Who will pay for biofuels development? For a while longer at least it looks as if South African sugar will be used to sweeten coffee rather than make fuel for motor vehicles. The reason: a standoff between cane growers and the government over how to pay for fuel-from-sugar research and development. Tom Nevin reports.

Author:Nevin, Tom
Position::SOUTH AFRICA
 
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When the South African government announced an aggressive fuels initiative that would see biofuels providing up to 75% of its renewable energy needs in just five years' time, the local sugar industry sat up and took notice. Next to maize, sugar is South Africa's most prolific cultivated crop and an ideal ethanol candidate.

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Growing sugar cane is a relatively simple agricultural enterprise in the right climate and soil, but marketing it globally is a nightmare with producers subject to violent price swings in distorted international pricing mechanisms.

A better proposition for growers is a domestic biofuels industry that uses sugar for feedstock and promises a reliable local market with fair and stable prices.

The sugar sector, taking up millions of hectares on KwaZulu-Natal's tropical coastlands and huge tracts in Mpumalanga's humid lowlands, has endorsed the government's drive for cleaner energy alternatives to harmful fossil fuels.

Brazil has been distilling ethanol fuel from sugar for half a century and today its cane fields, the world's biggest, supply 75% of the country's fuel needs.

The problem for South Africa's cane producers is in the fine print, or rather the lack of it, in the government's long-delayed biofuel policy. Still in draft form and far from complete, it hedges the state's financial commitment to the development of fuel-from-sugar infrastructure.

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It's not that the sugar industry is reluctant to invest in ethanol's development stages, insists Rodger Stewart, chairman of the South African Sugar Association (SASA), but it would like to see a definitive policy, especially with finality on such contentious issues as state subsidies and sugar prices.

Policy vacuum

The biofuels strategy, upon which the policy will be based, stipulates that by 2013 biofuels will constitute 4.5% of motor fuel sold because this fuel would contain either an 8% ethanol blend or a 2% biodiesel blend.

According to the Southern African Biofuels Association, between R2bn and R5bn ($300m and $750m) from the government is needed for development in view of its capital intensive nature.

"I think the problem is that we're in a policy vacuum at the moment," says Stewart. "What we need first for ethanol production to work is a clear policy and at the moment the policy environment is not clear. There are things like mandated ethanol content in fuel mixes, among other issues, that we would need in the policy in order for...

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