Biofuel development in the Lao PDR: Baseline assessment and policy evaluation

Since 2006, the government of the Lao PDR has strongly promoted biofuel development, on the basis of national energy security concerns, and interests for rural development. As a result, many farmers were encouraged to cultivate jatropha as a biofuel feedstock through government campaigns and private sector investment. For most, the return on their investment has been woefully low; a domestic biofuel sector has failed to materialise, largely due to (i) negligible feedstock supply and poor yields, (ii) inadequate market development, and (iii) a lack of investment in biofuel processing capacity. Despite these limitations, the Lao government has set an ambitious target of offsetting 10% of petroleum fuel consumption with biofuel by the year 2020. In order to address the likelihood and requirements of reaching such a goal, this paper presents a baseline assessment of the embryonic biofuel sector in the Lao PDR, and formulates a comparison between national expectations and targets with the current scale of investment by public and private sectors. A simple analysis of market chains for domestic biofuel production and consumption in the Lao PDR is established as a basis to evaluate the merits of biofuel for the Lao PDR, in the context of national development goals.