Panel II - Biofuels

Alfred Szwarc

IPC’s Fall Seminar “Sustainability in the Food & Agricultural Sector”

Stratford-Upon-Avon, October 15 – 16, 2007

UNICA is the leading Brazilian UNICA is the leading Brazilian association of sugar & ethanol association of sugar & ethanol

producersproducers

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

The Industry in Brazil

Sustainability Issues

Trade Issues

Concluding Remarks

Ethanol from 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.

Sugar Cane

Hydrolysis

Sugar Cane: Source of Energy

Hyd

roly

sis

1/3JUICE

1/3BAGASSE

1/3STRAW

SUGAR(153 kg/t)

ETHANOL CO-GENERATIONOF ELECTRICITY

MOLASSES

165 kg/t 15%humidity

276 kg/t 50% humidity

Source: Unica.

Cellulosic ethanol revolution: when will it take place?

Straw: tops and leaves of sugar cane

Where is the Sugar Cane?

Source: NIPE-UNICAMP, IBGE and CTC.

Plant in construction or in project

Current plant

Amazon Rain Forest

Wetlands

Sugar cane

Sugar Cane Expansion Area

Crop Season 2006/07

AC0 %

AM0,05%

PA0,16 %

RR0 %

RO0 %

MT3,09 %

AP0 %

MA0,39%

TO0,04%

GO3,79 %

BA0,51 %

PI0,17%

CE0,01%

RN, PE, PB, AL10,9 %

SE 0,27 %

MG6,82 %

SP62,05 %

ES 0,68 %

RJ 0,81 %PR

7,51 %

SC0 %RS

0,02 %

MS2,73 %

Source: Unica

Sugar Cane in Brazil

Availability of Arable Land

Note: Area harvested in 2004. Arable land in equivalent potential.Source: FAO, Land Resource Potential and Constraints at Regional and Country Level (2000); FAO (2007). Prepared by ICONE.

0

50

100

150

200

250

300

350

400

hec

tare

s m

illio

n

Agriculture Pasture and non-used land

0

10

20

30

40

50

60

70

Ap

ple

To

mat

o

Po

tato

Ora

ng

e

Co

tto

n

Gra

pes

Gar

lic

On

ion

Ban

ana

So

y

Pea

nu

ts

Co

ffee

Can

e

Wh

eat

Co

rn

Ric

e

To

bac

co

Bea

ns

Source: Sindag, IBGE, 2007

kg o

f ac

tive

su

bst

ance

per

hec

tare

Agricultural Defensives Consumption

Main Crops - 2006

0,0

0,5

1,0

1,5

2,0

2,5

3,0

Po

tato

To

ma

to

To

ba

cc

o

Co

tto

n

Co

ffe

e

Ora

ng

e

Ca

ne

So

y

Ba

na

na

Co

rn

Wh

ea

t

Ric

e

So

rgh

um

Be

an

s

Met

ric

To

n p

er h

ecta

re Fertilizer Consumption

Source: Anuário estatístico do setor de fertilizantes 2006. Associação Nacional para Difusão de Adubos-ANDA. São Paulo, 2007. p.34

Main Crops - 2006

0

10

20

30

40

50

Casto

rB

ean

Bean

Cassava

Pean

ut

Ric

e

Co

tto

n

So

y

Po

tato

Can

e

Co

rn

Metr

ic t

on

/hecta

re Agriculture Related Soil Losses

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 cana-de-açúcar, São Paulo. 2005.

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 m3/tonne of sugar cane (65% less than in 1997); ongoing efforts to reduce further this volume.

Ferti-irrigation

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

recover soil fertility

Ethanol Productivity

Source IEA – International Energy Agency (2005), MTEC,, Icone, Unica.

Lit

ers

per

Hec

tare

0

1.000

2.000

3.000

4.000

5.000

6.000

7.000

SugarCaneBrazil

Beet EU SugarCaneIndia

CornUSA

CassavaThailand

WheatEU

End of Pre-Harvest Field Burning

Note: 2007 refers to harvested area until August.Source: CTC, Unica.

25,9%27,5% 28,1%

33,5%

40,2%

33,0%

27,2%

22,6%22,3%21,3%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

2003 2004 2005 2006 2007*

São Paulo StateCenter-South

har

vest

% o

f n

on

-bu

rnt

can

e

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

/07

2

3

4

5

6

7

1000

lit

ers/

hec

tare

Ethanol Productivity

Source: CTC, Unica

Agricultural and Industrial Gains

Feedstock Renewable Energy Output / Fossil Energy Input

Wheat (EU) 1.2

Cassava (Asia) 1.2

Sugar Beet (EU) 1.9

Corn (USA) 1.3 – 1.8

Sugar Cane (Brazil) 8.3

Source: F.O. Licht, Macedo, I et alii 2004, NREL 2002

Gasoline/Diesel 0.8 (life-cicle fossil energy output/fossil energy input)

(*) Current practice (**) Biorefinery concept using biogas to generate energy

Energy Balance

Typical Sugar & Ethanol Plant in Brazil

Bagasse

Sugar cane field

Distillery Sugar plantEthanol storage

tanks

bagasse

electricity

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

Source: UNICA

steam

Bioenergy

0

10

20

30

40

50

60

70

80

90

100

Beet (EU) Wheat (EU) Corn (USA) Sugarcane(Brazil)

Brazilian Ethanol Has the Lowest Cost

Ind

ex

Economic Feasibility

Source: F.O.Licht, Unica

Jobs in the Sugar Cane Industry

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.

0,0

0,2

0,4

0,6

0,8

1,0

1,2

2000 2002 2004 2005

mil

lio

n o

f d

irec

t jo

bs

Center-South

North-Northeast

642.848

764.593

900.768982.604

Formal Jobs

42,3%

66,0%

80,4%

60,8%

85,8%

93,8%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

North-Northeast Center-South São Paulo State

1992

2005

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.

Formal Jobs Registration Rate

Ethanol Gasoline

Sulfur content & sulfur compounds emission

$$

CO2 , CO, VOC and fine particles NOx Volatility /

Toxicity of fuel & combustion products

$$

Life-cycle Greenhouse impact $$

Renewability Biodegradability in soil & water $$

Selected Fuel Characteristics

Environmental Merits

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: 27,5 M t CO2 eq.bagasse in sugar production: 5,7 M t CO2 eq.

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: 27,5 M t CO2 eq.bagasse in sugar production: 5,7 M t CO2 eq.

Source: Macedo, I et alii, 2004

Greenhouse Gas Emissions

Social Responsibility Programs

Subject Programs People Engaged

Culture 26 2.075

Environment 44 4.058

Sport 33 7.740

Education 55 35.060

Health 63 28.785

Total 221 77.718

Source: Unica

Programs conducted by UNICA’s associates since 2004

2006/07 2010/11 2015/16 2020/21

Sugar Cane Production (M t) 430 601 829 1,038

Cultivated area (M ha) 15.6 21.2 28.1 34.3

Sugar (million t) 30.2 34.6 41.3 45.0Domestic Market 9.9 10.5 11.4 12.1

Export 20.3 24.1 29.9 32.9

Ethanol (billion liters) 17.9 29.7 46.9 65.3DomesticMarket 14.2 23.2 34.6 49.6

Export 3.7 6.5 12.3 15.7

Bioelectricity (MW) 1,400 3,300 11,500 14,400Share (%) 3% 6% 15% 15%

Source: Unica, Copersucar and Cogen.

Sugar Cane Industry Expansion

Pasture Land in Brazil: 220 M ha. Expansion is being carried out mostly in reclaimed pasture land in the Center-South Region

Agroenergy Dilemma

• 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;

En

erg

y

X

Food

X

Feed

Ethanol Sustainability

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.

Cert

ificati

on

Sch

em

e

Ethanol International Trade

• Energy Security

• Diversification of Energy Sources & Energy Mix

• Environmental Issues (global warming, urban pollution)

• Rural Development

Dri

vers

Ch

alle

ng

es

• Doha ?

• 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.)

Growing popularity of bioethanol has Growing popularity of bioethanol has

created momentum for the development of created momentum for the development of

an international marketan international market..

Sound policies, environmental care, social Sound policies, environmental care, social

responsibility, technological development, responsibility, technological development,

standards harmonization, trade barriers standards harmonization, trade barriers

elimination and partnershipelimination and partnership are key for are key for

the successful development of a well the successful development of a well

structured international market.structured international market.

Concluding Remarks