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EthanolTable of Contents:
see also: green business models, end of cheap food, alternative fuels for automobiles, the problems with USA corn ethanol subsidies , ethanol skeptics , ethanol-related startups , Auto industry innovations and new business models , Automobile Industry , Brazil alternative energy market , Clean-tech and environmentally conscious investing
Corn ethanol subsidies have to go (and what to do about them)
In response to a mixture of high oil prices, and fears of energy security... the USA had the idea to seek alternative energy, which led to ethanol subsidies, which led to farmers switching to corn production and convertion away from food and toward fuel production, which has resulted in more expensive grain prices around the world. This is having a huge impact on both poor and rich world farmers, and consumers around the world. As far as global trends go, this is really a big one!
Food prices are rising on a mix of strong demand from developing countries; a rising global population; more frequent floods and droughts caused by climate change; and the biofuel industry’s appetite for grains. The price of rice and wheat has doubled in the past year while freight costs have also increased sharply on the back of rising fuel prices
1. corn Ethanol for fuel 2. so, farmers switch crops, and corn prices rise, along with other grains as Americans start trying to power more of their cars with corn (ethanol) 3. food prices rise 4. feedstock grain for cattle rises 5. Farmers no longer able to economically feed cows, pigs, chickens 6. Cattle farmers begin to liquidate (reduce) cattle stock 7. Temporarily there is a drop in meat prices as inventory is liquidated 8. prediction (based on futures prices)....is that there will soon be a massive upward pricing in steak, and pork prices. (only at higher prices will it be economical for farmers to raise cattle and pigs because of the high price of grain (feedstock for the animals).
Macroeconomic response:
1. Inflation (food prices rise) 2. Governments around the world attempt to control inflation in various ways. some do the right thing (inflation targeting with monetary policy), while others do the wrong thing (price controls as we are seeing in Argentina, Venezuela, China, Russia, etc)....
Solution
What has to be done?1. The US needs to stop this crazy idea of running cars on corn. The idea that we will just grow our own fuel is fine, but it is wrecking havok on the worlds food prices. 2. Switch focus, and look to sugar-based ethanol, which is better for fuel anyways. And, who really cares if the price of a candy bar gets to $10? (as opposed to increased Bread, corn, grain, and cattle prices).
Why it probably wont happen:1. The US doesnt grow enough sugar cane (the US is a net importer of sugar already), and the sugar industry in the US is heavily protected with subsidies and import quotas. 2. The corn lobby in the US is powerful and is pushing for import tarriffs on imported sugar-based ethanol 3. Politicians have this idea that the US should be "energy-independent", and therefore argue that ethanol is the right way to go. Forget the fact that we dont get all that much energy from a gallon of corn-ethanol (as compared to sugar-ethanol).
Why sugar -based ethanol makes alot of sense:1, Countries that are friendly to the US can produce alot of sugar (the entire Caribbean, Central and South America), as opposed to the unfriendly Middle east for oil. Brazil, for example is already the world's number one sugar cane- ethanol producer, and almost all cars in Brazil can run on that technology. 2. sugar-based ethanol is more powerful fuel (than corn-based ethanol) 3. if sugar prices were to rise as a result, nobody would starve (from not being able to afford food). Who cares if the price of a candy bar were to increase?
Politics
People might not care so much is the price of corn goes up, but once the price of steak goes up (dramatically) at the supermarket in the near future, I think people will start complaining. But, more than likely, they wont make the connections.....ie. ethanol subsidies...leads to expensive corn....which makes grain farmers switch to corn production....which leads to expensive feedstocks for cattle....which leads to cutbacks in production....which will lead to high steak prices....and expensive grocery bill.....BUT, ill bet that most people will just blame the next President (maybe a democrat), rather than tracing the problem back to the source (corn-ethanol, rather than sugar-ethanol).....
see more: the problems with USA corn ethanol subsidies
Ethanol Industry
The global ethanol industry According to the International Energy Agency, ethanol alone could represent 10 per cent of vehicle fuels by 2025 and 30 per cent by 2050, compared with only 2 per cent today. The Renewable Fuels Association reported that in 2005 the US just surpassed Brazil as the world’s largest producer; but Brazil remains the world’s largest exporter. Together the two nations represent approximately 70 per cent of global ethanol production. Other significant producers of ethanol are China, India and the European Union (with France, Germany and Spain as the top producers). The US is not only the world’s largest producer but also the largest consumer and importer of ethanol. The extraordinary growth in consumption is in large part driven by the Clean Air Act requirement to add oxygenates (such as ethanol) to gasoline, and the ban on methyl tertiary butyl ether as a gasoline additive. The rising costs of crude oil, paired with the national security goal of reducing American dependence on foreign oil, have also played a part in the recent growth of the US ethanol industry.
The US market is one of the most attractive to Latin American producers given its geographic proximity and extensive trading relationship. In fact, Brazil and Central America are already the main foreign suppliers of ethanol to the US, and large US corporations such as Cargill have plants in Latin America that produce ethanol for export to the US.
In Europe, the EU set a non-binding target in 2003 that vehicle fuels should contain 2 per cent of biofuels by the end of 2005 and 5.75 per cent by 2010. The goal is to reduce greenhouse gases and meet the EU’s Kyoto Protocol commitments. In addition, most member states, including top producers France, Germany and Spain, have tax breaks that encourage the production and consumption of ethanol. Although production in the EU has been increasing each year, it has not been able to keep up with demand. In fact, it is expected that the EU will become a net importer of ethanol, offering opportunities to ethanol exporting countries such as Brazil.
But it is in energy-hungry Asia where the highest increases in demand for ethanol are expected. The transportation sectors of the world’s two most populous countries, China and India, are growing rapidly, causing the demand for fuel to surge. Both countries have few hydrocarbon resources of their own, thus they present interesting opportunities to ethanol exporters. In fact, Brazil has reportedly begun negotiations with China for the sale of ethanol and Peru is expanding its ports on its Pacific coast so that both Brazilian and Peruvian exports can reach Asia more easily.
Read more from Kookyplan
Current Prices
Ethanol in Latin America – the Brazilian model
Brazil is the pioneer of the ethanol industry: as well as being the world’s largest exporter it is also its second-largest producer. At present, Brazil is also the only country that uses ethanol as a complete substitute for gasoline. At least four components have contributed significantly to the development of the Brazilian ethanol industry: governmental support, research and development, abundant raw materials (especially sugar cane) and labour.
Brazil’s commanding position in the global ethanol industry is partly owed to its government’s support of the industry since the mid 1970s. Although ethanol production in Brazil dates back to the 1920s, it remained a minor industry until 1975 when Brasilia decided to establish a national ethanol programme (PROALCOOL). The main goal of the programme was to reduce the country’s dependence on expensive oil imports, which were depriving Brazil of needed hard currency, while using the country’s sugar industry to produce a domestic fuel. The programme initially consisted of incentives aimed at the supply side of the industry: quotas, marketing orders, price setting, subsidised interest rates and other measures that helped foster the ethanol industry. Later, in 1979, Brasilia enhanced the PROALCOOL programme by legislating incentives aimed at the demand side of the industry: tax incentives to buyers of ethanol cars and consumer price fixing that pegged the price of ethanol to the price of gasoline.
Through the 1980s and 1990s, the ethanol industry shrank, due to cheap gasoline supplies and modest government budgets. The Brazilian government reacted by liberalizing the industry, and today it no longer intervenes in ethanol production other than by setting the ethanol-to gasoline blend ratio. In March 2006, the blend ratio was reduced from 25 per cent to 20 per cent because of short ethanol supplies and strong domestic demand.
All of Brazil’s ethanol is derived from sugar cane (the country is the world’s largest producer of both sugar and sugar cane-based ethanol). Brazil has more than 250 mills that convert sugar into ethanol and, as of August 2006, there were around 92 new ethanol plants proposed to be built over the next seven years with a total investment of around US$10 billion. This added capacity could double the present levels of production by 2014. The extra capacity will further boost Brazil’s already extensive ethanol export business, worth US$600 million in 2005. The goal is to at least double exports of ethanol by 2010 to reach US$1.2 billion. At present, Brazil exports to numerous countries, including Japan, Sweden, the US and Venezuela.
Ethanol in Colombia, Peru, Central America and the Caribbean BasinLatin American countries such as Colombia and Peru share some of the advantages that Brazil has had in developing an ethanol industry: well established sugar industries with growth potential, plenty of labour supply and low production costs. Those governments have taken note and have begun to implement supportive policies so that each country can develop its own successful ethanol industry.
ColombiaThe Colombian government began encouraging the use of ethanol in 1995 when it set certain environmental requirements for liquid fuels used in car engines. In 2001, a law was passed requiring a 10 per cent ethanol blend in gasoline (E10) to be used in cities with more than 500,000 inhabitants from 2006. Then, in 2002, new tax laws exempted fuel ethanol from various taxes, including VAT. Today, about half of Colombia’s vehicles can use the E10 blend. The industry’s goals are to have all cars running on the E10 blend by 2009 and on an E20 blend by 2015.
Colombia’s first ethanol plant began operations in October 2005 (to meet the 2006 E10 requirements) and today there are five plants operating. All plants use sugar as feedstock and are in the Cauca Valley region, the country’s sugar producing region. But these plants only supply around 57 per cent of the country’s needs and investors are already working on projects to satisfy the deficit. There are also efforts to begin selling in international markets. In fact, one Colombian company already has off-take agreements with Sekab, the Swedish ethanol trader, to sell approximately 750,000 litres of ethanol per day beginning in 2009. All together it is expected that around US$500 million will be invested in the Colombian ethanol sector over the next four to five years.
PeruPeru’s ethanol industry also has great potential. Similar to Brazil and Colombia, sugar cane can be cultivated in Peru all year round, especially on the country’s northern coast. But Peru’s competitive edge lies in its efficient use of land to cultivate sugar cane. In fact, Peru is one of the world’s most efficient producers of sugar cane: in 2002, Peru produced 130 metric tonnes of sugar cane per hectare of land compared with Colombia’s 84 metric tonnes and Brazil’s 73 metric tonnes.
Despite its great potential, Peru’s ethanol industry is still in its nascent stages. Policymakers have already taken important steps to create an ethanol market. In 1998 a decree was issued requiring refineries to eliminate the use of lead in gasoline by the end of 2004. In 1999, the Asociación Peruana de Productores de Azúcar y Biocombustibles (Peruvian Association of Sugar and Biofuels Producers) was formed to promote the industry. Then, in 2003, the Law for the Promotion of the Biofuels Market was passed. Starting in 2007, vehicles in Peru’s northern region will be required to use a 7.8 per cent ethanol blend; by 2010 the entire country will have to use this blend. The requirements are likely to be increased to 10 per cent to comply with the greenhouse gas emissions reduction targets of the Kyoto Protocol.
To satisfy growing demand, Peru’s major sugar producers recently announced the use of 15,000 hectares of land to exclusively produce sugar cane as ethanol feedstock. They also announced the construction of ethanol plants along the country’s northern coast and the Amazonian region of the Huallaga Valley. The government put up an additional 11,000 hectares of land for sale to be used exclusively to grow sugar cane as ethanol feedstock. The government is also working on tax incentives to stimulate faster growth.
Central America and the Caribbean BasinThe ethanol industry in Central America and the Caribbean Basin also has growth potential. The region has important sources of sugar cane (especially in Guatemala, one of the world’s largest sugar producers) and low production costs. The geographical proximity to the US and the tarifffree access to the US market under the Central America Free Trade Agreement (CAFTA) are also important factors in the industry’s growth.
According to the Renewable Fuels Association, Jamaica, Costa Rica and El Salvador are respectively the second-, third- and fourth largest exporters of fuel ethanol to the US. The region began exporting ethanol to the US under the Caribbean Basin Initiative, which allowed tariff-free exports of ethanol up to 7 per cent of US ethanol production. CAFTA allows the region to continue exporting biofuels to the US without any tariffs.
Large agribusiness concerns are already using Central America as an export base to the US. Cargill, through a joint venture with Brazilian and Salvadoran partners, set up an ethanol dehydration facility in El Salvador that converts Brazilian canebased ethanol into fuel ethanol for exports to the US. The plant has the capacity for more than 60 million gallons annually.
Business Opportunities in Latin America
Ethanol is booming as both production and consumption continues to rise across the globe, resulting in significant opportunities – and this trend is expected to continue as the ethanol industry grows. The development and financing of ethanol projects usually requires input from various legal specialists, including tax, environmental, real estate, ntellectual property and finance lawyers. Also, as more sophisticated sponsors, investors and lenders become involved in the industry and the size of the projects and financings increases, larger law firms are engaging in the sector. In the US, for example, lawyers are representing sponsors and developers, ethanol producers, lenders and private-equity providers in investments, debt financings and IPOs by ethanol producers. In Latin America, the increasing merger and acquisition activity in the ethanol sector also presents opportunities for lawyers to get involved.
The vast markets of Asia, the EU and the US represent important opportunities for the sugar- rich, ethanol-producing Latin American countries. Now it is the turn of these countries’ governments and private sectors to emulate Brazil’s example and build large-scale industries that can satisfy the demand of the international markets.
Top 10 Sugarcane Producers - 2005 Country 1000 tonnes
Brazil 422,926 India 232,300 China 87,768 Pakistan 47,244 Mexico 45,195 Thailand 43,665 Colombia 39,849 Australia 37,822 Indonesia 29,505 USA 25,307 World Total 1,011,581
Industry Summary
Soaring gasoline prices, effective lobbying by agricultural and industrial interests, and a growing interest in cutting reliance on imported oil has put a high national focus on bioethanol in America. Corn and other organic materials, including agricultural waste, can be converted into ethanol through the use of engineered bacteria and superenzymes manufactured by biotechnology firms. This trend is giving a boost to the biotech, agriculture and alternative energy sectors.
In addition to the use of ethanol in cars and trucks, the chemicals industry, faced with daunting increases in petrochemicals costs, has a new appetite for bioethanol. In fact, bioethanol can be used to create plastics—an area that consumes vast quantities of oil in America and around the globe. Archer Daniels Midland is constructing a plant in Clinton, Iowa that will product 50,000 tons of plastic per year through the use of biotechnology to convert corn into polymers.
Ethanol is an alcohol produced by a distilling process similar to that used to produce liquors. A small amount of ethanol is added to about 30% of the gasoline sold in America, and most U.S. autos are capable of burning “E10,” a gasoline blend that contains 10% ethanol. E85 is an 85% ethanol blend that may grow in popularity due to a shift in automotive manufacturing. Although only 800 or so of the 170,000 U.S. service stations sold E85 as of the middle of 2006, there may be an increase in demand for ethanol in the U.S. due to Detroit’s increased production of “flexfuel” vehicles than can run on E85 or on a mixture of gasoline and E85. Ford offers E85-capable F-150 pickup trucks, Ford Crown Victorias, Mercury Grand Marquis and Lincoln Town Cars. At GM, flexfuel technology is available in the Chevy Avalanche, Chevy Impala, Chevy Monte Carlo, Chevy Tahoe, GMC Yukon and GMC Sierra. Numerous other flexfuel cars are available in the U.S., including models from Chrysler and Mercedes.
Yet despite the millions of vehicles on the road that can run on E85 and the $3.5 billion in federal subsidies to participating refiners, many oil companies seem unenthusiastic about the adoption of the higher ethanol mix. E85 requires separate gasoline pumps, trucks and storage tanks, as well as substantial cost to the oil companies (the pumps can alone cost about $200,000 per gas station to install). Many drivers who have tried filling up with E85 once revert to regular unleaded when they find as much as a 25% loss in fuel economy when burning the blend.
Ethanol is a very popular fuel source in Brazil. In fact, Brazil is one of the world’s largest producers of ethanol, which provides a significant amount of the fuel used in Brazil’s cars. This is due to a concerted effort by the government to reduce dependency on petroleum product imports. After getting an initial boost due to government subsidies and fuel tax strategies beginning in 1975, Brazilian producers have developed methods (typically using sugar cane) that enable them to produce ethanol at moderate cost. The fact that Brazil’s climate is ideally suited for sugarcane is a great asset. Also, sugar cane can be converted with one less step than corn, which is the primary source for American ethanol. Brazilian automobiles are typically equipped with engines that can burn pure ethanol or a blend of gasoline and ethanol. Brazilian car manufacturing plants operated by Ford, GM and Volkswagen all make such cars.
In America, partly in response to the energy crisis of the 1970s, Congress instituted federal ethanol production subsidies in 1979. Corn-based grain ethanol production picked up quickly, and federal subsidies totaled about $11 billion through 2006. The size of these subsidies and environmental concerns about the production of grain ethanol produced a steady howl of protest from observers through the years. Nonetheless, the Clean Air Act of 1990 further boosted ethanol production by increasing the use of ethanol as an additive to gasoline. Meanwhile, the largest producers of ethanol, such as Archer Daniels Midland (ADM), have reaped significant amounts of subsidies from Washington for their output. The ethanol cause was further promoted by President Bush in his state of the union address in 2006, in which he chastised Americans for their “addiction to oil” and promoted the use of ethanol among other alternative fuels. The Bush administration claims that ethanol could provide more than one-third of the U.S.’s gasoline needs by 2025.
The U.S. Energy Act of 2005 specifically requires that oil refiners mix 7.5 billion gallons of renewable fuels such as ethanol in the nation’s gasoline supply by 2012. Ethanol production it the U.S. was fast approaching that level in 2007. Capacity had doubled since 2005. Although grain farmers enjoyed high prices at the onset, a glut of ethanol supply in late 2007 was causing prices to drop and slowing expansion. Ethanol prices fell by as much as 30% in mid-2007. In other words, ethanol production was increasing faster than the adoption of ethanol.
Traditional grain ethanol is typically made from corn or sugarcane. In contrast to grain ethanol, “cellulosic” ethanol is typically made from agricultural waste like corncobs, wheat husks, stems, stalks and leaves, which are treated with specially engineered enzymes to break the waste down into its component sugars. The sugars (or sucrose) are used to make ethanol. Since agricultural waste is plentiful, turning it into energy seemed a good strategy. Cellulosic ethanol can also be made from certain types of plants and grasses.
The trick to cellulosic ethanol production is the creation of efficient enzymes to treat the agricultural waste. The U.S. Department of Energy is investing $20 million per year in funding along with major chemical companies such as Dow Chemical, DuPont and Cargill. Another challenge lies in efficient collection and delivery of cellulosic material to the refinery. It may be more costly to make cellulosic ethanol than to make it from corn. In any event, the U.S. remains far behind Brazil in cost-efficiency, as Brazil’s use of sugar cane refined in smaller, nearby biorefineries creates ethanol at much lower costs per gallon.
Iogen, a Canadian biotechnology company, makes just such an enzyme and is presently building production-size cellulosic ethanol facilities in the U.S., Canada and Germany, to start commercialization and determine how economical the process is. The company plans to construct a $300-million, large-scale biorefinery with a potential output of 50 million gallons per year. Its pilot plant in Ottawa is capable of producing 260,000 gallons per year from 20 million tons of wheat straw and corn stalks.
In the U.S., the Department of Energy has selected six proposed new cellulosic ethanol refineries to receive a total of $385 million in federal funding. When completed, these six refineries are expected to produce 130 million gallons of ethanol yearly. Iogen’s technology will be used in one of the refineries, to be located in Shelley, Idaho. Partners in the refinery will include Goldman Sachs and The Royal Dutch/Shell Group.
Construction of new ethanol production plants pushed total production capacity in the U.S. to about 5.4 billion gallons by the end of 2006 (about 3.4% of total U.S. gasoline consumption), up from 3.9 billion as of June 2005. As of August 1, 2007, there were 124 ethanol biorefineries in the U.S. (totaling 6.5 billion barrels of capacity), with another 76 under construction (which will add another 6.4 billion barrels). However, increased capacity and high corn prices are slowing the expansion trend. Proposed facilities in Minnesota, South Dakota and Iowa have put construction projects on hold as of late 2007.
Other companies, such as Syngenta, DuPont and Ceres, are genetically engineering crops so that they can be more easily converted to ethanol or other energy producing products. Syngenta, for example, is testing an engineered corn that contains the enzyme amylase. Amylase breaks down the corn’s starch into sugar, which is then fermented into ethanol. The refining methods currently used with traditional corn crops add amylase to begin the process.
Environmentalists are concerned that genetically engineering crops for use in energy-related yields will endanger the food supply through cross-pollination with traditional plants. Monsanto is focusing on conventional breeding of plants with naturally higher fermentable starch contents as an alternative to genetic engineering.
Another concern relating to ethanol use is that its production is not as energy efficient as that of biodiesel made from soybeans. According to a study at the University of Minnesota, the farming and processing of corn grain for ethanol yields only 25% more energy than it consumes, compared to 93% for biodiesel. Likewise, greenhouse gas emissions savings are greater for biodiesel. Producing and burning ethanol results in 12% less greenhouse gas emissions than burning gasoline, while producing and burning biodiesel results in a 41% reduction compared to making and burning regular diesel fuel.
In addition, ethanol production requires enormous amounts of water. To produce one gallon of ethanol, up to four gallons of water are consumed by ethanol refineries. Add in the water needed to grow the corn in the first place, and the number grows to as much as 1,700 gallons of water for each gallon of ethanol.
Other concerns regarding the use of corn to manufacture ethanol include the fact that a great deal of energy is consumed in planting, reaping and transporting the corn in trucks. Also, high demand for corn for use in biorefineries has driven up the cost per bushel dramatically, creating burdens on consumers. For example, in Mexico, where corn tortillas are a food staple, consumer prices have risen significantly. Elsewhere, meat producers that rely on corn as feed for cattle and hogs are facing feed shortages and much higher costs.
Industry enthusiastsMost people would agree that the United States needs a new source of fuel: something renewable and nonpolluting with which to replace gasoline ... something that could be produced right here at home. Deep in America's heartland, a lot of people think they know the answer: ethanol, a fuel made from fermented corn.
According to USA Department of Agriculture estimates, you can get about 21/2 gallons of it from a bushel of corn. And an increasing number of states are working to make an 85 percent ethanol fuel called E85 available at gas stations at prices significantly below that of regular gasoline ... even when you account for the fact that ethanol provides only 62 percent of the mileage of gasoline.
It sounds like a perfect, win-win solution for both the nation's farm economy and its energy needs. According to the National Corn Growers Association, ethanol production could make 1.4 billion bushels of corn "disappear" in 2004 ... enough to replace more than 2 billion gallons of gasoline and provide a much-needed market for farmers stricken with chronically low corn prices.
Industry SkepticsThere are more than a few skeptics that dont believe the hype about the future of ethanol for fuel industry. Why arent they believers?
Sugar cane Ethanol
http://en.wikipedia.org/wiki/Ethanol_fuel_in_Brazil
In Brazil, ethanol fuel is produced from sugar cane which is a more efficient source of fermentable carbohydrates than corn as well as much easier to grow and process. Brazil has the tropical climate that is required for the productive culture of sugarcane. Brazil has the largest sugar cane crop in the world, and is the largest exporter of ethanol in the world. High government sales taxes on gasoline, as well as government subsidies for ethanol, have cultivated a profitable national ethanol industry. Nearly all fueling stations in Brazil offer a choice of either gasoline type C or hydrated ethanol.
Electricity from bagasseSucrose accounts for little more than 30% of the chemical energy stored in the mature plant; 35% is in the leaves and stem tips, which are left in the fields during harvest, and 35% are in the fibrous material (bagasse) left over from pressing.
Part of the bagasse is currently burned at the mill to provide heat for distillation and electricity to run the machinery. This allows ethanol plants to be energetically self-sufficient and even sell surplus electricity to utilities; current production is 600 MW for self-use and 100 MW for sale. This secondary activity is expected to boom now that utilities have been induced to pay "fair price "(about US$10/GJ or US$0.036/kWh) for 10 year contracts. This is approximately half of what the World Bank considers the reference price for investing in similar projects (see below). The energy is especially valuable to utilities because it is produced mainly in the dry season when hydroelectric dams are running low. Estimates of potential power generation from bagasse range from 1,000 to 9,000 MW, depending on technology. Higher estimates assume gasification of biomass, replacement of current low-pressure steam boilers and turbines by high-pressure ones, and use of harvest trash currently left behind in the fields. For comparison, Brazil's Angra I nuclear plant generates 657 MW.
Presently, it is economically viable to extract about 288 MJ of electricity from the residues of one tonne of sugarcane, of which about 180 MJ are used in the plant itself. Thus a medium-size distillery processing 1 million tonnes of sugarcane per year could sell about 5 MW of surplus electricity. At current prices, it would earn US$ 18 million from sugar and ethanol sales, and about US$ 1 million from surplus electricity sales. With advanced boiler and turbine technology, the electricity yield could be increased to 648 MJ per tonne of sugarcane, but current electricity prices do not justify the necessary investment. (According to one report, the World Bank would only finance investments in bagasse power generation if the price were at least US$19/GJ or US$0.068/kWh.)
Bagasse burning is environmentally friendly compared to other fuels like oil and coal. Its ash content is only 2.5% (against 30-50% of coal), and it contains no sulfur. Since it burns at relatively low temperatures, it produces little nitrous oxides. Moreover, bagasse is being sold for use as a fuel (replacing heavy fuel oil) in various industries, including citrus juice concentrate, vegetable oil, ceramics, and tyre recycling. The state of São Paulo alone used 2 million tonnes, saving about US$ 35 million in fuel oil imports.
Research on cellulosic ethanol is trying to viabilise the extraction of ethanol from sugarcane bagasse and other plants in an industrial scale.
Effect on oil consumptionMost cars in Brazil run either on alcohol or on gasohol; only recently dual-fuel ("[[Flexible-fuel vion of ethanol and the ethanol/gasohol ratio are expected to increase again with deployment of dual-fuel cars.
Presently the use of ethanol as fuel by Brazilian cars - as pure ethanol and in gasohol - replaces gasoline at the rate of about 27,000 cubic metres per day, or about 40% of the fuel that would be needed to run the fleet on gasoline alone. However, the effect on the country's overall oil use was much smaller than that: domestic oil consumption still far outweighs ethanol consumption (in 2005, Brazil consumed 2,000,000 barrels of oil per day, versus 280,000 barrels of ethanol)1. Although Brazil is a major oil producer and now exports gasoline (19,000 m³/day), it still must import oil because of internal demand for other oil byproducts, chiefly diesel fuel (which cannot be easily replaced by ethanol).
Exports of Brazilian ethanol
Ethanol-related Startups
Vaperma, for removing water from ethanol, raises CDN $21.5MVaperma is a Quebec City, Canada based company that makes dewatering systems for ethanol producers. Water is a by-product of ethanol production, and must be removed before the product is finished. Vaperma’s specialized membranes can selectively drain the water away, a method the company says is cheaper than distillation columns or chemical dryers. The CDN $21.5 million funding (about USD $23.1 million) was led by Low Carbon Accelerator Limited. Also participating were Volvo Technology Transfer Corporation, BDC Capital, Emerald Technology Ventures, and Fons d’investissement en developpement durable (FIDD).
How US corn ethanol might be good for Latin America:
With the cost of US corn prices rising, the producers in Latin America might suddenly become more competitive. see article here: http://www.brazzil.com/articles/169-july-2006/9661.html
Biofuels activity in Latin America, Caribbeanhttp://www.miamiherald.com/1060/story/173885.html
• Brazil: World's biggest exporter of ethanol, produced from sugarcane.
• Jamaica: Processes sugarcane-based ethanol from Brazil, then exports it to USA
• Trinidad And Tobago: Processes sugarcane-based ethanol from Brazil, then exports it to USA
• Costa Rica: Processes sugarcane-based ethanol from Brazil, then exports it to USA
• El Salvador: Processes sugarcane-based ethanol from Brazil, then exports it to USA
• Dominican Republic: Foreign companies are investing to produce sugarcane-based ethanol by 2008.
• Peru: Will export sugarcane-based ethanol to USA by 2009.
• Colombia: Undertaking program to develop biodiesel from palm oil.
• Panama: Looking for foreign investors to produce sugarcane-based ethanol.
• Nicaragua: Began exporting sugarcane- based ethanol to Europe this year.
• Guyana: A Brazilian company is planning to produce sugarcane-based ethanol.
• Argentina: Expects to begin exporting soybean oil-based biodiesel in 3-5 years.
• Chile: Trying to develop cost-efficient ethanol based from wood chips.
• Guatemala: Exporting sugarcane-based ethanol to Europe.
• Mexico: Developing plans to produce sugarcane-based and corn-based ethanol.
• Haiti: Will be getting technical assistance from USA and Brazil.
• St Kitts and Nevis: Will be getting technical assistance from USA and Brazil.
• Honduras: Looking for foreign investors to produce ethanol.
• Ecuador: Hopes to begin producing ethanol in 5 years.
• Venezuela: Ethanol denounced by President Chávez as threat to food supply for poor.
• Bolivia: Ethanol denounced as sinister idea by President Morales.
• Cuba: Ethanol denounced by Fidel Castro but government is upgrading ethanol facilities.
Brazil leads the way in biofuels exportshttp://www.miamiherald.com/103/story/173862.html
SOJO, Peru -- With a sweep of his arm, César Trelles proudly showed off acres of hilly scrub land that at first glance seem best suited for the foxes, lizards and geckos that call it home.
But in a few months, said Trelles, the governor of Piura state in northern Peru, the panorama will change dramatically.
Maple Energy will level the land and plant 20,000 acres of sugar cane in a $120 million project to produce ethanol for export to the United States and Europe.
Nobody wanted this land, but now it is worth very much, Trelles said.
Latin American and Caribbean countries -- from Mexico and St Kitts and Nevis to Peru -- are trying to catch the biofuels wave.
Government officials throughout the region say they want to help reduce global warming and improve public health by producing a less-polluting fuel, but the main driver is the desire to create jobs, attract new investment and increase exports to the United States and Europe.
It's a cleaner, cheaper and home-grown source of energy, said David E. Lewis, who tracks biofuel developments in Latin America and the Caribbean for Manchester Trade, a Washington, D.C.-based consulting firm.
Brazil has jumped far ahead of everyone in the region. But most other countries plan to begin exporting biofuels by 2010.
No country in Latin America or the Caribbean other than Brazil is currently exporting biofuels to the United States from a home-grown crop.
Companies in Jamaica, Trinidad, Costa Rica and El Salvador are importing sugar cane-based ethanol from Brazil, processing it and then shipping it duty-free to the United States.
Together, the four countries have exported about 90 million gallons of ethanol to the USA through May this year, or about as much as Brazil, said Lewis.
Colombia has the most ambitious plans in the region to develop biofuels, other than Brazil.
CHEAPER OPTION
Nearly all of the promising ventures involve sugar cane-based ethanol -- like the plans of Maple Energy -- because corn-derived ethanol and biodiesel from palm oil or soybeans are currently too expensive, said Manlio Coviello, an energy specialist with the Economic Commission on Latin America and the Caribbean, a U.N. agency based in Santiago, Chile.
But Todd Johnson, a senior energy specialist for Latin America and the Caribbean for the World Bank, said most countries in the region face the barrier of being high-cost sugar producers.
Unlike Brazil, they are not efficient, Johnson said by telephone from Washington. In most countries, it's more economical to produce sugar than ethanol.
Nevertheless, spurred by publicity about ethanol's benefits and the interest of foreign investors, governments and investors throughout Latin America and the Caribbean are moving ahead with plans to turn sugar cane into ethanol for export or to replace 5 percent to 10 percent of gasoline in domestic vehicles.
In Jamaica, government officials think ethanol could revive the island's dying sugar industry.
Guatemala will soon have five sugar cane-based ethanol plants in operation with plans for three more on the drawing board, said Aida Lorenzo, general manager of the Renewable Fuels Association of Guatemala. Guatemala accounts for about half of the sugar produced in Central America.
have the raw product, Lorenzo said by telephone from Guatemala City. We have interested investors from the United States, Japan, Brazil and Taiwan.
EXPORT POTENTIAL
Argentine soybean oil producers expect to begin converting a portion of their crop for biodiesel exports to Europe in the next three to five years, said Carlos St. James, president of the newly formed Argentine Biofuels Chamber.
The potential is enormous, he said.
Chile is conducting research to turn wood chips into ethanol.
The current research says it's five to 10 years away from being competitive with sugar cane-based ethanol, St. James said.
The United States and Brazil -- supported by the Inter-American Development Bank and the Organization of American States -- are trying to accelerate efforts throughout Latin American and the Caribbean.
They have targeted four countries and will begin with a needs assessment this summer, said Matt McManus, a State Department official based in Washington.
Those countries are Haiti, the Dominican Republic, El Salvador and St Kitts and Nevis.
`SELF-SUFFICIENT'
We would want to export if we can or be self-sufficient in ethanol, Nigel Carty, minister of state for sustainable development, information technology and finance, said by telephone from St Kitts and Nevis. We hope to sign a contract within the next three months to develop sugar cane with a private company.
Barbados hopes to do the same.
Cuba, where sugar has been a staple of its economy for centuries, is modernizing 11 of its 17 ethanol refineries, according to a published report last month, even though Fidel Castro has said that biofuels threaten to starve the world's poor.
In Haiti, plans for developing ethanol are in an early stage.
Jamaica, Trinidad and El Salvador, however, are importing dehydrated sugar cane ethanol from Brazilian companies, processing it and then shipping it duty-free to the United States under the Caribbean Basin Initiative and the Central America Free Trade Agreement.
This approach allows the Brazilian companies to evade the USA 54-cent per gallon tariff on imported ethanol.
Ethanol counts for 40 percent of the fuel consumed by vehicles in Brazil, and the figure will rise because 83 percent of new vehicles purchased during the first five months in Brazil run on E85, which is 85 percent ethanol and 15 percent gasoline.
Brazilian producers also export ethanol to the United States despite the stiff tariff.
Colombia plans to produce ethanol for vehicles -- the Congress has begun mandating a 5 percent mix of ethanol in vehicles and will require a 15 percent mix by 2010 -- and has even more ambitious plans to produce biodiesel through huge plantings of palm oil.
We want to reduce dependence on imported fuel, diminish global warming and create massive rural employment, said Jorge Bendeck, executive president of the Colombian National Biofuels Federation. If we can help bring social peace to rural areas, people will have better lives.
Meanwhile, Maple Energy's project in northern Peru -- one of the most ambitious in Latin America and the Caribbean -- will create 400 to 500 permanent jobs and hundreds more during the construction process, said Rex Canon, Maple's CEO. The company plans to produce 30 million gallons a year beginning in 2009.
IDEAL WEATHER
Canon said Peru's northern coast offers among the best conditions in the world for producing sugar cane for ethanol, with hot, dry weather during the day and cool weather at night, year-round.
The most energy-efficient and cost-efficient feedstock in the world is sugar cane, Canon said. We've got the best feedstock, we've got the best place in the world to produce that feedstock and we have strong demand. That's what makes it work.
Sugar Cane in the NE of Brazil
Pernambuco State has the 5th highest sugarcane Brazilian production.Brazil is by far the largest producer of alcohol fuel in the world, typically fermenting ethanol from sugarcane and sugar beets. The country produces a total of 18 billion liters annually, of which 3.5 billion are exported, 2 billion of them to the US. Alcohol cars debuted in the Brazilian market in 1978 and became quite popular because of heavy subsidy, but in the 80's prices rose and gasoline regained the leading market share. But from 2004 on, alcohol is rapidly rising its market share once again because of new technologies involving hybrid fuel car engines called "Flex" by all major car manufacturers (Volkswagen, General Motors, Ford, Peugeot, Honda, Citroën, Fiat, etc.). "Flex" engines work with gasoline, alcohol or any mixture of both fuels. As of February 2007, approx. 80% of new vehicles sold in Brazil are hybrid fuel.Because of the Brazilian leading production and technology, many countries became very interested in importing alcohol fuel and adopting the "Flex" vehicle concept. In March 7th of 2007, US president George W. Bush visited the city of São Paulo to sign agreements with Brazilian president Lula on importing alcohol and its technology as an alternative fuel.
Ethanol in Brazil
ethanol import tariff isn't likely to be lifted in coming days, but they add that
financing, either to build new sugarcane mills, resolve perennial logistical bottlenecks, or compile strategic ethanol stocks.
"If the USA provided financing for about 2 billion liters for strategic ethanol stocks, at a cost of $1 billion, it could be interesting," said Bioagencia's Rodrigues. "Think about how much the USA spends to finance its Strategic Petroleum Reserve. This is just a tiny fraction of that amount – and would help stabilize world ethanol prices."
- which isn't a friend – when they could buy more ethanol from us?" said Luis Gustavo Junqueira Figueiredo, a trader at Sao Paulo-based Alta Mogiana mill.
is the world's top ethanol producer, it was also the overwhelming buyer of Brazilian ethanol in 2006, snapping up roughly two-thirds of the record 3.4 billion liters of ethanol that
Sugar plantations in the Caribbean
The Sugar cane plant was the main crop produced on the numerous plantations throughout the Caribbean through the 18th, 19th and 20th centuries, as almost every island was covered with sugar plantations for refining the cane for its sweet properties. The main source of labor was African slaves. These plantations produced 80-90 percent of the sugar consumed in Western Europe. In the 1800s sugar dominated Martinique, Grenada, Saint Croix, Jamaica, Barbados, Leeward Islands, Saint Domingue, Cuba and many other islands that were run by the French or British.
On the British islands, sugar was the only crop grown, and on the French islands, sugar was their most important crop. The sugar was best grown on land that was near the coast where the soil was naturally yellow and fertile.
In the mid 1600s sugar cane was brought into British West Indies by Dutch-Jews in exile from Brazil. Upon landing in Barbados and other islands, they quickly urged local farmers to change their main crops from cotton and tobacco to sugar cane. With depressed prices of cotton and tobacco due mainly to stiff competition from the North American colonies, the local farmers switched, in which case leading to a boom in the Caribbean economies. Sugar was quickly snapped up by the British which used the sugar for cakes, and sweetener in teas.
For about the next 100 years Barbados remained the richest of all the European colonies in the Caribbean region. The prosperity in the colony of Barbados remained regionally unmatched until sugar cane production grew larger in geographically larger countries such as Haiti, Jamaica and elsewhere. As part of the mass sugar production, the process gave rise to other related commodities like rum, molasses, and Falernum.
The West India Interest was formed in the 1740s when the British merchants joined with the West Indian sugar planters. The British and West Indies shared profits and needs. This organization was the first sugar trading organization which had a large voice in parliament.
In the 1740s, Jamaica and Saint-Domingue became the world’s main sugar producers. They increased the production by using an irrigation system that French engineers built. The French engineers also built reservoirs, diversion dams, levees, aqueducts and canals. In addition, they improved their mills and used varieties of cane and grasses.
more info online
Renewable Energy http://www.nrel.gov/learning/re_biofuels.html
National Resource Defence council http://www.nrdc.org/air/transportation/biofuels.asp?gclid=CIOYw4yBsI0CFQZnZQodfCYF1g
"What are future possibilities for Brazil's Ethanol and BiFuel (e.g.BioDiesel) economy?"
"After nearly three decades of work, Brazil has succeeded where much of the industrialized world has failed: It has developed a cost-effective alternative to gasoline." -- Wall Street Journal (8)
"Flex fuel" cars which can run on both gasoline and any type of ethanol blend were introduced in Brazil in 2003. Since that time, the cars have become extremely popular among Brazilians and have taken two-thirds of the new car market. This bodes well for alternative fuels and biodiesels. In America, cars can also run on ethanol, but a high blend of ethanol is only available in Minnesota. Brazil has had a 30-year history of promoting biodiesels from its sugarcane crops, and that will serve it well in the future. Since the country and its carmakers are so open to promoting ethanol and other biodiesels, the future for that kind of industry is great. (1)
Brazil's sugar-based ethanol is cleaner and cheaper to make than other country's ethanols, which are made from corn or other crops. The future for ethanol, then, is greater in Brazil than in other countries.
Brazil's government has long stood behind ethanol, beginning during the 1970s after surges in oil prices left Brazilians in shock at the pump. The Brazilian government passed laws and subsidies which strongly encouraged the development of biofuels. By the 1980s, 90 percent of cars in Brazil could run on ethanol. However, a run on sugar supplies caused farmers to not be able to meet this demand for sugar-fueled cars (as they sold their sugar instead on the world sugar market) and the market for sugar in cars to crash. Sales of ethanol-powered cars fell to almost zero in 1990-- they were considered so worthless (as there was not enough sugar being produced to run them) that one taxi driver even set his ethanol-powered car on fire outside the Brazilian Congress.
Lessons can be learned from this previous crash in the ethanol market. If cars are expected to run on ethanol, there must be enough sugar produced in Brazil to run those cars. As long as farmers can provide enough supply, there will be demand for their product. If the farmers can't produce enough sugar this time, as last time, the market will crash and people will give up on ethanol as they did once before.
In addition, if the government wants to pass laws to encourage biodiesels' use, that is all the better for the industry. Flex fuel cars, which can run on any combination of biodiesels or petrol, came out because of a government decision. Brazilian parts manufacturers such as Magneti Marelli, owned by the Italian Fiat, convinced the government to extend the same tax protections to flex-fuel cars as they had to ethanol-powered ones. While it would seem a possibility that these companies could export their cars to other countries for great profit, it doesn't seem likely. There is nothing special about the Brazilian carmaking process, and if other countries want to make the cars, they could make them also. They could be made cheaper in other places, too, such as China.
However, car parts suppliers such as Germany's Bosch, which are based in Brazil, can export their particular parts involving biodiesel and might enjoy success at that endeavor. Eventually, it might be more profitable to even sell the technology to someone else in other countries and profit off that rather than the parts themselves.
Brazil's greatest success with its technology could be exporting its sugar-fuel itself. It can make its biofuel out of sugar very cheaply and efficiently, and the price is very competitive with that of oil. The European Union has ordered a billion litres of fuel from Brazil yearly; Brazil could be very competitive in the European Union as the EU reduces subsidies to its farmers and realizes that it just can't compete on price with cheaper makers of ethanol. To produce one litre of ethanol in the EU costs 30 Euro-cents-- to produce the equivalent in America or Brazil costs 15 Euro-cents.
Brazil will make about 16 billion litres of ethanol this year, as much as America does. American ethanol, however, is a more expensive process and costs 50 percent more to make than Brazilian. European ethanol costs 150 percent more than Brazilian. America has high tariffs for ethanol importers, but the EU could prove to be a great market for Brazilian ethanol. According to Brazilian ethanol makers, their ethanol became competitive with oil at pre-tax prices in 2002. Since then, the price of oil has skyrocketed and as a result, ethanol has become even more competitive. (4)
Brazil's largest maker of ethanol is also its state oil company, Petrobras. Petrobras expects to export eight billion litres of ethanol by 2010.
Brazil, already the world's leader in sugar and ethanol, could use its capabilities for philanthropical missions to poorer countries. In April 2006, while Haiti was being restructured, Brazil sent representatives to the country to look into how Haiti could benefit from biofuels. Brazil also wants to spread its technologies to other countries such as Nigeria.
Other countries are wanting to get in on Brazil's act on their own. India, the second-largest producer of sugar, is pushing a plan to buy 10,000 hectares from Brazil privately and produce cheap biofuels. (6) This would be a boost to Brazil's agriculture industry and would provide India with a cheap and reliable source of ethanol.
Brazil's sugar makers are spending $9 billiion to ramp up the number of plants available for production in an effort to double exports by 2010. (10)
A future development of the industry, some predict as early as two years from now, would be cars that run 100 percent on ethanol, thereby almost completely reducing dependence on gas for automobiles. (7)
==Biodiesels==
Biodiesels, or diesels made from vegetable oils, are becoming more and more popular in Brazil, also. The country's success with ethanol has encouraged its efforts in biofuels, and it has replaced up to 15 percent of its diesel with biodiesels made from vegetable oil, from soybeans.
The president of Brazil, Luiz Inácio Lula da Silva, said last year, "The truth is that nobody can compete with Brazil. Biodiesel production is a way of making Brazil less dependent on oil, a fuel that may eventually come to an end. This is a vital project for ensuring more independence for Brazil, as we may become a large biodiesel exporter." (9) He said this while opening a large biodisel factory in Brazil. No one can compete with Brazil on ethanol, and it stands to reason that the country is well-placed to convert that market leadership into success with biodiesels, also.
However, competitors to Brazil's possible biodiesels are leading campaigns against the fuel, saying that it is more expensive and dirtier than clean diesels that European carmakers are manufacturing. "It makes no economic sense outside Brazil," Jean-Martin Folz, Peugeot's chief executive, told the Guardian. This could be wishful thinking on Folz's part, but Brazil will surely face opposition to its fuels from those who don't stand to benefit monetarily from them.
Brazil is able to produce large amounts of biodiesels because it has the right climate and land to grow dozens of varieties of the vegetables needed to make the oils on which diesel engines can run. The country's largest beef exporter is even building a plant to convert cow tallow into biodiesel. Since it already produces half the world's output of ethanol, Brazil has much of the infrastructure already in place to produce and export biodiesels. Brazil now only provides biodiesel with two percent vegetable oil mixed in, but plans are for that to increase to 20 percent by 2020. This would also result in cuts to the $1.1 billion in imports of diesel that Brazil buys yearly.
So far, scientists from universities in Sao Paulo have produced biodiesel from 11 different plant types, and even from animal fat. Trains in Brazil have also announced that they will start using a diesel that is 20% biodiesel and 80% standard diesel. Brazil can position itself as a biodiesel power by using land that is unsuitable for crops to grow seeds for biodiesels.
"What is Brazil's BioTechnology, Bio-Agriculture, Plant Biology, Synthetic Biology ("AgBio") technology capability?"
Brazil, right now, is undoubtedly the world's leader as far as using ethanol goes.
Right now, ethanol is freely available at Brazilian gas pumps. It is up to 55 percent cheaper than regular gasoline would be.
In addition, the source of that ethanol, sugarcane, is very efficiently produced by Brazilian farmers. Right now, it only uses one percent of the land it has that is suitable for farming for sugarcane, so it has much more capacity than it's using now. That is only 19 percent of what the United Kingdom uses, yet Brazil is the world's leading sugarcane producer. Since the cane is produced in two regions of Brazil: South Central and North Northwest, there are two different harvest periods and more types of weather and locations for the sugar to grow in. If a natural disaster befell one of these sugarcane areas, the other would still be able to produce sugar.
Sugar powers 307 energy powerhouses in Brazil.
An additional interesting point is that unlike in many countries, the production of sugar in Brazil is not subsidized by the government. In other countries, most notably the United States, native sugar growers are given a high government subsidy, and non-native sugar sellers are given high tariffs. This is why most products in America contain high-fructose corn syrup, rather than sugar. Sugar is too expensive. With no subsidies to its sugar farmers, Brazil truly proves that its sugar industry is highly competitive and can compete on the free market without handouts from the government to support it. This is very important-- if the sugar growers needed subsidies to survive, they wouldn't be able to compete with other sugar growers who didn't.
Flex fuel cars-- The flex-fuel cars which came onto the market in Brazil in 2003 are truly revolutionary. They incorporate computers which constantly calculate how much gasoline and how much alchohol is in the fuel tank, and they can run on either fuel. Other countries would love to have the technology, and they can be exported to other countries if infrastructure allows, because they will run on any type of ethanol. Most of the cars take a 75/25 blend. Scientists are working right now to get Brazil on a 100 percent ethanol mix.
==Biotechnology==
What is clear is that Brazilian scientists are willing to spend the time to develop breakthroughs which will allow it to continue to use these fuels in the best of all ways to maximize output. Researchers at the Centro de Tecnologia Canavieira worked to develop strains of sugar which are resistant to droughts, pests and yielded more sugar per plant. (8) They will continue to come up with new technologies to support the sugar industry and new ways to make sugar more and more efficient.
In fact, Brazil has developed technologies in which the remains of the cane plant are transported to the factories along with the actual sugar, and the remains (called "bargasse") are used to power the plant with electricity.
Brazil is spending billions on research and development, helped by a president and government that encourage spending into scientific research in order to help biotechnology and thus, Brazil's economy. Since so much of Brazil's economy is based on agriculture, spending on biotechnology is put to efficient use, as companies make more money and people have more jobs as a result. With Brazil's natural resources-- a climate perfectly suited to hosting a myriad of crops-- and scientific and government backing, Brazil's health and technology industry is growing. In 2004, a DNA bank was established at the Jardim Botânico in Rio do Janeiro, to collect all types of DNA of plant life and study it for possible health benefits. With its location right next to the rainforest, Brazil is well-placed to benefit from so many different plants which could hold cures for various diseases.
As an example of Brazil's discoveries, a few years ago the Federal University of Minas Gerais in Belo Horizonte and the biopharmaceutical firm Biobrás in São Paulo banded together to develop and patent a form of recombinant human insulin. Biobrás then became one of only four companies worldwide which could produce this product. Brazil has the eighth-highest rate of diabetes in the world, and this is an example of it taking charge of caring for its own health. Brazil's sequencing of the genome of the plant pathogen "Xylella fastidiosa" was applauded worldwide.
A study examining the rates of Brazilian researchers' findings being published in established medical journals increased greatly from 1991 to 2002 (11).
This is for many reasons. Despite ever-changing governments, biotechnology has received unerring support from the Brazilian government, especially the Ministry of Science and Technology. Brazilian universities are also productive in these matters. The Oswaldo Cruz Foundation (FIOCRUZ, Rio de Janeiro, Brazil) and the Institute Butantan (São Paulo, Brazil) are leading players. In addition to these research institutes, there are 100 universities in Brazil conducting research and publishing papers. There are also now 354 biotechnology companies in Brazil, greatly expanded from the 75 or so that existed in 1990. (11)
Overall, what becomes clear upon looking at these figures is the tremendous capacity Brazil has for exporting its sugar product-- it is already the largest, most efficient sugarcane producer in the world, and it has only used one percent of its available farmland to do so. However, it will not be able to export it to countries such as the United States due to tariff issues, which I explain in the next section. More success could be had by selling the technology used to make its flex-fuel cars.
"What policies (trade tariffs, export to USA, etc.) effect, will have an effect on industry?"
Right now, there is not much of a market for Brazilian cars to be shipped to the US because the US doesn't have enough biofuels to power those cars. Only a handful of states require ethanol to be included in fuels at the pump.
In addition, the United States has a hugely successful farm lobby to its Congress. It often grants extremely high subsidies to its farmers, because their product cannot compete on the open market with those of less expensive countries. Brazil could enjoy a wonderful market for its sugar ethanol in America, where environmentalists abound; however, the corn farmers have a powerful lobby and have already gotten many laws and subsidies into place for their corn ethanol, which is less efficient, more expensive and less environment-friendly than Brazil's. It also imposes tariffs on ethanol from other countries, such as Brazil. It is unlikely that Brazil would be able to export its type of ethanol to America, considering that most Americans don't even realize that there is more than one type of ethanol or that their's is not the most environmentally-friendly. Even if they did realize, the American government gives out billions of dollars each year to those corn farmers-- and Brazilians selling on the free market without subsidies probably would not be able to compete.
It is theoretically possible that Brazil's government could try to subsidize the Brazilian ethanol industry and try to compete with America, but even then many states have passed laws requiring the use of corn ethanol in certain percentages in their gasoline, and that might be insurmountable. The Brazilian government, in addition, would probably not be able to provide the billions to its farmers that Americans do, and it wouldn't be good for the Brazilian economy anyway. And even after all that, Brazil would still have high tariffs imposed by the American government on its product.
But one should always learn from the past: in the past, Brazil has looked into selling its product in America and found that there was a 54 cent-per-gallon tax credit for ethanol in America. It was not strictly limited to American ethanol suppliers, but before Brazil could take advantage, a 54 cent-per-gallon tariff on foreign ethanol was imposed. If Brazil attempted to enter the market again, it would surely find a similar scene today. Another attempt was made to create some parts of Brazilian fuel in the Caribbean and bypass the tariffs, but then Congress passed two specific laws imposing tariffs on that fuel also. (4)
However, the European Union has ordered one billion litres (800,000 tons) of Brazilian ethanol to be imported in annually, duty-free. This could be a start of a great trading relationship between the EU and Brazil. In the future, laws could be made which benefit European countries over foreign nations (the Germans and French were not too happy about this acceptance of foreign ethanol by the EU), but since the EU is a group of countries and not just one, it might find it easier to import rather than try to decide which of its various countries' fuel to use. As the European Union expands and if it becomes more powerful, it could be a great partner with Brazilian ethanol producers. In addition, the EU is cutting subsidies to its farmers, which could help the Brazilian business there. (4)
Another factor affecting the ethanol makers' selling of their product could be the increasing socialism of its neighboring countries in South America. Following the lead of Venezuela, Bolivia recently nationalized its oil industry, and is attempting to get Brazil and Argentina, its two main customers, to pay higher prices. If it is successful, gas will be even more expensive in Brazil and it could be assumed that sales of flex-fuel cars, and ethanol, will rise. (5)
The signing of the Kyoto Protocol, an agreement to reduce carbon emissions, by many countries helps Brazil's economy. Germany signed a deal with Brazil in which Germany would pay for a subsidy to Brazil's flex-fuel cars in exchange for credits towards Kyoto. Other countries, such as Japan and Sweden, export Brazilian biofuel to meet Kyoto standards.
Japan is thinking of implementing a three percent mandated level of ethanol in its cars, which would cause Brazil's export demand to go up by a third if put in effect. Especially since Japan has proven to be Brazil's best trading partner so far, this would be great for the Brazilian ethanol industry if it goes into effect. (10) Now, the ethanol is exported by being sent from plants to the coast in tanker trucks, which is not as efficient as if a pipeline is in place. Petrobras has studied the use of a pipeline from its plants to the coast; if it were built, the pipeline would help Brazil to export more efficiently.
Sources: 1. The Economist "A Tankful of Sugar" September 22, 2005 http://www.economist.com/business/displaystory.cfm?story_id=E1_QQNSGQR
2. Sao Paulo Sugarcane AgroIndustry Union http://www.unica.com.br/i_pages/agroindustria_alta.asp
3. The Ecomomist "Life After Subsidies" February 9, 2006 http://www.economist.com/business/displaystory.cfm?story_id=E1_VVDQDPD
4. The Economist "Stirrings in the corn fields" May 12th 2005 http://www.economist.com/business/displaystory.cfm?story_id=E1_PJGDSSV
5. The Economist "Out of Gas" Aug 17th 2006 | LA PAZ http://www.economist.com/world/la/displaystory.cfm?story_id=E1_SSJGQVN
6. The India Times "Govt red-faced over Jairam's Brazil gaffe" Sept. 9, 2006 http://timesofIndia.Indiatimes.com/articleshow/1971455.cms
7. Minneapolis Star-Tribune "The Future of Ethanol" by David Morris April 17, 2005 http://www.commondreams.org/views05/0417-23.htm
8. Wall Street Journal "As Brazil Fills Up on Ethanol, It Weans Off Energy Imports" David Luhnow Geraldo Samor The Wall Street Journal, 16 January 2006 http://yaleglobal.yale.edu/display.article?id=6817
9. The Guardian "Sugar Powers a Revolution on Brazil’s Roads" Tom Phillips David Gow The Guardian, 23 November 2005 http://yaleglobal.yale.edu/display.article?id=6555
10. USA Today "Brazil hopes to build on its ethanol success" David J. Lynch http://www.USAtoday.com/money/world/2006-03-28-Brazil-ethanol-cover_x.htm
11. Nature "The scientific muscle of Brazil's health biotechnology" Marcela Ferrer, Halla Thorsteinsdóttir, Uyen Quach, Peter A Singer & Abdallah S Daar 2004 http://www.nature.com/nbt/journal/v22/n12s/full/nbt1204supp-DC8.html
Search terms: site:economist.com Brazil ethanol Brazil ethanol Brazil biodiesels Brazil biotechnology Brazil bioagriculture
Surveys of Brazil Ethanol and Biofuel Economy
in-depth surveys -- of Brazil's ethanol and bio-fuel (e.g. biodiesel) economic revolution. e.g. motivation, history, government involvement, micro-economics, macro/national economics.
I have compiled selected articles and reports that highlight some of the economics involved with the development of Brazilian biodiesel and ethanol. Some references are quite focused on individual issues you raise, while others contain only a few paragraphs out of an entire paper. In any case, I believe you will find a great deal of useful information in the following references.
BRIEF OVERVIEW ==============
"The use of ethanol to fuel automobiles was initiated partially in response to the oil shock of 1973, and as an alternative to oil to promote self-sufficiency. In 1975, the government created the Brazilian National Alcohol Program to regulate the ethanol market and encourage the production and use of fuel ethanol. The program guaranteed that all gasoline sold in the country would be blended with 22% anhydrous ethanol and that the pump price would remain competitive with gasoline. Past sugarcane crop problems have slightly altered the percentage of ethanol in Brazilian gasoline, however, mandated levels have usually remained at around 20%. On June 1, 2003, the Brazilian government raised the ethanol mix in gasoline from 20% to 25%. In July 2003, Volkswagen announced plans to have its entire Brazilian fleet's engine converted from conventional to bi-fuel version by 2006. A bi-fuel engine can run on either gasoline or ethanol (Flexible Fuel Vehicles). Ethanol usually offers consumers a cheaper option to gasoline. In the past, Brazilians became wary of relying on ethanol due supply problems and cheap oil prices. The use of biomass fuel ethanol is an effective strategy to mitigate greenhouse gases, as it replaces oil, a more carbon-intensive fuel. While the manufacture of crop fertilizers and extraction and purification of ethanol can be highly energy intensive, this is not the case in Brazil, because much of the work is done by hand." http://www.eia.doe.gov/emeu/cabs/brazenv.html
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From "Brazil has head start on ethanol production," By Michael Deibert Por Energia Alternativa 27/03/2006 http://www.midiaindependente.org/pt/blue/2006/03/349201.shtml
"Brazil, South America's largest economy, launched an ethanol motor fuel program in 1975 and, against heavy odds, has developed a cost-efficient alternative to gasoline. It appears now as though Brazil's sugar industry, once viewed as a remnant of the country's colonial past, may have a prominent place in the world's energy future. About half of the country's 21,000 square miles of sugar cane under cultivation is used to make ethanol that, according to the World Bank, is being produced at a cost of $1 per gallon compared to $1.50 for gasoline. Getting to that point required decades of steady pressure from Brazil's government, in ways that would be hard to duplicate in the United States."
"In the 1970s, with Brazil being hit hard by Mideast oil shocks, the ruling military dictatorship launched a national program to reduce the country's dependence. It encouraged the construction of ethanol plants by doling out low-interest loans to sugar companies, financed a national distribution network and imposed subsidies to keep the price of the fuel low. By the mid-1980s, most new cars sold in the country ran exclusively on ethanol, and the share of Brazil's energy needs filled by imported crude fell from around 80 percent in the late 1970s to about 45 percent in 1990. When gasoline prices fell again in the late 1980s, though, demand for ethanol stalled."
"In the late 1990s, the government of President Fernando Henrique Cardoso ended government subsidies for Brazil's sugar industry, spurring the sector to new competition and innovation. "After the end of state protection, a number of sugar mills went bankrupt, but now they are coming back and they are fully restructured," says Bruno Soares, an attorney with the New York business law firm Chadbourne & Parke. The government also switched its emphasis from alcohol-only to "flexible fuel" vehicles, mandating that all gasoline must be mixed with at least 25 percent ethanol. Now cars that can run on ethanol, gasoline or a mixture of the two account for 70 percent of all cars manufactured there.That has made motorists happy, because they can easily shift to whichever fuel is cheaper."
"With at least 300 sugar mills in Brazil employing an average of 2,000 people at each facility, Brazil's politicians also have seen the advantages of investing in innovation.
"For the government, each mill creates a lot of employment," says Frederico Humberg, executive director of the Brazilian agribusiness company Bunge Ltd. However, the conversion has not been without its hitches, especially supply problems.
"In January, Agriculture Minister Roberto Rodrigues announced that the country's sugar cane industry would need an estimated $10 billion worth of investment by the year 2012 to meet rising demand. That reflected the need to build 73 new mills to convert raw sugar into ethanol, and to plant another 10,000 square miles of cane, nearly a 50 percent increase. Also, the percentage of ethanol required in auto fuel recently was temporarily lowered to 20 percent because of limited supply. Still, Brazil plans to raises its profile as an ethanol exporter to the world. The country exported $600 million worth of ethanol last year, and that figure is expected to more than double to $1.3 billion by 2010."
"Brazil is going to "replace other players," says Soares. "Brazilian ethanol is cheaper, more efficient."
IN-DEPTH OVERVIEWS ====================
The following 27-page report contains some excellent information concerning governmental support for Biodiesel development in Brazil:
"Biodiesel in Brazil - Overview 2005." http://www.oti.globalwatchonline.com/online_pdfs/36488X.pdf#search=%22government%20support%20for%20Biodiesel%20in%20Brazil%22
"As part of its ongoing energy matrix diversification, Brazil has taken a further step in promoting its renewable sources policy. Almost thirty years after creating Proálcool (the National Alcohol Programme), the most important fossil fuel substitution initiative in the global automobile market, Brazil has now authorised the commercial use of a new fuel - biodiesel. This is a biodegradable product originating from sources such as vegetable oils, animal fats, industrial residues, and sewage. Under the PNPB (the National Biodiesel Production and Utilisation Programme), the Brazilian Government has created a production chain, defined credit lines, structured its technological base, and enacted a law regulating this sector. Over the next three years, Brazil will sanction the addition of 2% biodiesel to diesel oil, a mixture that will be compulsory from 2008 and which will increase to 5% in 2013."
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"Roundtable: Successes with Bioenergy. The Brazilian Experience." Israel Klabin, President Brazilian Foundation for Sustainable Development. 2005 http://www.fbds.org.br/Apresentacoes/FBDS-AgriculForum.pdf
Scroll down to 2. Bioenergy Initiatives Already Imprlemented in Brazil
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The following lengthy report (339 pages) has some interesting material on Biodiesel, social issues, etc, that you might want to review. You can scroll through the Table of Contents for relevant sections.
See "Brazil: A Country Profile on Sustainable Energy Development." http://www.iaea.org/OurWork/ST/NE/Pess/assets/BRAZIL_FINAL_24April06.pdf#search=%22Transpetro%20study%20ethanol%20pipeline%20Brazil%22
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A Powerpoint Presentation:
"Ethanol in Brazil: A Successful Experience." Washington D.C. 2006
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"The Brazilian Ethanol Program - Biofuels for Transport." Prof. Emilio Lèbre La Rovere, Federal University of Rio de Janeiro, Brazil. http://www.renewables2004.de/ppt/Presentation4-SessionIVB(11-12.30h)-LaRovere.pdf#search=%22Brazil%20AND%20ethanol%22
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"Brazilian SUGARCANE - ETHANOL: LESSONS LEARNED." Prof. Suani Coelho CENBIO - The Brazilian Reference Center on Biomass. 2005 http://stapgef.unep.org/docs/folder.2005-12-07.8158774253/folder.2005-12-08.9446059805/folder.2005-12-08.0238464777/folder.2005-12-20.8533782016/Brazilian%20Sugarcane%20Ethanol%20-%20Lessons%20Learned,%20Prof%20Suani%20Coelho.pdf#search=%22Brazil%20National%20Alcohol%20program%22
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"BIODIESEL - THE NEW FUEL FROM BRAZIL." NATIONAL BIODIESEL PRODUCTION & USE PROGRAM.
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A very good historical overview can be found in the following paper:
"Ethanol: Lessons from Brazil. A High Growth Strategy for Ethanol, May 2006. David B. Sandalow, Environment Scholar, Foreign Policy Studies. The Brookings Institution http://www.brookings.edu/views/articles/fellows/sandalow_20060522.htm
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"Alternative Fuel in Brazil - Flex-Fuel Vehicles." http://www.kenan-flagler.unc.edu/assets/documents/uploads_Flex_Fuels_Brazil.pdf
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"LIQUID BIOFUELS IN BRAZIL." Luiz Carlos Corrêa Carvalho http://www.bioenergy-lamnet.org/publications/source/bra/papers/PL2.2%20(LCCC).pdf
ABSTRACT: "This paper seeks to show the evolution of both the production and use of ethanol in Brazil, characterizing its importance among the liquid fuels in the country. At the same time, it qualifies the competitiveness of ethanol in Brazil under the current conditions, presenting the positive externalities of the renewable product and scenario-based demand projections. At the end, it seeks to characterize the fundamental works on the consolidation of ethanol as an international commodity."
Proceed to paper...
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"REVIEW OF THE EU BIOFUELS DIRECTIVE - PUBLIC CONSULTATION EXERCISE." Responses and comments by the Brazilian Government. Brussels, 10 July 2006 http://ec.europa.eu/energy/res/legislation/doc/biofuels/contributions/ms/Brazil.pdf#search=%22Brazilian%20government%20AND%20ethanol%20OR%20biodiesel%20%22
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"Bio-ethanol: Climate Benefits with Responsible Production." Ilan Kruglianskas Agriculture and Environment Programme. WWF-Brasil http://www.bioenergytrade.org/downloads/kruglianskasnovdec05.pdf#search=%22Brazil%20reason%20to%20develop%20biodiesel%22
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"BRAZIL: Fuel Alcohol Diplomacy," by Mario Osava. May 30, 2006 http://www.ipsnews.net/news.asp?idnews=33430
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"Brazil Exploits Ethanol as a Substitute for Petroleum." Innovacion y Empresa. 2/22/06 http://www.wharton.universia.net/index.cfm?fa=viewfeature&id=1109&language=english
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"With Big Boost From Sugar Cane, Brazil Is Satisfying Its Fuel Needs." The New York Times, April 10, 2006 http://www.nytimes.com/2006/04/10/world/americas/10Brazil.html?ex=1302321600&en=03adc82c67600388&ei=5088&partner=rssnyt
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"As Brazil Fills Up on Ethanol, It Weans Off Energy Imports," by David Luhnow and Geraldo Samor. The Wall Street Journal, 16 January 2006 http://yaleglobal.yale.edu/display.article?id=6817
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From "Luiz Fernando Furlan - "Ethanol and Renewable Fuels: The Brazilian Experience." April 20, 2005 http://socrates.berkeley.edu:7001/Events/spring2005/04-20-05-furlan/index.html
"Brazil is the biggest consumer of ethanol in the world. Currently, Brazil has six million hectares devoted to ethanol production from sugar cane. However, according to research by Embrapa (The Brazilian state’s Agricultural Research Corporation), there is the potential for up to 90 million hectares of sugar cane to be planted across a much broader geographical area, southern Brazil being the only region unsuitable for ethanol production. Meanwhile, the price of ethanol is currently lower than oil, and it is a cleaner burning fuel."
"As a labor-intensive activity, ethanol production can also create jobs and therefore encourage development, particularly in Brazil’s poorest areas. Today, one million people are employed as a result of the sugar cane industry’s activities in Brazil. But the sector, if expanded, could create an additional one million jobs directly and 1.5 million indirectly."
"The average size of a sugar cane plantation is 20 thoUSAnd hectares, producing around 1.5 million tons of sugar cane per annum. The organization of the firm can vary, from a single large plantation to a farmers’ cooperative. In Brazil, there are about 100,000 independent producers of sugar cane whose crops are used to produce not only ethanol but also Cachaça, Brazil’s national drink, a type of rum."
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"BRAZIL’S ETHANOL PROGRAM: THE CASE OF HIDDEN SUGAR SUBSIDIES," By Troy G. Schmitz, Andrew Schmitz, and James L. Seale, Jr. JRTC 03-1 April 2003 http://www.fred.ifas.ufl.edu/iatpc/archive/JRTC_03-01.pdf
MISCELLANEOUS ARTICLES ========================
"Brazil Is World's Ethanol Superpower." SAO TOME, Brazil, March 13, 2006 http://www.cbsnews.com/stories/2006/03/13/tech/main1394254.shtml
"Brazil's successful ethanol program fuels USA interest." BY MONTE REEL. Washington Post Service. Aug. 21, 2006 http://www.miami.com/mld/miamiherald/news/world/americas/15322233.htm
"BRAZIL'S ROAD TO ENERGY INDEPENDENCE." Washington Post. August 2006 http://ethablog.blogspot.com/2006/08/washington-post-Brazils-road-to-energy.html
"Brazil Starts Pushing Ethanol All Over the World." BrazzilMag. 08 September 2006. http://www.brazzilmag.com/content/view/7204/53/
"Brazil's Ethanol Won't Substitute Oil at Least for Three Decades." Written by Omar Nasser. 09 May 2006 http://www.brazzilmag.com/content/view/6341/53/
"Brazil Government Could Move Up 5% Biodiesel Goal to 2010." Jul. 24 2006 http://www.grainnet.com/articles/Brazil_Government_Could_Move_Up_5__Biodiesel_Goal_to_2010-35778.html
"Brazil is studying the possibility of moving up an obligatory 5% mix of biodiesel in the country's diesel fuel to 2010, three years earlier than mandated by law, according to a report in local Agencia Estado newswire on July 20......'
"Brazil Sees Ethanol as Its New Economic Frontier," by Alana Gandra. 11 April 2006. http://www.brazzilmag.com/content/view/6070/53/
"Sugar Powers a Revolution on Brazil’s Roads - Bio-fuel movement is gaining momentum on petrol station forecourts," by Tom Phillips and David Gow. The Guardian, 23 November 2005 http://www.guardian.co.uk/Brazil/story/0,,1648716,00.html
"THE Brazilian EXPERIENCE ON DEVELOPING A ALCOHOL-DIESEL BINARY FUEL." Economy and Energy 2002 http://ecen.com/eee20/adailsoe.htm
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From Ethablog - "the only blog in English dedicated to Brazilian ethanol."
"HISTORY OF BRAZIL'S ETHANOL PROGRAM." http://ethablog.blogspot.com/2006/06/history-of-Brazils-ethanol-program.html
(Non-English version - http://www.biodieselbr.com/proalcool/pro-alcool.htm)
BOOKS AND ARTICLES AVAILABLE FOR PURCHASE ==========================================
"Current Status of Biodiesel Development in Brazil." Authors: Ramos, Luiz Pereira; Wilhelm, Helena Maria. Applied Biochemistry and Biotechnology, Volume 123, Numbers 1-3, April 2005
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"Brazil's National Alcohol Program - Technology and Development in an Authoritarian Regime." Publication date - 1990 http://www.abebooks.com/servlet/SearchResults?&isbn=0275931838&nsa=1
"How are political systems likely to shape the choices, uses, and effects of technological progress? This important new book addresses that question in a case study of Brazil's national alcohol program, Proalcool......"
OR
Read it onine as a Questia member http://www.questia.com/library/book/Brazils-national-alcohol-program-technology-and-development-in-an-authoritarian-regime-by-f-joseph-demetrius.jsp
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"The Brazilian National Alcohol Programme." Authors: Gochnarg, I. In: Biomass for energy. (A80-52851 24-44) London, International Solar Energy Society, 1979, p. 30-50. http://adsabs.harvard.edu/abs/1979boen.rept...30G
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"Brazil since 1980." Series: The World Since 1980. Francisco Vidal Luna Universidade de São Paulo, Herbert S. Klein Stanford University, California
"This is a general survey of Brazilian society and of the Brazilian economy and political system since 1980. It describes the basic changes occurring as Brazil was transformed from a predominantly rural and closed economy under military rule into a modern democratic, industrial, and urbanized society, with an extraordinary, world-class commercial agriculture in the past sixty years..."
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Search Strategy
ethanol OR biodeisel Brazil history of Brazilian Ethanol Program Brazilian National Alcohol Program Economic history of Brazil and ethanol OR biodiesel economics of Biofuel in Brazil Transpetro study ethanol pipeline Brazil consumer use of ethanol in Brazil consumer use of biodiesel in Brazil government support for ethanol OR biodiesel in Brazil ethanol economy Brazil biodiesel economy Brazil
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