Economic Benefits of Biofuel Production in Thailand

Biofuel production requires approximately 100 times more workers per joule of energy produced than fossil fuel production (Worldwatch Institute 2007).  Biofuel is not only a viable option in the renewable fuel industry due to its lack of harmful emissions, but the production process also creates vast amounts of new jobs within developing countries.  Ultimately, this increase in demand for workers leads to an increase in overall economic activity and serves as an income generator for the workers who fill these jobs.  Increases in ethanol production are estimated to increase employment by 238,700382,400 people, and GDP by 150 million dollars by year 2022.  Biofuel policies aimed to promote production in Thailand are likely to improve the country’s agricultural sector, develop rural areas, and enhance energy security (Silalertruksa 2012).  In the United States, it is estimated that every 3.785 cubic hecta-meters of ethanol production create 10,00020,000 jobs (Kammen 2011).  Similarly, in South Africa, it has been determined that 350,000 jobs would be created if 15% of gasoline and biodiesel demand were replaced by ethanol and biodiesel production.  However, other aspects of the industry must be investigated, such as work conditions and labor laws.  The demand for biofuels in Thailand is expected to increase, and, therefore, the costs and benefits of increased production need to be taken into consideration.  Researchers expect the increase in biofuel production to have a strong effect on employment rates, GDP, trade balance, and overall socio-economic development (Silalertruksa 2012). Shelby Long
Silalertruksa, T. et al., 2012.  Biofuels and employment effects:  Implications for
socioeconomic development in Thailand.  Biomass and Bioenergy 46, 409
418.

Silalertruksa et al. assessed the benefits of biofuel production increases on the socio-economic development of Thailand.  They examined palm biodiesel as well as ethanol production from cassava, molasses, and sugarcane.  Researchers analyzed the employment effects of biofuel production in Thailand using a “hybrid method” with an analytical approach at the micro level and an input-output model at the macro level.  In order to determine the effect on direct employment due to increases in production they used a production process analysis of the expenditures for labor in land preparation, feedstock plantation, treatment, and harvesting, along with annual wage data (Duer and Christensen 2010).  The following equation was used to estimate the potential direct employment that can be achieved based on labor costs and average annual working hours in Thailand’s agricultural sector: Employmentagr =(PCfeedstock x Laborshare)/AWGagr (Employmentagris agricultural employment in agriculture; PCfeedstockis the production costs of feedstock; Laborshare is the share of labor cost in feedstock production costs; and AWGagr is the average annual wage per employed person in Thailand’s agricultural sector).  Data on the number of employees and production capacity were obtained from 5 sugar mills, 5 dried-chip floors, 10 ethanol plants, 4 palm biodiesel plants, and 17 palm oil mills.  This information was used to determine the effect increases in biofuel production would have on direct employment in the feedstock processing sector.  The impact of increased biofuel production on indirect employment was also examined.  Indirect employment includes the sectors that process intermediate goods that are delivered to the biofuel processing sector.  Researchers used economic input-output tables from 2005 that were compiled and published in an 180 x 180 format, which they then formatted into 50 x 50 input-output table.  They then categorized the final demand for molasses ethanol, cassava ethanol, sugarcane ethanol, and palm biodiesel by organizing their production costs.  These production costs were then assigned to sectors in the input-output table in order to determine indirect employment. 
                  It was determined that the largest amount of employment based on volume of biofuel produced would be created by an increase in palm biodiesel production.  The second, third, and fourth largest amount of employment increases were from sugarcane ethanol, cassava ethanol, and molasses ethanol.  However, based on energy content produced, the greatest effects were in ethanol production, with biodiesel production from palm oil being the lowest.  Researchers determined that significant increases in employment due to direct and indirect employment opportunities would lead to rural development in Thailand.  However, those employed in the biofuel industry are likely to work on a temporary basis, and, therefore, those who work in these industries are not as well-protected by laws for working conditions or other policies. Silalertruksa et al. suggest that policies and laws for working conditions, fair wages, and other labor rights must be considered in order to help small scale farmers, biofuel industry workers, and unpaid family workers secure more rights.  With improved standards for safety risks, safety procedures, child labor, working conditions, and other worker rights the biofuel industry and production can be improved for the future. 
Researchers suggest that further survey and analysis practices need to be adopted in order to determine the overall need for changes in policy because current indicators, such as the Global Bioenergy Partnership (GBEP), cannot be used as a representative of the whole country.  Researchers examined four scenarios for increasing feedstock production.  Scenario 1 would expand the cultivation areas for cassava and sugarcane, Scenario 2 would include machines to help cultivate cassava and sugarcane, Scenario 3 requires a 50% increase in labor for the production of feedstock, and Scenario 4 requires labor that increases at the same rate as yield production.  In order to produce 9 cubic decimeters per day of ethanol by 2022, it was calculated that a range of 238,700–382,360 persons would be needed.  The lowest number of workers would be required in Scenario 2 because many of the workers would be replaced by mechanization. 
Increases in the biofuel sector would spark national development through increases in GDP due to increases in investment in the biofuel sector and improvement in the trade balance and energy security.  Researchers calculated the total impact of different types of biofuels in Thailand on GDP.  They determined that producing 1 million liters of cassava, molasses, and sugarcane ethanol and palm biodiesel would contribute to GDP by 499, 411, 604 and 632 k$.  Feedstock, the most costly aspect of biofuel production, affects GDP by approximately 62–73% directly or 29–55% in total impacts.  However, an increase in the production of biofuel will also lead to a decrease in the production of petroleum, and, therefore, a decrease in GDP by around 90%.  The decrease in GDP due to reduced petroleum fuel production offsets some, but not all, of the increase in GDP due to increases in biofuel production.   This rise in GDP also implies a rise in the incomes of workers.  Also, an increase in production by 1 TJ of cassava ethanol, molasses ethanol, sugarcane ethanol, and palm biodiesel will result in an increase in total imports by approximately 29, 18, 49, and 15 k$.  However, by replacing petroleum fuels with biofuels imports could decrease by 10–41 k$ TJ—1 of ethanol and 46 k$ TJ—1 of biodiesel.  The indirect impact of chemicals used in the biofuels conversion stage and from energy consumed contribute largely to imports.  The total imports of chemicals for biofuel production account for approximately 25–68% of total imports; therefore, if ethanol production reaches a level of 9 cubic decimeters per day by 2022 then ethanol production could help reduce imports by 2547 M$ per year.  Researchers determined that in order to improve security of feedstock supply for long-term ethanol production, cassava and sugarcane yields must be improved to 50 t and 125 t ha—1 by 2022 (Silalertruksa and Gheewala 2010).  In order to achieve these levels, Silalertruksa et al. recommend that more research be done to develop high yield varieties of cassava and sugarcane and to promote good agricultural practices (GAP) to improve yields.  Increased biofuel production could also have adverse effects, such as decreased access to food for poor families, permanent farm labor of young workers, and the loss of small-scale farmers’ access to land.  Therefore, policies must be formed in order to alleviate these potential problems.
Silalertruksa et al. assert that biofuel production results in many positive externalities to the Thai economy.  It is estimated that 1720 more workers are needed for biofuel production than gasoline production, and biodiesel production would produce 10 times more workers than diesel production.  They suggest that not only does biofuel production increase the need for workers, but it also leads to a decrease in ethanol and biodiesel imports and an increase in GDP by up to $60 k per dam3 of biofuels produced.  These socio-economic benefits could make biofuels more price competitive in comparison with petroleum fuels as well.  Also, increases in biofuel production through community-based plans are also expected to help raise the living standards of rural communities as people learn to derive biodiesel from cooking oil or other oil plants from their land.  This could make energy cheaper and more available to rural communities.  
Other Sources
Duer, H. and Christensen, P.O., 2010.  Socio-economic aspects of different biofuel
development pathways.  Biomass Bioenergy 34, 237243.
Kammen, D.M., 2011.  Hearing on: green jobs created by global warming initiatives. 
United States senate committee on environment and public works.
Silalertruksa, T. and Gheewala, S.H., 2010. Security of feedstocks supply for future
bio-ethanol production in Thailand. Energy Policy 38, 74767486.
Worldwatch Institute, 2007. Biofuels for transport: global protential and
implications for sustainable energy and agriculture.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s