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Posted on Sustainabilitank.info on February 3rd, 2010
by Pincas Jawetz (pj@sustainabilitank.info)

The problem was the 51 cents/gallon of ethanol from sugar-cane tariff, the US imposes against imports from international producers of bioethanol – so they do not compete with US agro-ethanol.

We are cynics by nature and wonder if the release today has anything to do with Shell Oil Company having announced last weekend that they will invest over a billion dollars in the production of sugar-cane ethanol in Brazil. So, did we have to wait until an oil company steps heavily into this area – so we finally allow US door to be opened to a non-petroleum liquid fuel?

WE ARE VERY PARTIAL TO THIS TOPIC BECAUSE BACK IN 1978 AT UNIDO IN VIENNA, AND IN 1979 IN NEW ORLEANS, I WAS PERSONALLY INVOLVED IN BRINGING THIS SUBJECT TO THE ATTENTION OF THE LIQUID FUEL HUNGRY WESTERN WORLD. IN VIENNA WE SHOWED THE CUBAN EXPERIENCE AT A UN – AUSTRIA – SWEDEN EVENT. IN NEW ORLEANS THIS WAS “THE FIRST INTER-AMERICAN CONFERENCE ON RENEWABLE SOURCES OF ENERGY” THAT I HELPED ORGANIZE. OBVIOUSLY – TO LOUISIANA WE COULD NOT BRING THE CUBANS – BUT BRAZIL, ARGENTINA AND MANY OTHERS WERE PRESENT UNDER THE FRIENDLY EYES OF THE US DEPARTMENT OF STATE. ETHANOL BECAME A RECOGNIZED FUEL, BUT US AGRICULTURE MADE SURE IT WILL BE US CORN AS FEEDSTOCK. WE COULD NOT EVEN GET PREFERENTIAL TREATMENT FOR IMPORTS FROM FRIENDLY COUNTRIES BECAUSE OIL AND AGRICULTURE – SOME OF THE STRONGEST LOBBIES IN WASHINGTON – WOULD NOT ALLOW IT , EVEN AFTER THE INTERVENTION OF US REPUBLICAN SENATORS LIKE FRANK CHURCH, JACOB JAVITS, CHARLES PERCY – SO WHAT WILL IT BE NOW? WILL THOSE TARIFFS COME OFF?

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EPA Reaffirms Sugarcane Biofuel is Advanced Renewable Fuel with 61% Less Emissions than Gasoline.
Brazil Sugarcane Update – Brazilian Sugarcane Industry Welcomes U.S. EPA’s Renewable Fuels Rules.


The U.S. Environmental Protection Agency (EPA) has confirmed that ethanol made from sugarcane is a low carbon renewable fuel, which can contribute significantly to the reduction of greenhouse gas (GHG) emissions. As part of today’s announcement finalizing regulations for the implementation of the Renewable Fuel Standard (RFS2), the EPA designated sugarcane ethanol as an advanced biofuel that lowers GHG emissions by more than 50%.

“The EPA’s decision underscores the many environmental benefits of sugarcane ethanol and reaffirms how this low carbon, advanced renewable fuel can help the world mitigate against climate change while diversifying America’s energy resources,” said Joel Velasco, Chief Representative in Washington for the Brazilian Sugarcane Industry Association (UNICA).

Sugarcane ethanol is a renewable fuel refined from cane that grows typically in tropical climates. Compared to other types of ethanol available today, using sugarcane ethanol to power cars and trucks yields greater reductions in greenhouse gases and is usually much cheaper for drivers to purchase. Brazil has replaced more than half of its fuel needs with sugarcane ethanol – making gasoline the alternative fuel in that country and ethanol the standard.  Many observers point to sugarcane ethanol as a good option for diversifying U.S. energy supplies, increasing healthy competition among biofuel manufacturers and improving America’s energy security.

The RFS2 will help the United States meet energy security and greenhouse gas reduction goals sought by the Energy Security and Independence Act of 2007 (EISA). The new regulations establish minimum biofuels consumption in the U.S. of more than 12 billion gallons (45 billion liters) in 2010, rising to 36 billion gallons (136 billion liters) in 2022, of which 21 billion gallons per year would have to be one of three types of advanced biofuels: cellulosic, biomass diesel, and “other advanced,” that meet required GHG reduction thresholds as determined by the EPA.

Today, EPA affirmed that sugarcane ethanol meets the “other advanced” category in the RFS2, although with a GHG reduction level that exceeds the requirement for all categories as well.  Specifically, EPA’s calculations show that sugarcane ethanol from Brazil reduces GHG emissions compared to gasoline by 61%, using a 30-year payback for indirect land use change (iLUC) emissions.

“We are pleased that EPA took the time to improve the regulations, particularly by more accurately quantifying the full lifecycle greenhouse emission reductions of biofuels. EPA’s reaffirmation of sugarcane ethanol’s superior GHG reduction confirms that sustainably-produced biofuels can play a important role in climate mitigation. Perhaps this recognition will sway those who have sought to raise trade barriers against clean energy here in the U.S. and around the world. Sugarcane ethanol is a first generation biofuel with third generation performance,” noted Velasco.

Last year, UNICA submitted comments to EPA with abundant scientifically credible evidence showing that – even including indirect emissions – sugarcane ethanol has a reduction of GHG emissions of 73-82% compared with gasoline, on a 30- or 100-year time horizon respectively. The RFS2 requires the use of at least 4 billion gallons (over 15 billion liters) of “other advanced” renewable fuels a year by 2022. In 2010, the RFS requires 200 million gallons of this type of advanced renewable fuels.

“While we are reviewing the final rule, it is clear that EPA has incorporated many of the comments that UNICA and other stakeholders made during the public process. EPA should be congratulated for the way it upheld the Obama’s goals of transparency and scientific integrity in the environmental rulemaking. And we hope that other governments should take note of the manner that EPA has handled this process,” concluded Velasco.

Brazil is a leader in the production of sugarcane ethanol, which is widely considered as the most efficient biofuel available today. In 2009, Brazil produced over 7 billion gallons of sugarcane ethanol, most of which is used in Brazil in flex fuel vehicles. As a result of Brazil’s innovative use of sugarcane ethanol in transportation and biomass for cogeneration, sugarcane is the leading source of renewable energy in the nation, representing 16% of the country’s total energy needs. In fact, gasoline has become the alternative in Brazil, reducing the country’s dependence on fossil fuels lowering emissions. A recent study in the November 2009 edition of the journal Energy Policy indicated that since 1975, over 600 million tons of CO2 emissions have been avoided thanks to the use of ethanol in Brazil.

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ABOUT UNICA. The Brazilian Sugarcane Industry Association (UNICA) represents the
top producers of sugar and ethanol in the country’s South-Central region, especially the
state of Sao Paulo, which accounts for about 50% of the country’s sugarcane harvest
and 60% of total ethanol production. UNICA develops position papers, statistics and
specific research in support of Brazil’s sugar, ethanol and bioelectricity sectors. In 2008,
Brazil produced an estimated 565 million metric tons of sugarcane, which yielded 31.3
million tons of sugar and 25.7 billion liters (6.8 billion gallons) of ethanol, making it the
number-one sugarcane grower and sugar producer in the world, and the second-largest
ethanol producer on the planet, behind the United States.

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Brazil Hopes Shell-Cosan Can Boost Ethanol Exports

Date: 04-Feb-10, Reuters from Brazil
Author: Inae Riveras – Analysis

SAO PAULO – Brazil’s ethanol industry, which invested heavily to boost output of the cane-based biofuel, is counting on a tie-up between sugar and ethanol producer Cosan and Royal Dutch Shell Plc to revive its prospects after exports fell short of expectations.

The $21-billion-a-year ethanol joint venture announced by the two companies on Monday will enable Cosan, Brazil’s biggest ethanol maker, to move product more efficiently thanks to Shell’s global fuel distribution and retail system.

Cosan views the venture as a way to make Brazil’s ethanol a global commodity.

But whether that happens will depend largely on outside factors: whether oil is costly enough to make ethanol competitive; whether Brazil’s mills can provide a steady stream of biofuel; and whether key markets such as the United States will be more open to ethanol imports.

“Shell chose ethanol as the renewable fuel they want to be in and it chose Brazil. Whether this will mean more exports will depend on a series of circumstances beyond the companies’ control,” said ethanol expert Eduardo Pereira de Carvalho.

The slow rate of growth for ethanol exports has disappointed Brazil, where more than 450 mills joined the ethanol sector’s expansion drive in recent years.

Some analysts say any growth in ethanol exports will depend on oil prices more than other factor.

“The deal itself does not raise or reduce the economic viability of blending anhydrous ethanol in gasoline. This will be determined by the oil market,” said sugar and ethanol analyst Julio Maria Borges, director at Job Economia.

In 2008, when oil prices reached record highs of $147 per barrel, Brazil exported 5.1 billion liters of ethanol, up sharply from 3.5 billion liters the previous year. Countries simply bought more of the fuel to replace gasoline.

High oil prices together with environmental woes were then feeding discussions about a broader adoption of biofuels as an alternative to fossil fuels.

But oil prices tumbled as the global credit crisis intensified, and there was a similar decline in foreign interest for the cane-based fuel. Brazilian ethanol exports in 2009 slipped to 3.3 billion liters despite extremely low prices on the Brazilian market.

STEADY SUPPLIES, TARIFFS

If ethanol is economically viable compared to oil, however, Brazilian ethanol exports should benefit from Shell’s global infrastructure, commercial relationships and know-how.

Shell, with distribution centers and 45,000 filling stations around the world, will have access to annual supplies of 2 billion liters of Cosan ethanol.

“Shell will be able to strike long-term deals with clients around the world, something that currently hardly exists, as it will be backed by a big provider,” Borges said.

But the lack of steady supplies from Brazil, which produces 26 billion liters of ethanol a year that are mostly consumed domestically, may trouble potential long-term buyers.

Futures markets for ethanol have been incapable of minimizing producers’ risks. Deals are largely done on a spot basis — both in and outside Brazil. This makes it difficult for buyers and sellers to hedge against market volatility.

Brazil’s government has worked on ways of softening this problem by providing financing to mills to build stocks, which also smoothes out local prices over the year. But the system remains stubbornly inefficient.

“The same old problem will continue. Mills say they will expand production if there’s demand but demand will only be created if there’s the certainty of stable supplies,” said an ethanol expert based in the United States.

A U.S. tariff on imports of cane-derived ethanol is another roadblock to Brazil’s expansion goals. Some in the industry have suggested Shell’s entry into ethanol production in Brazil could mean extra pressure for removal of the tariff.

But it is not clear whether there could be a move in that direction.

“The oil industry was always against the U.S. tariff. The news is that it is now seeing a solution in cane,” said Joel Velasco, the North American representative for Brazil’s Sugarcane Industry Association, Unica.

But the announcement that the biggest-ever foray into biofuels by an oil major would happen in Brazil was a clear sign of preference for the fuel over other options.

“It’s difficult to predict (when exports could rise)… but the strategic meaning of a company the size of Shell to invest here is the most important point,” Carvalho said.

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