Browsing by Author "Garcia, Luis Rafael N."

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    CocoNOT worth it? a cost-benefit analysis of the CME diesel blend mandate in the Philippines
    (2025-05-23) Garcia, Luis Rafael N.; Roque, Maria Isabel Y.; Magno, Maria Cielo D.
    Despite roughly two decades of coconut-based biofuel mandates in the Philippines, no study has comprehensively accounted for nor evaluated the full welfare effects this policy has on the economy on net. This thesis utilizes a cost-benefit framework to evaluate the Biofuels Act of 2006 from Q3 2007 to Q3 2024, and a two-stage least squares year fixed effects strategy using the exogenous fluctuations in CME feedstock use to isolate the causal effect of blending percentages on farmer wages. Results show that the policy caused a net economic loss of ₱133.37 billion from 2007 to 2024. Most of this came from using coconuts for local fuel instead of exports, which reduced foreign exchange earnings. Consumers also faced higher fuel prices, since CME has usually been more expensive than regular diesel. While the policy led to small gains in environmental and health outcomes, these were far too small to offset losses. Using these findings, the policy’s effects were projected for the proposed 4% blend mandate increase for October 2025 using a probabilistic sensitivity analysis under a Monte Carlo simulation. The sensitivity analysis showed that raising the blend rate to 4% in 2025 has a very low chance, only 3.96%, of delivering net economic benefits. Risks and expected losses increase with higher blend rates. Additionally, the regression results show that increased CME usage has no statistically significant effect on farmer wages. In contrast, coconut exports were found to have a statistically significant positive relationship with farmer wages. This suggests that diverting coconuts to local fuel production may have reduced export earnings, offsetting any potential gains in farmer income. Overall, the CME blending policy did not meet its main goals. It did not significantly improve farmer incomes. It increased consumer costs. It worsened the Philippine coconut export sector. It also carries high economic risk. Ultimately, it is worthwhile to consider halting or revising the blend mandate and exploring alternative strategies to achieve the policy’s original objectives.