licensing process authorised by MERA that proof of provenance of feedstock must be part of the licensing approval process.

4.5 Taxation Policy and Fiscal Incentives

In Malawi it is important to come up with clear taxation policy for the promotion of biofuels. One such policy would be granting of tax holidays for investors. Another interesting area of intervention is on equipment for the production of biofuels which could be granted duty free status.

5.5.1 Taxation Policy Benefits

Fiscal impact: Foreign exchange savings to substitute petrol and diesel import by using locally produced biodiesel. Also foreign exchange savings on substitution of paraffin with Jatropha oil.

Employment: Jatropha growing with out-growers schemes will create permanent jobs with employees on contract. If local sales and marketing of the products are considered, many more rural jobs will be created, as well as considerable opportunities for local transporters and other downstream businesses.

Introduction of knowledge and technology: In order to ensure efficient bio-diesel production and considering that this is a relatively new technology in the country, training staff extensively in such subjects as forestry management, pest control, oil expelling, refining and laboratory testing.

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Income level and working conditions: Jatropha smallholder farmers will be paid a fair price for their seeds, while incentive payments during the first year of operation will form part of the supportive measures for these farmers.

Impact on the position of women: The biofuel industry will create employment opportunities for women, especially in the cultivation of the plants and collection of the seeds. By offering a fair purchase contract and incentive payments, combined with intensive training and monitoring activities, the project partners will enable the women, with their families, to improve their financial position and social status. An equitable gender balance is strived for in recruitment of staff. As such, the net impact on the position of women will be positive.

Environmental benefits - The environmental effect will be positive for a variety of reasons. In Jatropha there is a viable alternative; one that can improve the health of the local environment by revegitation and topsoil. The organic fertiliser produced will have a positive effect on the water quality and will also save Forex when importing fertiliser. An important component is contribution to reducing greenhouse gas emissions through carbon sequestration in Jatropha trees.

Carbon Trading: Carbon debt must be taken into account when growing biofuels. This means current biomass must be recorded and strict criteria must be set. If proper policies are put in place for carbon trading, energy crops can qualify for benefiting from the carbon trade.

5.0 Conclusion

Malawi has a big potential to produce enough biofuels for its local as well as international markets.

Malawi is capable of producing different non-food feed-stocks Malawi can convert unutilised land for biofuels crop production. Malawi has the potential to reduce its fuel importation bill. The issue of food verses fuel does not arise if the production of biofuels is

accompanied with proper policy instruments. Malawi needs additional policy instruments for the sustainable promotion of

biofuels

7.0 Recommendations

There is need to expand sugar production for production of more ethanol.

Malawi may wish to involve the academics for further study on:

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cost-benefit analysis of biofuels production. land productivity forproduction in biofuels production. utilisation of marginal land for biofuels production. how to engage in international trade for biofuel and gain from carbon markets.

8.0 References1. Government of Malawi, 2003, Malawi Energy Policy2. National Biofuels Advisory Council, 2009, Draft Biofuels Position Paper for Malawi3. Malawi Government, 2004, Malawi Energy Laws

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