Are Biofuels Economically Competitive with Their Petroleum Counterparts? Production Cost Analysis for Zambia

With increased global interest in biofuels, Zambia, a Sub-
Saharan African country that entirely depends on imports
for its petroleum supply, is planning to implement
blending mandates for biofuels. But, a large number
of issues—including production costs of biofuels, land
requirements to meet the mandates, and environmental
benefits—have not yet been explored. This study aims to
contribute in filling this gap. It finds that depending on
feedstock type, costs of ethanol production range from
US$0.360 a liter to US$0.680 a liter while the costs
for biodiesel production range from US$0.612 a liter
to US$0.952 a liter. Even if lower energy contents of
biofuels are taken into account, the analysis shows that
biofuels are cheaper than their petroleum counterparts.
Considering the cost advantage of these biofuels over
petroleum products and the availability of surplus
agricultural land, Zambia is likely to benefit from the
development of a biofuel industry. Biofuels is expected to
reduce Zambia’s petroleum import bill, which currently
stands at more than US$700 million, enhance food
security by providing incentives to increase yields, and
increase affordability and accessibility to modern energy
in the country where 77 percent of the population still
lacks access to modern energy. It could also stimulate
rural employment and development.