Panel II - Biofuels. Alfred Szwarc. IPC s Fall Seminar Sustainability in the Food & Agricultural Sector Stratford-Upon-Avon, October 15 16, 2007

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1 Panel II - Biofuels Alfred Szwarc IPC s Fall Seminar Sustainability in the Food & Agricultural Sector Stratford-Upon-Avon, October 15 16, 2007

2 UNICA is the leading Brazilian association of sugar & ethanol producers Ethanol related UNICA s goals: structure an international fuel ethanol market consolidate ethanol as a global energy commodity develop new applications and markets incentive adoption of best practices

3 Ethanol from Sugar Cane The Industry in Brazil Sustainability Issues Trade Issues Concluding Remarks

4 Sugar Cane Sugar Cane is the prime ethanol feedstok in Brazil Semi-perennial plant: lasts for about 5 crop seasons with high yields and has many benefits over traditional row crops: less energy to plant & cultivate; root system reduces erosion & effective carbon uptake; relatively low defensive & fertilizer requirements; many varieties.

5 Sugar Cane: Source of Energy 1/3 JUICE 276 kg/t 50% humidity 1/3 BAGASSE Hydrolysis Hydrolysis 165 kg/t 15%humidity 1/3 STRAW SUGAR (153 kg/t) ETHANOL CO-GENERATION OF ELECTRICITY MOLASSES Straw: tops and leaves of sugar cane Cellulosic ethanol revolution: when will it take place? Source: Unica.

6 Where is the Sugar Cane? Amazon Rain Forest Wetlands Sugar Cane Expansion Area Sugar cane Current plant Source: NIPE-UNICAMP, IBGE and CTC. Plant in construction or in project

7 Sugar Cane in Brazil AC 0 % AM 0,05% Crop Season 2006/07 RO 0 % RR 0 % MT 3,09 % MS 2,73 % AP 0 % PA 0,16 % TO 0,04% GO 3,79 % PR 7,51 % RS 0,02 % SP 62,05 % SC 0 % CE 0,01% MA 0,39% PI 0,17% MG 6,82 % BA 0,51 % SE 0,27 % ES 0,68 % RJ 0,81 % RN, PE, PB, AL 10,9 % Source: Unica

8 Availability of Arable Land Agriculture Pasture and non-used land hectares million Brazil US Russia India China Australia Canada Argentina Indonesia Colombia Ukraine Venezuela Mexico France Note: Area harvested in Arable land in equivalent potential. Source: FAO, Land Resource Potential and Constraints at Regional and Country Level (2000); FAO (2007). Prepared by ICONE.

9 Apple Tomato Potato Orange Cotton Grapes Garlic Onion Banana Soy Peanuts Coffee Cane Wheat Corn Rice Tobacco Beans Agricultural Defensives Consumption Main Crops kg of active substance per hectare Source: Sindag, IBGE, 2007

10 Fertilizer Consumption Main Crops ,0 2,5 2,0 1,5 1,0 0,5 0,0 Potato Tomato Tobacco Cotton Coffee Orange Cane Soy Banana Corn Wheat Rice Sorghum Beans Metric Ton per hectare Source: Anuário estatístico do setor de fertilizantes Associação Nacional para Difusão de Adubos-ANDA. São Paulo, p.34

11 Agriculture Related Soil Losses 50 Metric ton/hectare Castor Bean Bean Cassava Peanut Rice Cotton Soy Potato Cane Corn Fonte: Bertoni, et al. (1998), apud Donzelli, J.L. Erosão na cultura da cana-de-açúcar: situação e perspectivas. In: Macedo, I.de C. (org). A energia da canade-açúcar, São Paulo

12 Water Consumption In most of the Brazilian territory Dry Farming is the dominant practice because of sufficient rainfall. Irrigation in Brazil s crop areas has been required in less than 4 M ha (< 6% of present agriculture land). Irrigation in sugar cane production is more widespread in the NE, however Salvation Irrigation and Suplementary Irrigation are adopted according to the need. Rational use of water in the sugar cane industry has increased considerably with reuse and recycle practices. Presently the average consumption of water in São Paulo State s sugar cane industry is in the order of 1.8 m 3 /tonne of sugar cane (65% less than in 1997); ongoing efforts to reduce further this volume.

13 Ferti-irrigation Ferti-Irrigation with stllage (vinasse) helps to reduce use of water & chemical fertilizers and is a good practice to recover soil fertility

14 Ethanol Productivity Liters per Hectare Sugar Cane Brazil Beet EU Sugar Cane India Corn USA Cassava Thailand Wheat EU Source IEA International Energy Agency (2005), MTEC,, Icone, Unica.

15 End of Pre-Harvest Field Burning harvest % of non-burnt cane 45% 40% 35% 30% 25% 20% 15% 10% 5% 25,9% São Paulo State Center-South 21,3% 27,5% 28,1% 22,3% 22,6% 33,5% 27,2% 40,2% 33,0% 0% * Note: 2007 refers to harvested area until August. Source: CTC, Unica.

16 /03 03/04 04/05 05/06 06/07 75/76 76/77 77/78 78/79 79/80 80/81 81/82 82/83 83/84 84/85 85/86 86/87 87/88 88/89 89/90 90/91 91/92 92/93 93/94 94/95 95/96 96/97 97/98 98/99 99/00 00/01 01/ liters/hectare Ethanol Productivity Agricultural and Industrial Gains Source: CTC, Unica

17 Energy Balance Feedstock Renewable Energy Output / Fossil Energy Input Wheat (EU) 1.2 Cassava (Asia) 1.2 Sugar Beet (EU) 1.9 Corn (USA) Sugar Cane (Brazil) 8.3 Gasoline/Diesel Source: F.O. Licht, Macedo, I et alii 2004, NREL (life-cicle fossil energy output/fossil energy input) (*) Current practice (**) Biorefinery concept using biogas to generate energy

18 Typical Sugar & Ethanol Plant in Brazil Ethanol storage tanks Distillery Sugar plant Bagasse Sugar cane field

19 Bioenergy Sugar & Ethanol plants produce own thermal & electric energy using bagasse as a fuel and co-generation systems and sell excess electricity to the public grid bagasse steam electricity Source: UNICA

20 Economic Feasibility Brazilian Ethanol Has the Lowest Cost Index Beet (EU) Wheat (EU) Corn (USA) Sugarcane (Brazil) Source: F.O.Licht, Unica

21 Jobs in the Sugar Cane Industry Formal Jobs 1,2 1,0 Center-South North-Northeast million of direct jobs 0,8 0,6 0, ,2 0, Source: MORAES, M.A.F. de. Número e qualidade dos empregos na agroindústria da cana-de-açúcar. In: A energia da cana-de-açúcar, Brazil, 2007.

22 Formal Jobs Registration Rate 100% 90% 80% ,8% 80,4% 93,8% 70% 60% 60,8% 66,0% 50% 40% 42,3% 30% 20% 10% 0% North-Northeast Center-South São Paulo State Source: MORAES, M.A.F. de. Número e qualidade dos empregos na agroindústria da cana-de-açúcar. In: A energia da cana-de-açúcar, Brazil, 2007.

23 Environmental Merits Selected Fuel Characteristics Sulfur content & sulfur compounds emission Ethanol Gasoline $$ CO 2, CO, VOC and fine particles NOx Volatility / Toxicity of fuel & combustion products $$ Life-cycle Greenhouse impact $$ Renewability Biodegradability in soil & water $$

24 Greenhouse Gas Emissions Avoided GHG emissions in Brazil in 2003 due to the sugar cane industry are equivalent to the emission of GHG by Norway: ethanol substituting for gasoline: bagasse in sugar production: 27,5 M t CO2 eq. 5,7 M t CO2 eq. Source: Macedo, I et alii, 2004

25 Social Responsibility Programs Programs conducted by UNICA s associates since 2004 Subject Programs People Engaged Culture Environment Sport Education Health Total Source: Unica

26 Sugar Cane Industry Expansion 2006/ / / /21 Sugar Cane Production (M t) ,038 Cultivated area (M ha) Sugar (million t) Domestic Market Export Ethanol (billion liters) DomesticMarket Export Bioelectricity (MW) 1,400 3,300 11,500 14,400 Share (%) 3% 6% 15% 15% Pasture Land in Brazil: 220 M ha. Expansion is being carried out mostly in reclaimed pasture land in the Center-South Region Source: Unica, Copersucar and Cogen.

27 Agroenergy Dilemma Energy X Food X Feed Rapid demand growth for ethanol, dry climate and strong demand from Asia have all been contributing to grain prices increase; While ethanol production has been increasing in Brazil sugar prices (sugar is food) have been low and stable; Debate has been fueled by a campaign against biofuels and ethanol has become the preferred scapegoat to justify price increase; Hunger has been due primarily to inadequate income distribution not food scarcity; Agriculture productivity is increasing and there is considerable arable land to be used; Cellulosic ethanol is a good promise;

28 Ethanol Sustainability Certification Scheme Based on the Triple Bottom Line requirements: SOCIAL, ECONOMICAL and ENVIRONMENTAL. BENCHMARKED against fossil fuels. UNIVERSAL: applied internationally to all producers, feedstocks & production processes. Agreed within a MULTI-STAKEHOLDER negotiation process. Based on a transparent process defined by CLEAR PRINCIPLES, BALANCED CRITERIA and OBJECTIVE INDICATORS. VOLUNTARY: to reward those who invest in the process. Applied PROGRESSIVELY.

29 Ethanol International Trade Drivers Energy Security Diversification of Energy Sources & Energy Mix Environmental Issues (global warming, urban pollution) Rural Development Doha? Challenges Reduction/Elimination of Trade Barriers More Producers & Consumers Harmonization of Product Quality Standards Closer Relationship with Stakeholders (motor industry, oil industry, fuel distributors, governments, NGO s etc.) Wider Use of Futures Market Contracts (BM&F, NYBOT, CBOT etc.)

30 Concluding Remarks Growing popularity of bioethanol has created momentum for the development of an international market. Sound policies, environmental care, social responsibility, technological development, standards harmonization, trade barriers elimination and partnership are key for the successful development of a well structured international market.