COST-BENEFIT ANALYSIS OF BIOFUELS

Biofuels are sustainable, naturally biodegradable, non-harmful and ecological agreeable fuels. Biofuels are considered as the promising substitute of the fossil fuels (Wang et al., 2011). It is emphatically accepted that the creation and utilization of Biofuels can possibly give a concurrent pathway to country's advancement, business openings, contribute towards reducing emission and less reliance on fossil fuels (Schmer et al., 2008; Wang et al., 2011). Many natural sources are there to produce Biofuels, however photosynthetic plants are the most normally utilized base material to produce biofuels. Oilseed crops, grains, sugar crops, agricultural residues, trees and grasses are the commonly used natural sources of biomass (Koçar, 2013).   

The basic purpose of this article is to analyze the economic factors associated with the production, utilization and socio economic challenges associated with the production and utilization of biofuels. Many governments are supporting the production of Biofuels, because Biofuels can be the game changer in many aspects. The game changing aspects includes homegrown energy security, decreased ozone harming substance (GHG) emanations and economic growth. Biofuels are considered as the alternative of their counterpart competitors, such as petroleum product partners, contributing towards the creation of employment opportunities, nature friendly environment, human development and economic booster for the people residing in the agriculturally based areas  (Nigam, 2011).

Governments of all the regions specifically America, Europe and Asia taking special interests to produce biofuels and include biofuels as a great economic factor to their economy. National and International Policies are made and these policies are continuously evolved to get the maximum economic benefit from biofuels. The legislatures of East Asian nations and the countries within the region are elevating biofuel projects to make sure the handling of energy security and ecological issues just as to boost their rustic economy. In this common cause of elevating the region that covers East Asian countries that includes China (People's Republic of China), Japan, Korea (Republic of Korea), and Taiwan to become the powerful nations of launching and implementing biofuel programs. India, Malaysia and Pakistan are also contributing towards the production of biofuels.

Cost benefit analysis includes the correlation of complete expenses and advantages related with a venture or strategy. Particularly, these benefits can be seen in market costs. The outer financial and natural environment accomplishes these costs without affecting the market system (Diakoulaki, 2007). It means Cost Benefit Analysis is just a traditional tool used to do the analysis, without taking any consideration of factors like social factors, environmental management factors, factors include socio and economic together. However, it is not in the case of cost benefit analysis of biofuels. There is a need to address public health, quality of the environment, social factors, demographic issues, and bio-diversity in order to do the cost benefit analysis of biofuels. Therefore, there is a need of doing “Qualitative cost benefit analysis” and Quantitative cost benefit analysis depending upon the case.  

 BACKGROUND:

The accessible written literature survey indicates the importance of the production of biofuels.  Available studies on biofuels incorporate specialized, technical, ecological, financial feasibility energy and emanation impacts of biofuels; feedstock types, mixes and essential execution impacts; impact of nanoparticles and different added substances on biofuels, and other maintainability impacts (Sheth, 2020). Increasing financial socio-economic development by reducing ecological bio-degradation stays one of the major worldwide difficulties for humanity (Raudsepp-Hearne, 2010). Ongoing impractical utilization of the Earth's limited resources and characteristic capital (Hoekstra, 2014) has prompted a wide scope of negative effects on the environment, climate and economy (Rockström, 2009).The nations have to face challenges including expanding biodiversity misfortunes (Ceballos, 2015), modifications in the arrangement, and nature of environment administrations (Lawler JJ, 2014), and environmental change (Cox, 2000).

All these effects and the choices that society makes to diminish them are the source of real hope. The steps, which helps in reducing these effects, are the incorporate adjusting human populace development (Crist, 2017)  and getting ready for arrangements dependent on various connecting ecological weights (Watson, 2014). All these impacts are critically significant ramifications for worldwide financial and natural frameworks. According to Williaams C.L in 2016, the final products of the biofuels are Biodiesel, Ethanol, Butanol, methane, Hydrocarbons and the organic natural oils. All these products can meet the requirements of fossil fuels. These fuels are nature friendly and they are deduced from the natural sources, which are easily available (Williams C.L., 2016).

The previous assessment shows that a strategic plan ought to be developed for better management of biofuels. According to Smith J. in 2010, it is evident that, Economically, Biofuels cannot compete with fossil fuels. Unfortunately, support from the government is often too costly and illogical (Smith J., 2010). Moreover, Biofuels threaten food security. However, under proper management, they can improve agricultural production, thus improving rural standards of living and increasing food production (Peter J.N., 2003).

Therefore, to overcome the crisis of biofuel’s regulations many governments are taking their responsibility in order to make legislative national policies. The global biofuel areas are unequivocally impacted by the policies made at national and international level. There are three major goals: decreased GHG outflows, potentially diminished energy independence and farmer support. Two address these very issues; researchers gave the cost-based analysis (CBA) to highlight the benefits of biofuels utilization. The Qualitative CBA is valuable when looking for data on the undertaking/strategy instead of contrasting other options.

According to the reports of UNFAO published in 2016, Biofuels (bio-ethanol and bio-diesel) are powers delivered from biomass. As of now, about 64% of ethanol is delivered from maize, 26% from sugarcane, 3% from molasses, 3% from wheat, and the rest of different grains, cassava or sugar beets. About 77% of biodiesel depends on vegetable oils (37% rapeseed oil, 27% soybean oil, and 9% palm oil) or utilized cooking oils (23%). China, India, Indonesia, Pakistan and Thailand from Asia along with other EU and US regions are the major contributors in the production of biodiesel market (Liu.W, 2020). 

         Figure: Development of the world bio-diesel market

Above-mentioned figure clearly depicts the market share associated with the EU, US and Asian countries. Above diagram shows the global biofuel consumption and a prediction of biodiesel consumption until 2029.

COST BENEFIT ANALYSIS (CBA):

CBA is a method for assessing the general advantages and expenses of ventures. For instance, it empowers examinations between current expenses and future ecological advantages. Accordingly, it gives data on how advantageous the considered speculation would be for society over the long haul. A Cost-benefit-analysis additionally assesses non-financial effects, for example natural advantages. This is accomplished by utilizing monetary strategies to transform such effects into financial qualities. Financial qualities are typically founded on the eagerness to pay for a superior climate.

There are many methods to analyze the cost benefit of biofuels but we are discussing the two very interesting types of Cost-benefit-analysis.

Qualitative Cost Benefit Analysis of Biofuels:

            Qualitative Cost benefit analysis is the type of CBA in which a Cost benefit analysis is done through having a look at the intangible things. A Cost-benefit-analysis additionally assesses non-financial effects, for example natural advantages. This is accomplished by utilizing monetary strategies to transform such effects into financial qualities. Financial qualities are typically founded on the eagerness to pay for a superior climate.

            In the case of Biofuels, it is very important to consider the Qualitative Cost-benefit- Analysis. Benefits of the Qualitative CBA of biofuels are,

§  Qualitative CBA helps in understanding the importance of the non-budget factors for biofuels production and utilization like environment, climate, employees and weather.

§   Qualitative CBA helps in the estimation of plant cost. Different regions have different setup cost for biofuels plants. Qualitative CBA helps in determining these costs to get the final cost.

§  Qualitative CBA helps in determining the demand and supply factors.

§  Biofuel prices, procurement, and product knowledge is very important. Qualitative CBA helps to determine all these.

§  Qualitative CBA alludes to the expansion or decrease in air contaminations that incorporate CO2, CO, NOx, SOx and PM; which can be contrasted in amount and diesel and other substitute powers. Biodiesel utilization is required to diminish most air contaminations/emanations by 24 %.

§  Qualitative CBA alludes to the self-food of giving the energy locally or broadly and not relying upon outside sources like imported fuel.

§  Qualitative CBA refers to public awareness of biofuels among the society.

Quantitative Cost Benefit Analysis of Biofuels:

    A Quantitative Cost Benefit Analysis (Quantitative CBA) includes the weighing of the expenses related with a ruling against the advantages emerging from that choice. ... This may incorporate the underlying and resulting venture of assets, just as the expense impacts of devaluation, support costs, and extended value focuses. Quantitative CBA comprises of the positive effects and costs include negative effects. Ventures assessed by CBA, ought to incorporate all the immediate and backhanded, market and non-market, individual and social, substantial and elusive expenses and advantages. Some important considerations and factors that are important to know and they must be taken into account for Quantitative CBA,

§  It valuate all the effects and computes the net advantages (benefits less expenses) of the venture and these anticipated evaluations are utilized for making near examination between the counterfactual circumstance or different undertakings of a similar sort.

§  For successful Quantitative CBA, one must quantifies every cost associative impact in any duration.

§ For successful Quantitative CBA, it is important to calculate the net current sum of every discounted item. These discounted price items makes the calculations vulnerable for biofuel.

Conclusion:

          This particular study of cost-benefit-Analysis of biofuels aims at discussing the literature survey of all the possible impacts associated with the CBA of biofuels. We conclude in our study that, biofuels are very important in order to improve the climate change and economy of the people residing in the remote and rustic areas. We determined that how government legislations and policies are important in order to regulate the policies for biofuels production and utilization.

Quantitative and Qualitative CBA are the techniques that have different but very important impacts that must be taken into the account to measure the overall CBA analysis. We can undermine the qualitative factors in the calculation of overall costs. 

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