Many have noticed the new opportunities and throughout the region technologies to generate bio-fuel are the centre of attention. There are basically two types of technology: (1) the extraction of oil from oil rich seeds; and (2) the processing of starch into ethanol.

It is well known that some countries outside the region, such as Brazil, have strived far ahead. In the case of Brazil, progress is pinned on the sugar industry and its by-products.

In Asia, the current picture shows that Thailand, which has a comparatively well-developed agricultural industry, has progressed relatively well in the production and use of bio-fuel. Thailand primarily uses cassava as a substitution for mineral oil and has set a very ambitious goal of becoming almost entirely self sufficient in energy through the use of ethanol. In Thailand, a large group of cassava producers now relies exclusively on this recently developed branch of the agricultural energy business.

India has also set an ambitious goal with a target of 20 per cent of all mineral oil blended with bio-fuel by 2012. In India, the pathway towards the new agricultural energy industry seems to favour the extraction of vegetable oil, in particular from the Jatropha plant. Jatropha is a sturdy and drought resistant plant, which can be grown in marginal and dry areas. There is general concensus that this crop could contribute to the living standards and income of farmers in marginal areas

Against this backdrop, however, a number of outstanding issues involved on both the demand and production side. On the production side, the main issue is simultaneously a strength and a weakness of Jatropha. It is inedible, cattle leave it alone and it is relatively free of pests and disease. Early experience of Jatropha shows that it was unpopular because it provided no value in terms of consumption in rural households. Furthermore, the current extraction rate of oil from the seed is below potential. It would seem that, in general, 16 per cent of the seed weight can be extracted as oil but advanced technology using solvents is required to improve efficiency. The oil content of Jatropha seed is reported to be around 30 per cent. On the demand side, product cleaning is necessary before it can be mixed with fuel, while the energy industry and consumers have to be involved in setting industry standards.

In India, the government is keen to develop the sector on the basis of the current crude oil price, that is, without subsidies.

In Australia, intensive interaction between the government and industry has led to a situation which differs essentially from the Thai and Indian models. In Australia, the pricing of bio-fuel is based on the prevalent price of oil and the only measure taken by the government has been to provide producers with a tax break.

The essential difference, however, is that in Australia a very wide range of sources of fats and oils is used for the production of bio-diesel: used cooking fat, waste from slaughter houses, as well as vegetable oil. In Australia, a lot of time was spent to ensure that the quality of bio-fuel would meet the requirements of consumers and the energy industry. Although up-to-date information remains scant, there are many signs that the agricultural energy sector is expanding exponentially in Australia.

There is much to be learned from the experiences in Thailand, India and Australia by other countries in the region where the agricultural energy sector is yet to be conducive for rapid growth. The first and foremost lesson is that the agricultural energy sector uses natural resources and their by-products as the basis for production. This may seem a trivial statement but it is not. The fact of the matter is that the natural diversity of agriculture is such that energy can always be produced. Hitherto, in Asia, we see a mixed sourcing system, evidently starch and ethanol systems, as well as a vegetable oil system. The second lesson is that to balance the production of energy with the consumption of energy, a policy formulation process has to be entered and completed.

Most oil price analysts assume that the current high oil price is here to stay. Based on this assumption, a whole new branch of the agricultural industry is set to develop. Creativity and thoughtful policy formulation are necessary to turn this process to the advantage of the rural poor. The priority accorded this process should be as high as for food security and trade. The agricultural feed energy sector could become the fastest growing sub-sector in years to come.

Written by J.W.T. Bottema, Director, UNESCAP-CAPSA, Bogor, Indonesia.

(References available upon request)