Jamaica Still Exploiting CBI Biofuels Incentives

The Government is steadfast in its thrust to develop the local biofuels industry, producing ethanol from local feedstock and boosting exports of this highly valued fuel, under the Caribbean Basin Initiative (CBI).
Minister of Energy and Mining, Hon. James Robertson, says that it is toward this end that Jamaica last year accepted an invitation to join the Memorandum of Understanding (MoU) between the United States of America (USA) and Brazil, for increased co-operation on biofuels.
The island is among the newest partners in this US/Brazil biofuels collaboration. Others include Guatemala, Honduras, Guinea-Bissau and Senegal. Under the MoU, all work to develop their biofuels industry and reduce dependence on imported fuels.
Ethanol is an alternative to gasoline touted and as producing lower greenhouse gas emissions. Its increased use is expected to play a key role in reducing the contribution of carbon monoxide, from motor vehicles, to global climate change.
The CBI is a trade agreement between the USA and Caribbean and Central American countries. It was originally launched in 1983, under the Caribbean Basin Economic Recovery Act (CBERA), and was significantly expanded in 2000, under the US-Caribbean Basin Trade Partnership Act (CBTPA).
The agreement grants participating countries duty-free access for some products to the US market, and exempts them from the 54 cents per US gallon tariff on ethanol. Eighteen Caribbean countries benefit from the CBI: Jamaica, Barbados, Belize, Guyana, Haiti, Panama, St. Lucia, Antigua and Barbuda, Aruba, the Bahamas, British Virgin Islands, Dominica, Grenada, Montserrat, the Netherlands Antilles, St. Vincent and the Grenadines, St. Kitts and Nevis, and Trinidad and Tobago.
Jamaica is among a group of only eight countries that benefit from the CBTPA, however. The other members of the group being: Barbados, Belize, Guyana, Haiti, Panama, St. Lucia and Trinidad and Tobago.
Minister Robertson tells JIS News that in 2007, Jamaica exported 80 million gallons of ethanol to the US, and 110 million in 2008. However, he said, the CBI countries only met 71 per cent of the total 2008 quota of 452 million gallons.
Between January and July 2009, Jamaica exported some 51 million gallons of ethanol to the USA. This represents just 15 per cent of the 2009 quota and, according to Mr. Robertson, is an indication that less than half of the quota for the year will be met.
However, Jamaica earns some $140 million annually from ethanol exports to the US and has, what the Minister says is, “an excellent relationship with other ethanol exporting countries”.
He says Jamaica’s Ambassador to the US, His Excellency Anthony Johnson, has taken an active role in getting his counterparts in the region to collaborate on issues affecting CBI ethanol.
He also states that inter-regional competition is friendly and productive, and is expected to remain this way as long as ethanol exports from non-regionally grown feedstock remain below quota. Under the legislation governing the Initiative, access to ethanol from non-regional feedstock is limited to seven per cent of total US ethanol domestic consumption.
Jamaica, El Salvador, Costa Rica, Trinidad and Tobago and the US Virgin Islands are the only countries that have exported ethanol under the CBI. According to a March 2008 Congressional Research Service report, Jamaica and Costa Rica were the two largest exporters of fuel ethanol to the United States between 1999 and 2003.
The CBTPA, which comes up for review periodically, will expire on September 30, next year, or when the US and individual CBTPA beneficiary countries enter into a free trade agreement – whichever comes first. But, unfortunately, there is threat of the elimination of the ethanol tariff, which expires at the end of 2010, and the changing of the excise tax credit for CBI countries to a small producer tax credit.
Volumetric ethanol excise tax credit is an income tax credit, based on the volume of ethanol that has been blended with gasoline for sale. For each gallon of ethanol blended, an income tax credit of US$0.45 cents per gallon is available. A small producers’ credit allows for income tax credit of just US$0.10 per gallon for the first 15 million gallons for ethanol producers whose total output is less than 60 million gallons per year.
The Minister also indicates that, under the Renewable Fuels Standard (RFS) introduced by the US’s Energy Policy Act, there is also the possibility that sugar-based ethanol will be classified as an advanced biofuel. This would mean that the quota for fuels from this source would be only four billion gallons, compared with the provision for 15 billion gallons for conventional biofuels set out in the RFS mandate.
“There is also the threat that the EPA (Environment and Protection Agency) will determine that sugar-based ethanol production and exports do not meet the threshold of a 50 per cent net offset in greenhouse gas emissions,” he added.
However, Mr. Robertson says that there are indications that the Obama administration is supportive of continuing the CBI agreement.
Jamaica has been steadily ramping up its programme for renewable energy sources, with E10-fuel diversification emerging as one of the major successes of that thrust.
Launched in November 2008, the E-10 programme was fully rolled out across the island just last month, as demand grew for the blend of 10 per cent ethanol from sugar cane and 90 per cent 87 octane gasoline. By December 2008, the demand for the E10 ethanol blended gasoline had spiralled past the projected 3,000 barrels, to 8,000 barrels per week.
Meanwhile, negotiations to establish a Liquefied Natural Gas (LNG) sector has advanced, as the Government, led by the Energy Ministry, seeks out cheaper and varied energy sources. LNG has much lower air emissions than other fossil fuels, such as oil or coal.
Speaking at a press conference in September, Mr. Robertson said there would soon be a direction on the way forward for LNG, as a number of interested companies have visited Jamaica to examine aspects of the LNG build-out and roll-out plans.
In advance of the LNG agenda, last week Cabinet gave approval for the use of Floating Storage and Regasification (FSR) units to import LNG for local use.
“As a result of this, the requests for proposals have gone out and we have a timeline starting in November and ending in April 2010, which will be the execution of the LNG supply term sheet. The Government considers this a priority and as such, is trying, as best as possible, to fast track it, while adhering to the procurement requirements,” Minister with responsibility for Information, Telecommunications and Special Projects in the Office of the Prime Minister, Hon. Daryl Vaz, confirmed at a recent Post Cabinet press briefing.
He noted that once this initiative is fully realised, it will save on fuel costs for consumers and the Government as a whole. He added that LNG is seen as the fuel choice capable of satisfying the objectives, while having the potential to grow the economy through increased competitiveness in global markets.