1. 2 ème Université d’été franco-allemande et européenne en droit de l’énergie et de l’environnement "Political, legal and practical Aspects of Biofuels in Mozambique" Eduardo Chiziane (Msc) eduardo.chiziane@uem.mz eduardo.chiziane@univ-poitiers.fr 12 – 14 september 2012, PARIS eduardo.chiziane@uem.mz eduardo.chiziane@univ-poitiers.fr 1

2. 2 Mozambique Mozambique 2.

3. POLITICAL AND REGULATORY ASPECTS ON BIOFUELS 1. Main Legislation on Biofuels 2. Background of the introduction of PSB in Mozambique 3. Objectives of the PEB 4.Political and Strategic Framework for Biofuels 5.Biofuels potential assessment in mozambique 6.Principles and criteria for biofuels sustainability for mozambique 7.Strategy for implementation of PSB 8. Coordination, supervision, monitoring and evaluation of PSB 9. Progress report regarding the creation of legal and institutional framework on Biofuels 10. Approval of investment projects on Biofuels domain 11. Biodiesel deriving from Jatropha - key questions for the production of Jatropha 12. Final Remarks 1. Main Legislation on Biofuels 2. Background of the introduction of PSB in Mozambique 3. Objectives of the PEB 4.Political and Strategic Framework for Biofuels 5.Biofuels potential assessment in mozambique 6.Principles and criteria for biofuels sustainability for mozambique 7.Strategy for implementation of PSB 8. Coordination, supervision, monitoring and evaluation of PSB 9. Progress report regarding the creation of legal and institutional framework on Biofuels 10. Approval of investment projects on Biofuels domain 11. Biodiesel deriving from Jatropha - key questions for the production of Jatropha 12. Final Remarks 3

4. 1. MAIN LEGISLATION ON BIOFUELS 1. Constitution of the Republic - 2004 2. Policy and Strategy for Biofuels - 2009 3. Policy Development and Renewable Energy News - 2009 4. Regulation of Biofuels and Mixtures - 2011 5. Regulation of the production, processing, distribution, defining percentages of mixtures and marketing of liquid biofuels - 2011 1. Constitution of the Republic - 2004 2. Policy and Strategy for Biofuels - 2009 3. Policy Development and Renewable Energy News - 2009 4. Regulation of Biofuels and Mixtures - 2011 5. Regulation of the production, processing, distribution, defining percentages of mixtures and marketing of liquid biofuels - 2011 4

5. 2. Background of Policy and Strategy for Biofuels The promotion and use of agro-energy resources for energy security and sustainable socio-economic development; The need to cope with instability, unpredictability and volatility of fuel prices in the international market, as well as reduce the country's dependence on imported fossil fuels; The Government undertook an assessment of the potential of the country in terms of land, waters, climate, and its geo-strategic location in the SADC region for biofuel production, in response to the National Agency for the Fight Against Poverty; The PEB focuses on the promotion of ethanol and biodiesel produced from agricultural raw materials appropriate to varied agro-climatic environments of the country for the production of liquid biofuels to be used mainly in transport, as well as for other energy purposes. 2. Background of Policy and Strategy for Biofuels The promotion and use of agro-energy resources for energy security and sustainable socio-economic development; The need to cope with instability, unpredictability and volatility of fuel prices in the international market, as well as reduce the country's dependence on imported fossil fuels; The Government undertook an assessment of the potential of the country in terms of land, waters, climate, and its geo-strategic location in the SADC region for biofuel production, in response to the National Agency for the Fight Against Poverty; The PEB focuses on the promotion of ethanol and biodiesel produced from agricultural raw materials appropriate to varied agro-climatic environments of the country for the production of liquid biofuels to be used mainly in transport, as well as for other energy purposes. 5

6. CONT... 5) The main challenges faced by this industry consist of: i. In the allocation and proper use of land without conflict with communities. ii. Balance between biofuel production and food; iii. The rational use of water and iv. The management of environmental impacts inherent in the production of Biofuels 6

7. 3. Objectives The PEB also aims to respond to the priorities of the Government in combating poverty and promoting energy security, having as main objectives: 1) Stimulates the production of sustainable biofuels 2) To reduce the country's dependence on imported fossil fuels; 3) Diversify the energy matrix; 4) To promote rural development through investments in biofuels and support to producers; 5) Encourage rural incomes through the expansion of cultivated areas, as well as increased productivity; 6) Increase exports, contributing to improving the balance of payments; 7

8. Cont. : 7) Participate in international cooperation through the exploration of available markets, particularly in the SADC region; 8) Encourage the involvement of educational and research institutions, as well as the national scientific community in research and technology development work; 9) Promote food security and nutrition; 10) Encourage and promote the development of technologies for local community initiatives; 11) Reduce costs of biofuels to the final consumer, without creating other financial impacts as a subsidy; 12) Protect the economy and consumers against the instability and unpredictability of fuel prices and against the energy insecurity. 8

9. 4. Political and Strategic Framework for Biofuels Vision of EGP: Contribute to energy security and sustainable socio-economic development Mission: "Exploration of agro-energy resources in order to stimulate the diversification of the energy matrix, contributing to the welfare of the population and socio- economic development, particularly in rural areas.“ 9

10. 4. Political and Strategic Pillars 4.1. Political Pillars 1) Establishment of a short-term domestic market for biofuels; 2) Strengthening inter-institutional coordination within the country, to ensure a comprehensive and integrated development; 3) Promoting cooperation and trade opportunities for biofuels in regional and international markets; 4) Promotion of cultivation of raw materials for biofuels production under the agricultural zoning, avoiding the use of the basic food crops; 5) Adoption and implementation of legislation that determines the percentage of biofuel blend, to be incorporated in petrol and diesel; 6) Promotion of local development and job creation in rural areas through the installation of factories to obtain the final product; 7) Participation in the promotion of import, assembly and distribution of vehicles equipped with flex-fuel engines for the simultaneous use of fossil fuels and biofuels; 8) Strengthening institutional and technical capacity of the agencies involved in the National Programme for Development of the Biofuels (NPDB); 9) Intensification of efforts to the use of opportunities of the initiatives under the Clean Development Mechanism (CDM) 10

11. 4.2. Strategic Pillars The Strategic pillars reflect the fundamental principles that underpin the strategy, with emphasis on factors such as: demand, supply, pricing mechanism, management of negative impacts, institutional framework training for share capital. 1. Supply - The purchase mechanism for the domestic market is a main instrument since the national market will remain under the control of the government of Mozambique. The second, which is the international market. 2. Demand - The value chain of biofuel production includes: i) agricultural production, land-based, in suitable climatic conditions and water resources, as well as the hand labour and agricultural inputs, ii) the processing capacity in the form of installation of equipment for harvesting, processing and refining of biofuels iii) logistics capability, which requires equipment for transporting biofuels, and the necessary infrastructure, such as roads, railways, ports and other; 3. Mechanism of Price Fixing - The way in which the prices of international markets will impact on prices in the domestic market for biofuels will depend on the mechanism to be used; 11

12. CONT. - Strategic Pillars 4. Management of Negative Impacts - the establishment of a regulatory framework under the supervision of a regulatory body that ensures management of harmful externalities of the three stages of the process for the development of biofuels; 5. Institutional Framework - creating the NPDB intended to provide financial support to activities and projects in the sector. The creation of NCB, responsible for overseeing the implementation of the Strategy. The NPDB and the NCB have not yet been created; 6. Formation of Share Capital - The growth of the biofuel industry will depend on the training of Mozambicans to ensure the production chain of the same ones. 12

13. 4.3. Components 1. National Market for Biofuels: Regulations for Renewable Fuels (RRF) will be established with a Biofuels Purchase Programme (BPP), under Acquisition Fuels, with the purchase of ethanol and biodiesel for blending, thereby creating a stable domestic demand of biofuels and encouraging investment in the sector; 2. Phased Approach: The EGP must involve several stages in order to preserve flexibility and allow adjustments to the schedule which provides for increases in the percentages for mixtures according to the prevailing conditions in order to create an adequate base of potential customers before proceeding with implementation of the Strategic expansion phase; 3. Agreements of Pricing Based on the Levels of the Market: The pricing of biofuels for use in the domestic market will reflect the opportunity costs (international market prices) found by producers, thus avoiding distortions that limit the domestic market; 13

14. Cont.: Components 4. Regional Cooperation About Biofuels: Mozambique is a transit point for fuels consumed in neighbouring countries with which it has trade agreements in force, the Government should coordinate its Biofuels policy with SADC countries; 5. Export of biofuels: Mozambique must become exporter of biodiesel and not from the raw vegetable oils, so that local producers can achieve economies of scale and give local producers the opportunity to add value to their products; 6. Boundaries for Approval of Land: The government will designate agro-ecological regions for the production of biofuels based on agricultural zoning. These are the only areas where the commercial cultivation for biofuels will be allowed. Task which lies ahead; 7. Selection: Sustainability criteria will be used to evaluate the project proposals and allow the selection of those which have incorporated provisions of best practices to avoid unacceptable risks in terms of food security, loss or degradation of habitat, biodiversity and other environmental damages. 14

15. 5. BIOFUELS POTENTIAL ASSESSMENT IN MOZAMBIQUE A Baseline Study made na assessment of cultures to be used in biofuels production in Mozambique, where preliminarly 9 were sellected fo a further assessment namely: i) for ethanol production: a) sugar cane; b) sweet sorghum; c) manioc d) corn; ii) for buiofuel production: a) jatropha curcas; b) coco; c)sunflower; d) soya; e)peanut. Reducing Emission of Greenhouse Gases and Potential Clean Development Mechanism (MDL): Beside socio economic benefits, biofuels also can generate great environmental benefit, as is the case of reduction of fossil fuel consumption. Financial and Macroeconomic Impacts regulation for a compulsory mixture of biofuels with fossil fuel in the country to levels around E10 (10% of ethanol with 90% of gasolinena) and B5 (5% biodiesel with 95% of fossil diesel), could obtain the following results: Decrease of fuel imports based on petroil between 390 and 520 millions Meticais, na equivalent to about 15 and 20 millions US$ peryear (based on petroil prices of 2006). Then creation of about 150 000 job opportunities, including self employment, two third of which will be ito cultivate raw materials for biodiesel eand remaining ones for ethanol production, etc. 15

16. 6. PRINCIPLES AND CRITERIA FOR BIOFUELS SUSTAINABILITY FOR MOZAMBIQUE The EGP reflects adherence to six guiding principles formulated to know: Inclusion - Creating opportunities for both private investors and for the communities and also for large and small producers; Transparency - Establishment of fuel prices is done as transparently as possible and the overall management of GNP allows the participation of all stakeholders; Environmental and Social Protection - The implementation of the Strategy should be based on models that emphasize the environmental and social benefits of production and use of biofuels and, at the same time, prevent or mitigate any negative impact; Gradualism - Prioritise an approach of incremental and flexible character to the adoption of biofuels, allowing all parties to develop their institutional capacity with the progress of the process; Fiscal Sustainability - Establish tax incentives for the production and use of biofuels should be as limited as possible and its duration, as short as possible, because in the long term, the sector is expected to generate positive contributions in fiscal and macro-economic terms and must be economically sustainable to long term; Innovation-The platform of this policy is based on the promotion of research in innovative initiatives that promote the establishment of small and medium enterprises (SMEs) attracting investments in appropriate technologies for the production and consumption of biofuels in the country. The EGP reflects adherence to six guiding principles formulated to know: Inclusion - Creating opportunities for both private investors and for the communities and also for large and small producers; Transparency - Establishment of fuel prices is done as transparently as possible and the overall management of GNP allows the participation of all stakeholders; Environmental and Social Protection - The implementation of the Strategy should be based on models that emphasize the environmental and social benefits of production and use of biofuels and, at the same time, prevent or mitigate any negative impact; Gradualism - Prioritise an approach of incremental and flexible character to the adoption of biofuels, allowing all parties to develop their institutional capacity with the progress of the process; Fiscal Sustainability - Establish tax incentives for the production and use of biofuels should be as limited as possible and its duration, as short as possible, because in the long term, the sector is expected to generate positive contributions in fiscal and macro-economic terms and must be economically sustainable to long term; Innovation-The platform of this policy is based on the promotion of research in innovative initiatives that promote the establishment of small and medium enterprises (SMEs) attracting investments in appropriate technologies for the production and consumption of biofuels in the country. 16

17. 7. IMPLEMENTATION OF PSB Implementation Instruments 1.Setting up specific legislation com internal regulations and internationa agreements that jointly will be a regulatory framework for biofuels in Mozambique with emphasis to: a) Legislação de energias renováveis: Legislação que regule as percentagens de mistura de etanol e de biodiesel para os transportes em Moçambique; b) Legislação sobre biocombustiveis, indicando claramente: Período de implementação gradual de mistura compulsiva dos biocombustiveis, Quadro regulador para o Programa de Compra de biocombustiveis (PCB), criação do PNDB, constituição da Comissão Nacional dos Biocombustíveis; Directrizes sobre as autorizações dos DUATs para projectos de biocombustiveis, etc; 2. Definição de Normas Nacionais nas Áreas de: Qualidade dos biocombustiveis e Certificação da produção dos biocombustiveis. 17

18. 7.1. Stakeholders Role in Biofuels Strategy During implementation stage, interesting parties, namely the Government, Civil Society, Small Scale Products, private and public teaching institutions, as well as international partners of cooperation will play complementary roles, as is described below: the Government: a) Ensure adequate and coordenate policy formulation; b) Promote industrial development of biofuels in Mozambiqueve; 18

19. 7.2. Action Plan Action plan presented identify key necessary actions for development of biofuels in Mozambique, worth mentioning: a) Demand of biofuels: i. Established adequate mechanisms to ensure national biofuels development; ii. Prepare legislation changing modalities to charge TSC; iii. Prepare legislation on cogenerating electricity; iv.. Prepare sustianable criteria of biofuels; v. Contribute for establishment of a regional agreement between SADC countries. b). Supply of biofuels: i. Establish programs of technical cooperation with partners; ii. Adopt mechanisms that ensure availability of biofuels in accordance with what is envisage in the gradual introduction plan. 19

20. Cont.: Action Plan c) Pricing Mechanisms: i. Develop an operational manual for bidding the Acquisition Program of Biofuels (PCB); ii. Develop a method for pricing of reference for PCB. d) Management of Environment /Social: Develop sustinable criteria. e) Institutional Frameworkl: i. Establish National Commission on Biofuels; ii. Establish a National Program to Develop Biofuels (PNDB); / iii. Establish a Biofuel Acquisition Program (PCB); / iv. Prepare criterias for clearance for entities rendering services for certification. 20

21. 7.3. Priorities of National Program for Biofuels Development (PNDB) Program to introduce flexfuel vehicles; Program to introduce gelfuel stoves; Projects for production of biofuels in small scale; Fund for training and educational programs; Fund for projects to improve local infraestructures; Laboratories for quality and certification of biofuels; Research and development of new plants and cultivation system and technologies, including research on indigenous varieties to amplify the supply of raw materials 21

22. 7.4. Chronogram and Target Pilot Phase – During which PCB will start to buy biofuels from national producers, covering the period 2009 - 2015; -Operational Phase – This phase envisage the consolidation of biofuels sector, as from 2015 aiming to attain higher mixture levels; - Expantion Stage – From 2011 upwards, that will cover activities related with the separate and parallel distribution assignments of networks for fuels with higher percentage of ethanol (E75 e E100) and pure biofuels (B100), respectively. 22

23. 8. Coordination, Supervision, Monitoring and Evaluation of PSB Functions of CNB The main role of CNB is to coordenate and supervise the implementation of various elements of Stratefgic Policy, in particular aspects to be undertaken in coordination with other agencies. Coordination and implementation functions will be done as follows: Coordination of Strategy’ Implementation – CNB is a forum where representatives of various institutions involved in the Strategy implementation report about their progress, requesting support and/or involviment of other institutions to ensure a smooth implementation of the program./ Planning – CNB will provide support in planning and development of Strategy by the Government, including a Budget process./ Collection and Analysis of Information – CNB will collect informations and provide its management remittance to Dissemination Center and exchange of informations, as well as inclusion of periodic reports/ Central Hub for Dissemination and Exchange of Information – CNB will gather information of various agencies in order to provide detailed data of the sector and implementation of policies and Strategy of Biofuels, as well as provide periodic reports on the implementation of Strategy; / Contact Entities for Technical Cooperation – CNB is the contact entity for international cooperation on biofuels will act as implementation unit of programs to be established; / Contact Entity for Internal Communications 23

24. 9. Present Stage in regard to the establishment of legal and institutional framework of Biofuels 1- Establishment of National Commission on Biofuels: A proposal was prepared as well as regulations and statutes and submitted to the Council of Ministers (Government) and wait for its approval. 2- Regulations on Biofuels: There are two proposals of Regulations prepared by the Ministry of Energy and submitted to the Council of Ministers for the moment being wait for its appretiation and further approval: Decree Proposals to be submitted to the Council of Ministers- « Regulation of Biofuels and its Mixtures », Maputo, October 2010 ; and the Proposal of Decree to the Council of Ministers - « Regulation related to production, processing and marketing of biofuels », 2010; 3.First version its ready concerning Framework of Production and sustainable use of biofuels: work for sustainability of biofuels that covers Principles and Criteria for Sustainbility of Biofuels (stage 1), terms of reference have been already prepared to prepare indicators and verification means (second stage). 24

25. Cont: 8.1. … 4.Quality Specification of Biofuels: there is a draft of a Ministry Diploma that establishes physical chemical specifications that biofuels produced in Mozambique must observe. This document is being prepared by DNER in collaboration with INNOQ. 5.National Program for the development of Biofuels: The first meeting was held involving institutions such as CEPAGRI, CPI, DNAIA and DNC to evaluate the TORs in order to prepare PNDB; 6. Indication of agricultural ecological regions for productions of biofuels: Nothing so far has been prepared in regard to mapping the zones for biofuels production 25

26. Cont.: Leassons: 1. The debate around the introduction of biofuels must be more incluse and participatory; 2.Base Law on Biofuels must be approved by the Parliament. This option is much in aline with the present Constitution of the Republicin force published in 2004, art. 179; 3.The option to use RAI instead of RAE to approve the legal framework on Biofuels, does not allow the participation of Parliament and block the possibility to braoder the democratic debate; 4.Normative process still under way, we still have a legal vacuum. There is a need to make Lobby with the Council of Ministers so that in the course of this year documents can be approved. The lack of approval of legal framework its an opportunity for us to see carefully and in critical manner our legal framework comparing it with other laws, e.g. That from Brazil under the perspeective of comparative law on Biofuels.. 26

27. 10. APPROVAL OF INVESTMENT PROJECTS Main conditions to develop an investment project on Biofuels: 1. Preparation of project feasibility studies 2. Economic, technical and financial Feasibility Study 3. Environmental Impact Assessment (Law No. 20/1997, and Regulation on EIA)Alpha 4. Getting Clearance for the Right of Use and Access to Land (according to the legislation on land) 5. Clearance for production, processing, distribution, defining percentages of mixtures and marketing of liquid biofuels a) License production b) Licenses for processing, distribution and sell. Main conditions to develop an investment project on Biofuels: 1. Preparation of project feasibility studies 2. Economic, technical and financial Feasibility Study 3. Environmental Impact Assessment (Law No. 20/1997, and Regulation on EIA)Alpha 4. Getting Clearance for the Right of Use and Access to Land (according to the legislation on land) 5. Clearance for production, processing, distribution, defining percentages of mixtures and marketing of liquid biofuels a) License production b) Licenses for processing, distribution and sell. 27

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29. 11. BIODIESEL DERIVING FROM JATROPHA - KEY QUESTIONS FOR THE PRODUCTION OF JATROPHA A lot of discussion and questioning has been made by Mozambican Civil Society in regard to the cultivating of jatropha or not. The predominant issues are: Ensure that really it is cultivated on marginal land by smallholders, rather than displacing food crops from productive land. How will be the level of competitiveness, since it is directly correlated with productivity along the supply chain? Thus we will be able to better position ourselves in the national and international markets? Limit the number of large-scale plantations of Jatropha (in some cases may be required to provide the balance raw material for oil presses and to achieve critical mass in the early stages of the industry). Isn’t it that the goal is to produce the maximum possible to meet the needs of the markets? Give evidence that it is possible to change from pilot to full production (and there seems to be very few examples in the world). Actually there are few examples worth however to see how those few available are well managed so that prices at the end of the day are the more realistic one. Ensure a fair access to market for small farmers so that are not denied a reasonable price. The main function of a company is to create value, thereby generating profit for its owners and shareholders as well as welfare for the society by optimizing profits The definition of appropriate norms for marketing and local oil production, that are tailored for likely use (sophisticated diesel vehicle need much fuel of quality than simple static mechanisms for irrigation or grinding). A lot of discussion and questioning has been made by Mozambican Civil Society in regard to the cultivating of jatropha or not. The predominant issues are: Ensure that really it is cultivated on marginal land by smallholders, rather than displacing food crops from productive land. How will be the level of competitiveness, since it is directly correlated with productivity along the supply chain? Thus we will be able to better position ourselves in the national and international markets? Limit the number of large-scale plantations of Jatropha (in some cases may be required to provide the balance raw material for oil presses and to achieve critical mass in the early stages of the industry). Isn’t it that the goal is to produce the maximum possible to meet the needs of the markets? Give evidence that it is possible to change from pilot to full production (and there seems to be very few examples in the world). Actually there are few examples worth however to see how those few available are well managed so that prices at the end of the day are the more realistic one. Ensure a fair access to market for small farmers so that are not denied a reasonable price. The main function of a company is to create value, thereby generating profit for its owners and shareholders as well as welfare for the society by optimizing profits The definition of appropriate norms for marketing and local oil production, that are tailored for likely use (sophisticated diesel vehicle need much fuel of quality than simple static mechanisms for irrigation or grinding). 29

30. 11.1. Criteria on Sustainability The Ministry of Energy and Civil Society (Forum dos Biocombustiveis) are leading this process of preparing the sustainability criteria. Social, environment and economic indicators of sustainability could increasing the income derived from the cultivation of biofuel crops. The Ministry of Energy and Civil Society (Forum dos Biocombustiveis) are leading this process of preparing the sustainability criteria. Social, environment and economic indicators of sustainability could increasing the income derived from the cultivation of biofuel crops. 30

31. 12. FINAL REMARKS – PART I The Biofuels Sector has the following political vision,“Contribute for energy security and sustainable socioeconomic development”. 1. PEB function around promotion of ethanol e and biofuels produced from adequate agricultural raw materials to agricultural diversified climate conditions of the country; 2. Overcome main challanges: 1) clearence of correct use of land without conflict with communities, 2) the balance between production of biofuels and food production, 3) rational use of water and 4) management of environment impacts; 3. Establishment of regulation in biofuels sector must respect and implement guiding principles of PEB: inclusion, transparency, and social and environment protection, gradualism and fiscal and innovation sustainability; 31

32. Cont.: Part I – Final Remarks 4.The Government must promote urgently the establishment of PNDB; 5.The Government must establish the National Commission on Biofuels (CNB), tasked to supervise the implementation of Strategy – indicating the type of powers and the organ ( specific Ministry) ; 6.Need to establish Renewable Fuels Norms (NCR) jointly with the Acquisition Program of Biofuels (PCB); 7.Need to enhance the production of norms for sustainable production of Biofuels by INNOQ; 8.Indication of agricultural, ecological regions for production of biofuels; 9.Need to approve essential legal instruments e.g. Laws and basic regulations for implementation of Policy and Strategy of Biofuels; / THANK YOU VERY MUCH. 32

33. THANK YOU VERY MUCH. VIEL DANK MERCI MUITO OBRIGADO KANIMAMBO 33