The recent Middle East–driven energy crisis has prompted a range of policy responses in the Philippines aimed at mitigating rising fuel prices and ensuring supply stability. Among these are proposals to suspend bioethanol blending requirements and allow the temporary use of lower-quality fuels. While these measures seek to provide short-term relief, they risk undermining the long-term objectives of the Biofuels Act of 2006, which aims to enhance energy security, support domestic agriculture, and promote cleaner fuel use.
This study finds that the current policy framework governing bioethanol is marked by inconsistencies that constrain the sector’s potential to contribute meaningfully to energy security and price stability. Despite mandates to increase bioethanol blending, domestic production remains limited due to feedstock constraints, high production costs, and regulatory barriers. As a result, the country relies heavily on imported ethanol, which is often significantly cheaper than locally produced supply.
The analysis suggests that increasing ethanol blend levels (e.g., from E10 to E15 or E20), combined with a more flexible import policy, has the potential to reduce gasoline pump prices. Conversely, restrictive import policies, combined with protectionist measures in the domestic sugar industry, contribute to higher production costs and limit supply responsiveness. The study also finds that the fiscal impact of removing the existing 1% duty on ethanol imports would be minimal relative to the potential benefits in terms of lower fuel prices and improved market efficiency.
In light of these findings, the paper recommends a more coherent and market-aligned policy approach. This includes gradually increasing ethanol blend mandates, relaxing import restrictions to address supply gaps, and rationalizing existing policies that inadvertently constrain domestic production. Strengthening the alignment between energy, agricultural, and trade policies will be critical to unlocking the full potential of the bioethanol sector as a tool for enhancing energy security and mitigating the impact of future energy shocks.