Biofuel Economics: Egypt’s Profitable Path Towards Energy Transition

Biofuel Economics: Egypt’s Profitable Path Towards Energy Transition

In being the host for COP 27 this November and a leading country in Africa, Egypt stands for the interests of the entire African continent in seeking a feasible vision for energy transition. As climate scientists express increasing concerns about emissions, energy transition has become a prerequisite for a prosperous future. Biofuel has been proposed by many as an effective route to escape a global climate cataclysm, but economists have been left to ponder whether it is an economically feasible component to the energy mix that will stimulate growth and boost profits.

Biofuel is a source of energy that uses biomass as an alternative to using fossil fuels. Biomass is renewable organic material that comes from either an animal or plant source. There are many types of biofuels, including biodiesel, biogas, bioethanol, and others. With the wide variety of different biofuels out there, many types of businesses in the public and private sectors could get involved in this new and emerging field.

From an economic perspective, assessments indicate that biofuel could have substantial contributions to growth, which include greater job creation in opening up lucrative opportunities for those working in the agricultural sector or in rural areas. Being an agricultural country, Egypt’s ability to supply the biofuel industry with the needed feedstock is a proven advantage. Since scarcity is not an issue in terms of feedstock because it is readily available in nature, biofuel opens up the possibility of turning the economic tables.

A 2012 study titled “Economics of Biofuels: An Overview of Policies, Impacts, and Prospects” by Gian Carlo Moschini, Jingbo Cui, and Harvey Lapan further reinforces this point by saying, “One of the obvious economic impacts of biofuels is to increase the demand for agricultural output, beyond the traditional uses for food and feed. The resulting price effects positively impact incomes and returns in agriculture, and thus biofuels can play a positive role in the longstanding perceived need (especially in developed economies) to support agriculture. In particular, there is interest in the potential of biofuels to help with rural economic development, by spurring investment and employment in rural areas with sluggish economic activity.”

With the importance of its agricultural sector, Egyptian biodiesel in particular has witnessed substantial growth with a number of different local producers working in the private sector. For a long time, the Egyptian government has invested in the potential of the Jatropha crop as a possible source for producing biodiesel. Jatropha has been used for the production of some of Egypt’s jet fuel, even though some experts point out its relatively high cost of production. According to SciDiv.Net, researchers have noted that the lowest price of biofuel is 90% higher than the average fuel.

A 2015 study titled “The Potential of Jatropha Plantations in Egypt: A Review” written by economic experts Waleed Mahmoud Soliman from the Agricultural Economics Research Institute in Egypt and Xiurong He from the China Agricultural University’s College of Economics & Management also examined the key economic benefits of this crop. “By our rough assumption for the Egyptian model, 1 million hectors of Jatropha plantation is expected to produce 1 million ton of BDF (biodiesel fuel). This 1 million ton of BDF usage would reduce 2 million tons of CO2 emission. Annually, a value of $28 million market would be delivered. The Egyptian actual profits from the carbon trading would be one-half or one-third of the expected value.” It cited figures from the Japan Bio-Energy Development Corp.’s 2007 Projects Report. The study added that the establishment of Jatropha plantations could contribute to improving living standards for lower-income areas of Upper Egypt.

It is the power of pricing that really gives Egypt a competitive edge in the biofuel market. As the Executive Manager of BioRotterdam Cleantech, a biodiesel and energy consultancy firm, Dr. Ibrahim Farouk asserts that Egypt has the ability to produce biofuel at a lower rate than other markets, citing a Swedish study that found producing biofuel in Europe is six times more costly than production in Egypt and a number of Arab countries. This advantage makes Egypt an attractive prospect for buyers overseas. “There is a strong opportunity [for biofuels in this market] based on figures that show that there is a large supply of feedstock in Egypt because of high population and there is also high demand for biofuel as a result of EU mandates as well as other types of green energy in both Egypt and Europe,” said Farouk. “Egypt has a lot of experience in the field of producing vegetable oils for food uses and the oleochemicals’ industry since the 1950s. At one time, we had large plantations for sunflower, cotton, and soybean oils. Our vast experience in this field has given us a technological advantage in the production of biofuels. Now we can melt our experience with market requirement and play a good role in planting vegetable oils for nonfood uses, biofuels being one of them.”

Catching the eye of willing investors remains the key to boosting this industry. Farouk asserts that COP 27 would be an ideal platform to lure all the essential investments, financing, strategic partnerships with international companies to benefit from. “We have a great opportunity at COP 27 to introduce ourselves as a country and as operating companies to show that we have the expertise, excellent infrastructure, and experience in producing vegetable oils. We need to introduce ourselves as an attractive location to invest in the production of biodiesel. According to the given data, Egypt can be easily become a regional hub for biofuels by 2030 whenever the investments are available.”

Above all, Egypt’s mere geography could play in its favor with its close proximity to the European market, which is considered the world’s largest for biofuel. Combined with the need for environmentally responsible fuel options, current regional developments may even create more demand and push the Europeans to tap into nearby markets where biofuel production is cost-effective, the know-how is available, and there is a reliably sustainable supply of feedstock. No country in the region would fit this description more than Egypt does, making it an attractive biofuel exporter to Europe.

Though there have been accomplishments in this field, there is still yet more to be done in Egypt for the local biofuel economy to be considered a force to be reckoned with. Nonetheless, with Egypt’s commitment to The Paris Agreement, it is not far-fetched that the Egyptian economy will witness major developments in this field soon enough, especially considering its export potential.

As much as biofuels are the more environmentally responsible path for a prosperous future, it also represents an economic opportunity that, if managed properly, can contribute to paving the way for Egypt’s energy transition. The potential that biofuels have is an inspirational reminder that even the most complex problems can be tackled with the simplest solutions. In this case, it is the biosphere itself.


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