Battle Brews Over Japan's Push for Ethanol Gasoline
Date: 03-May-07
Country: JAPAN
Author: Risa Maeda
Japan could end up importing thousands of barrels of gasoline to blend with ethanol if the government does not find a distributor in coming months, since domestic oil refiners are promoting a different type of alternative fuel.
The Japanese refiners' reluctance to supply the gasoline needed could create export opportunities for regional exporters such as Taiwan's Formosa and South Korea's S-Oil, and could be another setback in Japan's struggling efforts to cut emissions using voluntary measures.
Japan lacks farm products to produce biofuels but is looking to its unused biomass, including forests which cover 70 percent of the country and that can be harvested in a sustainable way.
The project in Osaka, backed by the environment ministry, uses cellulosic ethanol, which can be produced from biomass feedstocks including branches cut from planted forests and used timbers from demolished houses.
But it faces resistance from the country's powerful oil industry, which is instead promoting gasoline blended with ethyl tertiary butyl ether (ETBE) -- a petrol additive made from biomass ethanol -- a popular renewable fuel in Europe.
The oil sector is anxious to defend its nationwide network through its own alternative fuel -- launching its trial sale at 50 pump stations in Tokyo and surrounding areas last week -- on top of ordinary gasoline, as it wrestles with a shrinking petrol market.
"The two sides are critically in dispute," said a government source, who declined to be named.
"The oil industry does not like the idea of an alternative auto fuel distribution in cities. The fact that anyone can now sell gasoline under the liberalised market irks them," he said.
E3 VERSUS ETBE
Japan, the world's No. 3 gasoline consumer, is the biggest polluter among the countries with Kyoto caps. It aims to cut greenhouse gas emissions by 6 percent from 1990 levels by 2008-2012.
Japan's largest business lobby Keidanren, which opposes mandatory emissions caps, told the government last month that given the country's high energy efficiency it will have to spend 60-90 percent more than other nations in achieving Kyoto targets.
To achieve that goal, the central government decided to replace 500,000 kilolitres (kl) a year, or just 0.8 percent of annual gasoline sales, with biofuels by 2010, and subsidised cellulosic ethanol and other technologies that are affordable for resource-poor Japan.
The oil industry has said it would share 210,000 kl of the total by introducing the ETBE-blended gasoline. The project to be carried out in Osaka prefecture, western Japan, is one of the steps to meet the remaining 290,000 kl.
ETBE is a high-octane fuel, and unlike ethanol, it has low water solubility and low vapour pressure. So it affects the quality of the motor fuel less than ethanol if blended with gasoline.
Given these characteristics, big oil distributors, which are also major refiners in Japan, can mass-produce ETBE-blended gasoline and manage its price and quality under its current retail network.
In contrast, a petrol station must make adjustment to its facilities before selling gasoline directly blended with up to 3 percent of ethanol, or E3, to keep it away from water, the option pushed by the Osaka initiative.
Under Japanese regulations, gas stations are allowed to sell E3, which has practically no users so far, in a country where there is no tax incentive for gasoline mixed with biomass ethanol.
"We have no plan for an E3 test," said a spokesman at industry body the Petroleum Association of Japan. "We sell the ETBE-blended gasoline through our current distribution network," he said, adding it was set to go nationwide in 2010.
OSAKA PROJECT
Helped by a set of market deregulations by 2002, Japan's gasoline sales topped 61 million kl a year in 2005, about 10 times as much as before the Tokyo Olympics in 1964 which spurred motorisation.
But sales fell 1
