San José, Costa Rica, since 1956

Commission Works to Define Country’s Policy on ‘Green’ Energy Use, Production, Incentives

As gas prices skyrocket and Costa Rica stumbles around in the dark to find solutions to its energy crisis, the country’s top energy experts are trying to offer up an alternative solution: biofuels.

A proposal that the National Biofuels Commission expects to finish in coming weeks will unveil some of the Arias administration’s promised “green” energy policy, insiders say.

Dovetailing a U.S.-led hemispheric push toward increased biofuel development, the Arias administration’s proposal is expected to offer incentives for the production and use of renewable, plant-based fuels, namely ethanol and biodiesel, and give parts of Costa Rica’s agricultural industry an opportunity to reinvent themselves while weaning the country off its dependence on petroleum.

Details of the proposal are still scarce, as officials from the Environment and Energy Ministry (MINAE) review it before sending it to the President.

Vice-Minister of Energy Julio Matamoros, who has the latest draft of the proposal, didn’t respond to Tico Times’ requests for comment in recent weeks.

Salvador Quirós, president of the Legislative Assembly’s Agriculture, Fishing and Natural Resources Commission, said the proposal would allow for up to a 10% ethanol mix in gasoline, and a 10% biodiesel mix in diesel fuels sold in Costa Rica, and may include incentives for both producers and consumers of the alternative energies.

Quirós, a National Liberation Party (PLN) lawmaker who has reviewed drafts of the proposal, said Costa Rica’s laws on alcohol and oil production are outmoded and require reforms to foster the national production of biofuels.

Eladio Madriz, manager of Energías Biodegradables S.A., a Central Valley company that produces biodiesel with vegetable oils and waste grease from restaurants (TT, April 27), agrees.

“If we give this to farmers, we can rebuild the country,” he said.

It’s not yet clear how the proposal might affect the National Oil Refinery (RECOPE), which has a monopoly on fuel imports and production including the mixing and sale of ethanol as a fuel additive. President Arias has said he plans to lift RECOPE’s monopoly (TT, June 23, 2006).

William Ulate, RECOPE’s International Trade and Development Manager, said the government should approve tax incentives to make the price of biofuels, which are currently about 50% higher than regular vehicle fuels, more competitive. The government’s policy should also include loans to farmers of fuel crops, said Ulate, who is on the Biofuels Commission.

Sugarcane, yuca or cassava, and African palm oil – raw materials for ethanol and biodiesel production – are most likely to be developed in Costa Rica first, Quirós said.

The development of these fuel crops would boost many of Costa Rica’s 7,000 sugarcane producers, concentrated in the northern region, and palm oil producers, concentrated in the southern and central Pacific region.

With the United States hoping to mitigate its oil addiction as well as diminish oilrich Venezuela’s regional influence, U.S. President George W. Bush and Brazilian President Lula da Silva recently teamed up to encourage ethanol use throughout the Americas. The ethanol buzz increased in Central America after El Salvador announced April 2 it was chosen by the two allied ethanol producers for a pilot program to develop raw materials for biodiesel.

Part of Bush’s push to reduce U.S. oil consumption by 20% in 10 years, the plan has drawn fire from Venezuelan President Hugo Chávez and Cuban head of state Fidel Castro, who called it “genocidal.”

They and other critics of biofuels say the initiatives could exacerbate poverty by increasing prices of land and basic crops in already poor countries; could mean more deforestation to make room for fuel crops; and that biofuels may not even result in less emissions due to contaminating processes involved in extracting some raw materials for production, such as the case with African palm oil (TT, May 4).

Nonetheless, the problem is clear: Gas prices last month crept above ¢549 ($1.05) per liter, with further rate hikes expected. In Costa Rica, 61% of energy consumed in 2005 was petroleum-based fuels used mostly for transportation, according to statistics from the Environment and Energy Ministry (MINAE). Costa Rica imports 100% of its oil and spent nearly as much money – more than $1 billion –importing crude oil as it did exporting bananas, pineapples and coffee combined.

Ethanol Giant

Costa Rica last year began to sell mixes of ethanol in gasoline to the public, though the country has been producing alcohol for 150 years and took its first stab at selling gas mixed with ethanol in 1980.

Though alcohol used for beverages is technically ethanol, for ethanol to be used as a fuel additive it goes through a couple of extra steps (see sidebar).

“I remember being a very young professional in the government of (former President) José “Pepe” Figueres; no one understood the issue of supply and demand of crude oil except Brazil, which began to produce ethanol at the beginning of the 70s,” President Oscar Arias said last month in Alajuela, northwest of San José, celebrating the announcement of plans by palm oil producer Palm Oil Agroindustrial Cooperative’s (COOPEAGROPAL) to build a $3.4 million biodiesel plant.

“The rest of the world and Latin America ignored the dangerous dependency on oil … We crossed our arms and today we are paying for that negligence with prices above $60 a barrel, that hit our economy hard,” Arias said.

Ulate pointed out that though Costa Rica tried selling ethanol nationwide the same time Brazil did, the initiative lost steam as oil prices dropped.

Costa Rica currently has the capacity to produce 189 million liters of ethanol a year, according to the Costa Rican Association of Sugarcane Technicians (ATACORI). Two large Costa Rican sugarcane mills, Taboga and Tempisque Sugar Producers (CATSA), both have distilleries.

However, the country also needs more infrastructure to dehydrate, denature and mix alcohol with gasoline. RECOPE is currently the only organization allowed by law to mix ethanol with gasoline.

Ulate said that in January of next year, RECOPE plans to start building facilities in all its plants to mix ethanol and biodiesel into fuel. By June 2008, the infrastructure should be in place to distribute and sell biofuel throughout the country, he said. The rest, he said, will depend on the administration’s policy.

Edgar Herrera, president of the Agroindustrial Sugarcane League (LAICA), said the association of sugarcane producers has been fighting for rights to produce and sell alcohol domestically, since the government has had a monopoly on sales of nationally produced alcohol for more than 150 years (TT, May 4).

The league has been exporting ethanol for 25 years, and in 2007 exported $4.5 million worth of the fuel. The league imports alcohol from the European Union, Brazil and China, dehydrates it and exports it to the western United States to be mixed with gasoline, Herrera said, adding that Costa Rica has a long way to go in this area.

“We’re left behind and today we ask why. What happened with Costa Rica? Thirty years ago we had the vision that we should start producing ethanol, but we closed down the plants,” Herrera said, referring to a decision made during the administration of President Rodrigo Carazo (1978-1982) to close down CATSA’s distillery after oil prices dropped.

A Greener Policy

Costa Rica is the world’s most cost-effective producer of African palm oil, a raw material used in biodiesel production (TT, Nov. 3, 2006).

In the country’s Southern Zone, the government and international financiers loaned COOPEAGROPAL millions to develop the palm oil industry after the banana exporter United Fruit company pulled out of the region in 1985, shocking the area’s economy (TT, July 8, 2005). Now palm oil and pineapple are the region’s two biggest exports, according to Foreign Trade Ministry statistics.

In March, Spanish company Biodiesel de Andalucia (BIDA) announced plans to build an $11 million biodiesel plant near the Caribbean port of Limón to begin operations in December (TT, March 9). Also, a Cartago plant has begun producing biodiesel to fuel area buses (TT, April 27).

This month, the Inter-American Development Bank (BID) announced it would invest $300 million to help produce ethanol in Central America, including Costa Rica.

Last year, RECOPE launched a $6 million pilot plan to mix ethanol with gasoline and use it in RECOPE vehicles. The program concluded Costa Rican vehicles can handle mixes up to 10%.

However, RECOPE also ran a pilot program last year offering drivers gasoline with up to 7% ethanol at pumps in the northwest province of Guanacaste and in the central Pacific.

The test raised questions about demand, since customers preferred gasoline without the ethanol additive. The government received complaints that ethanol mixes had negative effects on consumers’ cars. Ronald Rodríguez, RECOPE’s aide on biofuels, explained that initially, ethanol has that effect on older vehicles because the alcohol cleans out the pipes. But the effect subsides over time, he said.

Meanwhile, in Brazil, where ethanol makes up 40% of all fuel used in vehicles, “flex-fuel” vehicles that run on any combination of ethanol and gas are sweeping the market, Herrera said.

“We have to develop a campaign to explain to people what the benefits of biofuels are,” Rodríguez said, sitting in his 12th floor office in RECOPE’s downtown San José building with a view of the smogchoked Central Valley.

If Costa Ricans were to use 2% biodiesel mixes in their diesel fuels and 7% ethanol mixes in their gasoline, carbon dioxide emissions would be reduced by 65,000 metric tons a year here, he said.

“This isn’t just about the future of Costa Rica, but the whole planet,” he said.

Ethanol and Biodiesel: What are they?

Both ethanol and biodiesel are renewable energies that can be used as vehicle fuel and are believed to produce fewer carbon monoxide and greenhouse emissions compared to gasoline and diesel use.

Ethanol is basically alcohol produced from sugarrich crops such as sugarcane, corn, yuca (cassava) or other crops.

Once the alcohol has been distilled, it must be dehydrated to remove the remaining water and create anhydrous ethanol. That ethanol is then denatured by adding gasoline to make it unfit for human consumption. Since it is flammable, ethanol can be used as a fuel, and is generally used as a fuel additive mixed with gasoline.

The National Oil Refinery (RECOPE) is the only agency authorized to mix and sell ethanol as a fuel additive in Costa Rica.

Biodiesel is a biodegradable, nontoxic, liquid biofuel produced from natural lipids such as vegetable oils and animal fats. It’s made through a chemical process called transesterification, in which glycerin is separated from the oil or fat, creating biodiesel and a byproduct generally used to make soaps.

Costa Rican company Energías Biodegradables, located on the highway between San José and the eastern Central Valley city of Cartago, sells biodiesel, and can be contacted at or 537-4510.

Sources: National Oil Refinery (RECOPE), U.S. National Biodiesel Board, American Coalition for Ethanol


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