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Understanding the failures in developing domestic ethanol markets: Unpacking the ethanol paradox in Guatemala

L. Cutz, J. Tomei and L.A.H. Nogueira

Energy Policy, 2020, vol. 145, issue C

Abstract: Fostered by environmental and economic drivers, liquid biofuels are expanding in the global energy matrix. However, many countries with biofuel potential, such as Guatemala, have yet to develop domestic biofuels markets. During the last decade, ethanol production in Guatemala has increased significantly, yet a domestic market does not appear to be in the horizon. It is a kind of paradox: a world class sugarcane producer and ethanol exporter does not use any blend of ethanol and gasoline in vehicles. This paper presents a techno-economic analysis and review of barriers that have delayed ethanol-gasoline blends in Guatemala. The cost assessment considers data from an existing distillery in Guatemala. Results show that Guatemala could produce annually a maximum of 250 million liters of ethanol from molasses, more than the amount required to introduce E10. For the current conditions, results from the modelling indicate that the cost of ethanol has minimal impact on the price of E10, but taxes could represent one third of the cost of E10 at the retail level. Since supply conditions are favourable and technical barriers are not relevant, strong government intervention and a coherent price structure for ethanol-gasoline blends is needed to create an ethanol market in Guatemala.

Keywords: Ethanol; Biofuel policies; Institutional analysis; Sugarcane (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:eee:enepol:v:145:y:2020:i:c:s0301421520304912

DOI: 10.1016/j.enpol.2020.111769

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