India, don’t fall for ethanol: Roadmap leads National Policy on Biofuels off track

India’s release of its 2025 ethanol roadmap earlier this summer made ripples throughout the environmental community but could create huge waves for the integrity of its national biofuels policy. In advancing the 20% national ethanol blending target (E20) by 5 years, to 2025, the roadmap largely abandons a focus on second-generation biofuels—which typically do not compete with food production—in favor of using maize, rice, sugarcane, and other food crops as feedstocks for ethanol production. Not surprisingly, the roadmap also ignores the potential to reduce ethanol demand through ambitious policies to promote electric vehicles as a complementary low-carbon fuel strategy.

The policy guiding the development of India’s alternative fuels sector is the National Policy on Biofuels (NPB), adopted by India’s Union Cabinet in 2018. It is a model biofuels strategy in part because it prioritizes second-generation feedstocks (which rely on non-food biomass, such as stalks and leaves), as well as molasses and surplus grains, to deliver significant emissions reductions in the transport sector without distorting food markets. The 2025 ethanol roadmap places a renewed focus on food-based feedstocks, a significant departure from the Ethanol Blended Program (EBP) laid out under the NPB.

Despite India’s past difficulty in meeting ethanol blend rates, the 2025 ethanol roadmap forecasts ample supply and corresponding blending targets. These projections are based in part on surplus grain production in recent years, the product of abnormally wet monsoon seasons. It is not clear that those production increases can be sustained, yet the ethanol roadmap doubles down on recent production successes: It estimates that ethanol production from domestic grains will increase a whopping four-fold by 2025, and that ethanol produced from sugarcane will increase more than 2.5 times.

The projections are beyond optimistic: the USDA Foreign Agricultural Service reports coarse grains production during last year’s record harvest season was only 7 percent greater than forecast—a rate of increase far short of the growth needed to meet the 2025 goal. Coarse grains including corn, barley, millet, and sorghum are likely to make up the largest share of India’s grain-based ethanol production in the near-term. The chart below gives a visual sense of the steep increase in coarse grains output needed over the next four years to meet the roadmap’s projected 2025 demand for grain-based ethanol.

Figure 1. Annual coarse grains production (MMT) in India (source: USDA FAS)

In principle, other strategies could be used to produce more feedstock material for ethanol, but each has one or more serious downsides. For example, India could turn to surplus rice from the Food Corporation of India (FCI) as feedstock. However, ramping up rice ethanol production to the levels needed to reach 2025 targets is highly unlikely during the remaining four-year timeframe. This year, the government allocated 78,000 tonnes of FCI rice for ethanol production, equivalent to roughly 0.4% of 2025 ethanol demand. An insufficient supply of rice ethanol is confirmed by the Food Secretary of India, who has called the current share of volumes “miniscule and transitory.” He noted further that corn is likely to remain the primary grain-based ethanol feedstock due to its higher fuel yields, low costs, and by-products that double as inputs to livestock feed.

Meeting sugar-based ethanol production targets will also be difficult, as India has insufficient ethanol distillation capacity to accommodate surplus sugar. Growing sugarcane for ethanol is also highly water-intensive. In the sugar-producing hub of Uttar Pradesh, sugar mills account for close to a third of wastewater discharge in the region. Although the mill effluent is mostly non-toxic, it can build up organic matter content in waterways, leading to oxygen depletion and drinking water health concerns. Increased water demand to cultivate crops for the fuels sector could also exacerbate India’s water scarcity and food security concerns.

Farmers could also turn to measures like increased irrigation and fertilizer application to increase crop yields, although agricultural intensification would be virtually impossible on the scale required to meet 2025 targets. More realistically, quadrupling India’s grain ethanol demand means increasing imports—by nearly 200 times compared to today, using FAOSTAT trade data. This would shift India from a country self-sufficient in grains to one reliant on imports and would represent a transfer of capital to other countries that are able to expand agricultural production. We estimate this transfer would be in the ballpark of 1.4 trillion INR based on import price data from FAOSTAT. While trade deficits are not inherently bad, deficits may result in reduced domestic work opportunities, depressed wages, and currency fluctuation.

Beyond being costly, India’s new ethanol roadmap would inflict irreparable harm on climate and the environment globally. Although agricultural expansion is unlikely to occur within India, increased demand for ethanol feedstocks would drive land-use change in countries exporting their crops to India. The expansion of agriculture onto forests, grasslands, and other natural lands leads to the destruction of trees and other biomass, with stored carbon released and ending up in the atmosphere as CO2. Ploughing up soils to plant crops puts even more carbon into the air. And the practice of growing crops itself causes more greenhouse gas (GHG) emissions from the use of fertilizer and farm equipment that often runs on diesel. Overall, it’s not clear that using food- and feed-based biofuels reduces GHG emissions at all compared to fossil fuels.

As outlined above, a policy that harms the climate and the environment and fails to help domestic farmers doesn’t sound like a good strategy for India. There are better ones. As we explain in our recent study, expanding support for cellulosic ethanol from agricultural residues will deliver strong GHG benefits, support India’s farmers with additional revenue, and cut air pollution from straw burning. While India is potentially a global leader in cellulosic ethanol production, ICCT’s newly released techno-economic analysis finds that the industry may need additional financial support beyond the Viability Gap Funding that has been committed by the government.

Alternatively, the challenge to produce adequate supplies of biofuels in India could be reduced by converting an increasing share of the country’s vehicle fleet to battery electric vehicles (BEVs). India is well positioned in this regard. Our research demonstrates that many EV two-wheelers in India have a lower total cost of ownership (TCO) than their internal combustion engine (ICE) counterparts. Larger electric vehicles and those with greater range could reach TCO parity as well within 10 years, with the proper policy support. In fact, the Indian government has recognized this growth potential and announced its own EV target of 30% private vehicle sales by 2030. Setting ambitious fuel efficiency standards and zero emission vehicle production requirements are key to India’s oil security and decarbonization objectives.

While the goals of the 2025 ethanol roadmap to “strengthen [India’s] energy security, enable local enterprises and farmers to participate in the energy economy and reduce vehicular emissions” are laudable, its execution is likely to fall short. Strengthening India’s energy security cannot come at the expense of its food security, just as enabling participation in the energy economy cannot come at the expense of the environment. India would be wise to revive the environmental safeguards of its 2018 regulation by focusing investment on second-generation ethanol pathways and prioritizing the transition to EVs across its passenger vehicle sector.

Alternative fuels