Brazilian sugarcane ethanol a sustainable contribution to a cleaner transport mix. Emmanuel Desplechin Chief Representative - European Union

Transcription

1 Brazilian sugarcane ethanol a sustainable contribution to a cleaner transport mix Emmanuel Desplechin Chief Representative - European Union Dublin, 8 October 2009

2 OUTLINE About UNICA From ProAlcoolto date: an examination of sugarcane production and use in the Brazilian bioethanol market Assessing the benefits of sugarcane production to promote and capitalise on a sustainable future for the biofuels industry Evaluating the challenges to overcome within the EU biofuelmarket to facilitate industry and market expansion Conclusion: creating a win-win biofuelmarket how sustainability can be maximisedand what developments lay ahead for the commoditization of ethanol

3 UNICA Leading sugarcane industry association, representing over 120 producers and mills located in the Center-South of Brazil. Responsible for more than 50% of the ethanol and 60% of the sugar produced in Brazil. Emerging as a leader in the generation of bioelectricity International presence

4 Update on Sugarcane Production and Use in Brazil 4

5 The Brazilian Fuel Ethanol History Incentives. Mandatory Blends. New Technologies Deregulation. Sugar Exports Flex Fuel Global Market? Ethanol prod duction (billion liters) PROÁLCOOL FIRST PHASE Mandatory blend and subsidies. ETHANOL CRISIS at the end of the 80s Oil prices down. Brazilian government cuts support. Higher sugar prices affect ethanol production and sales of E-100 cars went down rapidly Anhydrous Hydrous 0 72/73 73/74 74/75 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 01/02 02/03 03/04 04/05 05/06 06/ Oil crisis & low sugar prices PROÁLCOOL SECOND PHASE Fiscal incentives and tax exemptions for ethanol production and E-100 fueled cars. All gas stations must obligatorily sell ethanol. Low ethanol prices (65% of gasoline s) guaranteed at the pump FLEX FUEL Flex fuel vehicles begin to be sold. Source: Datagro Elaboration: Icone and Unica.

6 2008 / 09 Harvest and Projections for the Brazilian Sugarcane Industry 2008/09e 2015/ /21 Sugarcane production (million t) ,038 Sugar (million t) Internal market and stocks Surplus Export Ethanol (billion l) Internal market and stocks Surplus Export Bioelectricity (MW average) Bioelectricity in Brazilian energy matrix (%) 3% 15% 15% Note: e = estimated data; potential generation of surplus electricity has been calculated based on the utilization of 75% of the available bagasse and 50% of the available straw, and considering the sugarcane production during most recent harvest, Sources UNICA, Copersucar, Koblitz and Cogen.

7 New production units in the Centre-South 350 New units Number of plants / / / / /2010* Source: UNICA. Note: 2009/10* - preliminary.

8 Where sugarcane is grown Sources: NIPE-Unicamp, IBGE and CTC 88% of sugarcane production

9 Sugarcane for ethanol: 1% of the country total arable land Millions of Hectares (2007) % BRAZIL 851 TOTAL ARABLE LAND total land % arable land 1. Total Crop Land % 21.6% Soybean % 5.8% Corn % 3.9% Sugarcane % 2.2% Sugarcane for ethanol % 1.0% Orange % 0.3% 2. Pastures % 49% 3. Available area Total arable land (crop land + pastures) % 30% Sources: IBGE, UNICA

10 Deforestation unrelated to sugarcane Cane area in Brazil vs. annual deforestation rate in the Legal Amazon Sources: INPE and UNICA. Deforestation data is calendar year while sugarcane production is based on harvest.

11 Petrolisnowthealternativefuel in Brazil PETROL ETHANOL Source: ANP & ÚNICA for Brazil Ethanol: anhydrous and hydrous

12 FFVs: main driver for ethanol consumption 90% of new cars sold are FlexFuel, representing 36% of fleet Domestic ethanol sales (E-100) Accumulated sales of flex-fuel vehicles Source ANP and ANFAVEA. Elaboration: UNICA

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14 Ethanol use: not limited to cars Ethanol-powered buses (E95) - still a pilot project in Brazil Flex-fuel motorcycles Bio-plastics (PHB, polyethylene, PVC) Brazilian-made crop dusting planes running on ethanol Biobutanol Production of diesel from sugarcane at commercial scale by 2010

15 Bioelectricity: Sugarcane s next frontier Alcochemical Bio-plastic Source: UNICA, CTC.

16 Benefits of sugarcane use and sustainability 16

17 Sugarcane is today the best available feedstock Note: Reduction of GHG emissions avoided from unit of ethanol compared to gasoline, calculated on a life-cycle basis. Source: IEA and UNEP for OECD (2008), Economic assessment of biofuel support policies, based on a review of recent articles.

18 Benefits of sugarcane ethanol SC (BRAZIL) Corn (US) Wheat (EU) Beet (EU) GHG Reductions 90 % 35 % 34 % 45 % Energy Balance 9,3 1,4 2,0 2,0 Productivity (litres/ha) Nota: Redução de Gases do Efeito Estufa do etanol em substituição à gasolina, calculado com base no ciclo de vida. Fonte: Balanço Energético: World Watch Institute (2006) e Macedo et al. (2008). Produtividade: IEA International Energy Agency (2005), MTEC e UNICA. Gases de Efeito Estufa: IEA International Energy Agency (2004) e Macedo, I. de C. et al. (2004 e 2008). Elaboração: UNICA

19 The Green Protocol in São Paulo State Signed between the São Paulo state government and UNICA in June Mills and sugarcane suppliers are involved Protocol Guidelines Elimination of sugarcane straw burning by % of the harvest is already mechanized Protection of river side woods and recovering of those near water streams (APPs) Adoption of technical plans for soil conservation and water resources Measures to reduce air emissions New sugarcane areas must be harvested mechanically.

20 Best Agricultural and Environmental Practices Soil Conservation Low levels of soil losses due to semiperennial nature of sugarcane Increased soil conservation and retencia as result of mechanisation, part of the straw beingleft on the field as organic matters. Less Agrochemicals Sugarcane Minimal Water Use Reduced use of pesticides Almost no use of fungicides Biological control of plague Use of vignasse Riverside Woods Protection No irrigation in Centre-South Decrease in water use in industrial processing Over 140,000 ha APPs in São Paulo State

21 AgroecologicalZoning for Sugarcane SP State (2008) Brazil(2009) National Zoning 1. Sugarcane is forbidden in the most sensitive biomes- Amazon, Pantanal and Upper Paraguian Bassin. It is also forbidden to expand with deforestation on native vegetation (e.g. Cerrados) 2. Area available for the sugarcane cultivation: 64,7 million ha (7,5% of the national territoty) (today it accounts for almost 0,9% of the territory) Source: Ministério da Agricultura, Pecuária e Abastecimento,(2009) e Secretaria do Meio Ambiente do Estado de São Paulo (2008)

22 Social actions UNICA-FERAESP Protocol: signed in February 2006 with the objective to enhance the working conditions of the sugarcane sector workers, and to evaluate and recommend best practices for the following areas: 1. Gradual elimination by 2011 of the practice of outsourcing in the sugarcane manual cutting 2. Improvement in the transport system for rural workers 3. Transparency in the systems of labor evaluation and payment in the production of sugarcane. National Commitment of Brasília: The Protocol is the result of a never seen before experiment in Brazil of a national tripartite dialogue and of negotiation between the sugarcane industry, trade unions and the Federal government. It was designed to improve working practices beyond what is mandatory by the Brazilian legislation

23 Requalification Program for Sugarcane Rural Workers Objective: training and requalifying 7,000 workers and community members per year for jobs in sugar mills and ethanol plants and to work in other sectors, as a response to the process of mechanizing the sugarcane harvest to eliminate burning. Requalification courses: For the sector: sugarcane field operator, harvester operator, harvester electrician, truck electrician, harvester mechanic, tractor mechanic, tractor electrician and welder For other sectors: horticulture, beekeeping and reforestation, horticulture, handicrafts, information technology, sewing, civil construction, hotel labor and tourism Coordination: UNICA and São Paulo Labor Union Sponsors: Syngenta, John Deere and Case Support: Inter-American Development Bank (IDB)

24 Perspectives in the European bioethanol market 24

25 Exports of Brazilian ethanol by destination 3.4 bi liters 3.5 bi liters 5.1 bi liters Total exports Million liters Others European Union CBI United States Source: SECEX. Elaboration: UNICA

26 EU ethanol imports vs. domestic production Ethanol import tariff 19.2 cents/litre Source: UEPA, LMC, F.O.Licht and Eurostat. Note: *2008 production refers to estimated data for the entire year; import data include statistics until October, 2008.

27 Promising Renewables Mandatory Target 10% of renewable energies in the transport sector by 2020 without specific targets for certain renewable energy sources and without intermediate targets Themajorityofthis10%isexpectedtobefulfilledbybiofuels Challenges Insights on the EU market EU ethanol tariff at 19.2 / hl independent of the end use and distortive preferential schemes Options to lift or reduce trade barriers and gain further market access within multilateral rounds Technical barriers to trade Practical implementation of sustainability criteria and corresponding certification schemes Requirements for greenhouse gas emissions savings compared to fossil fuels: 35% in 2010, 50% by 2017 and 60% for new projects launched as of 2017 Crops cannot be grown on land of high biodiverse value or of high carbon stock Reporting requirements on measures taken to preserve water, soil and air ILUC debate

28 Sustainability initiatives for biofuels: A universe in constent expansion SUSTAINABLE BIOFUELS EU Directives NATIONAL INITIATIVES INTERNATIONAL BODIES GLOBAL MULTISTAKEHOLDER INITIATIVES IDB IFC OCDE IEA G8 +5 FAO UNEP ISO NL UK DE SE USA BR CRAMER CEN European Committee for Standardization RTFO Meó/ISCC Low CVP Fuels SEKAB SEI Cramer Renewable Transport Commission Fuel Obligation Biofuel Quota Law- Stockholm Ordinance for sustainability Environment requirements Institute Greenergy VERIFIED SUSTAINABLE ETHANOL BAFF LCFS Low Carbon Fuel Standard PBCB Brazilian Biofuels Certification Program RFS Renewable Fuel Standard INMETRO Scorecard Equator Principles PRIVATE BANKS T ask 39 BSI Better Sugarcane Initiative GBEP Liquid Biofuels Global Bioenergy Round Table from Biomass Partnership on Sustainable Biofuels RSPO RSB Prop. ABNT+DIN RTRS Roundtable on Roundtable on Sustainable Palm Oil Responsible Soy Prepared by UNICA v. mar09 IB Sistema de Verificação. da Atividade Agropecuária SDG Sugarcane Discussion Group WWF

29 The Babel of Ethanol Certification National Certifications Directive on Renewable Energy Sources European Union Meó Consulting / ISCC German Government ETHANOL RTFO UK Government RFS / LCFS US Government Numerous initiatives to verify and certify ethanol PBCB Brazilian Government Institutional Certifications RSB Based in Switzerland BSI Based in the UK Private Certifications SEKAB, GREENERGY Sweden, UK How to attend all these? Proliferation of certification schemes is counterproductive: it discourages initiatives and investments, especially in developing countries v. mar09

30 The Challenges of the EU Legislation Lack of clarity remains with regards to : The definition of highly biodiverse grasslands; The definition of a methodology to identify degraded lands; Criterias on conservation practices data (re. soil, water, air) which will be provided Guidance as per criteria implementation These definitions will be adopted up to S2 2010! Despite the timeframe, various countries could inicitate the incorporation of the Directive into national legislation this year, creating legal uncertainties over required criteria. The lack of clear definitions prevents the sector to progress in the development of a certification scheme that responds to the European demands.

31 Conclusions 1. Biofuels use will expand in the world, due to consumers demand and public policy interests. 2. What are the factors contributing to the commoditization of ethanol? Targets, global firms, contribution to emissions reductions targets, diversification of the production of energy 3. What are the factors preventing ethanol to become a global commodity? Tariffs and distorting measures, small and volatile market, standards, flourishing of diverse sustainability requirements 4.Whatneedstobedone? Communications to repeal myths, technical cooperation, investments, adequate production/consumption, elimination of distorting support mechanisms

32 Thank you!