Ethanol Fuel Blending Program in India: Analysis of Environmental, Economic, and Policy Aspects Using System Dynamics Approach

Abstract

India initiated its ethanol fuel blending program (EBP) two decades ago to enhance energy security, reduce crude imports, and promote low‐carbon transportation. However, despite government initiatives and policies, the EBP has made slower progress than anticipated. For the long‐term adoption and success of the EBP, the following critical areas must be analyzed: integrated ethanol production from multiple feedstocks, demand and linkage to industries requiring ethanol, impact on the environment and revenue prospects, and evaluation of the policy measures adopted. This study addresses these topics by analyzing the interaction between various industries (demand) and ethanol production from multiple sources (supply) using system dynamics modeling. Simulation and scenario analysis have been used to evaluate the environmental and economic performance of ethanol blends under the influence of various policy parameters. The findings indicate that, contrary to the conventional belief, the production of ethanol directly from sugarcane juice does not significantly threaten food security. Higher blending ratios yield enhanced environmental benefits and revenues in the short term, but these are outweighed by the long‐term benefits of lower blending ratios. The findings also indicate that encouraging second‐generation ethanol production from rice stalks and increasing the blending ratios will reduce CO2 emissions. However, the goals set for blending cannot be achieved until measures to diversify feedstocks and improve the infrastructure for ethanol production are scaled up.