Thailand biofuel subsidy ends in 2027, costs to rise for farmers
Thailand’s Energy Ministry is set to introduce measures to mitigate the effects of the impending cessation of biofuel price subsidies in 2027. With the expiration of these subsidies, the cost of biofuels is anticipated to rise, impacting palm and sugar cane growers who supply raw materials for biofuel production.
Farmers sell their crops to factories that produce two types of biofuels: ethanol, derived from sugar cane molasses, and methyl ester, derived from palm oil. These biofuels are blended with traditional fuels; ethanol is mixed with gasoline to create gasohol, while methyl ester is combined with diesel to produce biodiesel.
Currently, the prices of ethanol and methyl ester exceed those of refined oil, prompting the government to use the state Oil Fuel Fund to subsidise biofuels, thereby encouraging their use.
“Once the subsidy programme expires, the biofuel-blended oils will become more expensive,” stated Energy Minister Pirapan Salirathavibhaga.
Pirapan expressed concerns about the economic consequences for farmers if no action is taken. As such, he emphasised the need for government intervention to support them.
Pirapan proposed collaboration between the Energy and Industry ministries to draft new legislation focused on palm and palm oil. The aim is to assist palm growers in adapting to the anticipated rise in methyl ester prices.
Details on how the proposed law would support palm growers remain sparse. However, Pirapan suggested it should offer benefits similar to those provided by the Sugar Cane and Sugar Act, which facilitates cooperation between cane farmers and sugar millers with the government to manage plantations and market sugar both domestically and internationally.
“We expect to set up a joint panel comprising officials from the two ministries within two weeks to work together.”
As of this month, energy officials reported ethanol and methyl ester prices at 32.32 and 35.35 baht per litre, respectively. In contrast, ex-refinery prices for gasoline and diesel stand at 20 to 21 baht per litre.
The government has been subsidising biofuel prices partly to reduce the financial burden of oil imports.
“The move was later viewed as helping farmers, though this is just a by-product of the policy, not a primary aim.”
The Energy Ministry’s initiative reflects a broader strategy to balance economic and environmental objectives while addressing the financial challenges faced by key agricultural sectors in the wake of changing energy policies, reported Bangkok Post.
What Other Media Are Saying
- World Resources Institute highlights the biofuel industry’s expansion in the Midwest, revealing significant environmental harm, public health risks, and economic inequities, urging policymakers to reconsider its sustainability and impacts. (read more)
Frequently Asked Questions
Here are some common questions asked about this news.
Why is the Thai government planning to end biofuel subsidies by 2027?
The expiration aims to align with fiscal sustainability, reducing dependency on subsidies while addressing economic and environmental objectives.
How might the cessation of subsidies affect palm and sugar cane farmers in Thailand?
Without subsidies, biofuel prices will rise, potentially reducing demand and impacting farmers’ income from raw material supply.
What if new legislation similar to the Sugar Cane and Sugar Act is implemented for palm growers?
Such legislation could provide structured support and market stability, potentially mitigating economic impacts on palm growers.
How could the collaboration between Thailand’s Energy and Industry ministries influence biofuel markets?
Joint efforts may lead to innovative policies that stabilise biofuel markets, balancing farmer welfare with energy goals.
What might be the broader economic implications of stopping biofuel subsidies in Thailand?
Ending subsidies could lead to higher consumer fuel prices, impacting both domestic markets and the agricultural sector’s competitiveness.
