Trade mission promotes ethanol in Indonesia, Vietnam

The U.S. Grains Council and ethanol industry partners added an octane enhancer to the U.S. Department of Agriculture’s recent Agricultural Trade Mission to Indonesia, led by USDA Undersecretary for Trade and Foreign Agricultural Affairs Ted McKinney.

The Council delegation joined the larger mission to Indonesia to follow-up on the productive discussions at the Ethanol Summit of the Asia-Pacific this spring, then traveled separately to Vietnam to meet with industry and ministry leaders there.

The Indonesian government has had an ethanol policy in place since 2006, but the mandate has largely gone unmet. Indonesia currently imports half of its gasoline demand, and the government has set a goal for renewables to represent 23 percent of the country’s energy mix by 2025 and to reduce greenhouse gas emissions by 29 percent by 2030. Importing a lower-cost form of octane, ethanol, could help Indonesia secure these achievements by reducing the use of aromatics.

“On the books, Indonesia has goals to ratchet up ethanol blends in its fuel supply from 2 percent to 5 percent and eventually 10 percent,” said Manuel Sanchez, USGC regional director for southeast Asia. “To date, however, Indonesia has blended almost no ethanol, despite global availability and the potential for immediate cost savings.”

Instead, the Indonesian government has instituted import restrictions and high tariff rates for ethanol and ethanol products inconsistent with those for gasoline or aromatics. As a result, the Council delegation met with Indonesian ministry officials to highlight the benefits of increased ethanol use in terms of air quality and GHG emission reductions and the importance of a policy with a role for trade in developing a consistent supply of ethanol.

The delegation also highlighted the competitiveness of U.S. ethanol as an octane enhancer compared to methyl tertiary-butyl ether and other aromatics, such as benzene, toluene and xylene. Substituting ethanol for aromatics also reduces ultrafine particulate matter, which is nanoscale-sized and comprises the bulk of airborne particulate matter. This type of particulate matter can penetrate deep within the lungs and enter the bloodstream, making it a major respiratory health concern, especially for children and young adults.

“Reducing market access barriers is a critical component of the Council’s engagement,” Sanchez said. “Regulatory hurdles impede Indonesia’s ability to capture the societal and cost-saving benefits generated by increased ethanol use.”

Other markets in southeast Asia are already implementing policies that work toward accomplishing the goals of open trade and achieving the full range of economic, environmental and human health benefits associated with increased ethanol usage.

Vietnam represents a market with growing potential for ethanol trade as the country moves from E5 to E10 by 2020.

Vietnamese officials helped craft the guiding document the Council uses in its global ethanol promotion efforts—the Asia-Pacific Economic Cooperation road map for best practices for creating and implementing ethanol policies with a role for trade. The country started offering E5 on Jan. 1, 2018, with a goal to move to E10 by 2020, as total gasoline consumption rates are expected to grow by nearly 10 percent annually. The Council delegation met with Vietnamese energy ministry officials, ethanol producers and oil industry members to learn more and offer their support for the country’s trade-friendly policies.

The Vietnamese ethanol industry expects to source some of the ethanol needed to fulfill these mandates domestically from local cassava producers. But, the government and industry are open to importing ethanol should domestic production fall short of feedstock needed to fulfill the mandate, as ethanol plants come back online or feedstock prices fluctuate.

“Vietnam has set ambitious targets for ethanol blending levels,” Sanchez said. “The government and industry are working through best practices in incentivizing consumers at the pump and ethanol blenders to support increased ethanol use—a major improvement from unsuccessful attempts nearly a decade ago and critical for successful implementation.”

Work in Vietnam and Indonesia offers a good example of the broad scope of the Council’s efforts to promote ethanol in Southeast Asia. From strong policies with a role from trade to regulatory barriers, Council delegations like this one aim to learn more about the specific needs of each individual market and how to pave the way for increased global ethanol usage.