The Economic and Environmental Costs/Benefits of Green Fuel: The Case of the Chisumbanje Ethanol Plant

The study assesses the micro level benefits of a bioethanol plant in Zimbabwe. The study findings show that, besides producing cleaner fuel which is environmentally friendly, the Chisumbanje bioethanol plant provides a wide range of benefits to the country and the community in terms of import cost reduction and employment creation. The results demonstrate that, with just a 5% ethanol blend (E5), Zimbabwe has potential to reduce its gross fuel import bill by at least US$4.5 million per year, and this cost saving increases as higher blends are used. However, such projects have serious implications on government revenue. Government revenue from fuel import duties is reduced by at least US$0.30 per litre. The study also indicates that the country has capacity to increase the production of both sugar and alternative crops, hence no opportunity cost since production is inefficient. The findings further reveal that an industrial initiative such as the Chisumbanje project generates more utility for the youth who make the majority of the labour market as shown by the negative coefficient of age square.